Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 17, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
GST
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Territorial jurisdiction of the High Court to entertain and try the writ petition - Levy of GST on purchase and sale of lottery tickets - The High Court ought not to have dismissed the applications of the appellant without considering the petition memo which has no semblance of a case having been made out as to how part of cause of action arose within the territorial limits of the High Court or without any pleading as to how any right has been affected within the territory of Sikkim. - SC
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Application for pre-arrest bail - Fraudulent availment of ITC - The applicant is not cooperating even for the purpose of recording his statement pursuant to the issuance of the summons to witness. - Undoubtedly, after recording the statement, if the first respondent had reason to believe that the arrest is imperative, the applicant may at that stage have an apprehension that he is likely to be arrested. It is open for the applicant at the appropriate stage to apply for anticipatory bail - HC
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Cancellation of GST registration of petitioner - there is no reason why the petitioner’s cancellation was effected with retrospective effect. It is also clear that the order rejecting the petitioner’s application for cancellation of registration, is unsustainable as it discloses no reason. The show cause notice issued earlier to the petitioner is also cryptic and does not set out any particulars as to why the petitioner’s application for registration was proposed to be rejected. - HC
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Power of respondent to attach the bank account of petitioner - The action of attachment of bank accounts is a draconian measure and must be resorted to as a measure of last resort. - HC
Income Tax
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Computation of income - business of carrying out life insurance viz-a-viz investment amortization - Ms Jha’s submission that in the computation of profits and gains of the appellant/assessee insofar as its insurance business is concerned, only the provisions of Section 44 of the Act would apply, has weight and hence will have to be accepted. - HC
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Addition based on statement recorded during the course of survey - in the light of the CBDT Circular/Instruction and the various other decisions relied on by assessee to the proposition that the statement recorded during the course of survey has no evidentiary value unless the same is backed by credible evidence, the addition made by the AO was rightly deleted by the CIT (A). - AT
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Income from other sources u/s. 56(2)(x) - difference of stamp duty value and the actual consideration - tolerance band limit from 5% to 10% under section 56(2)(x) to be treated as clarificatory/curative - since the difference between the valuation for stamp duty and the actual consideration is less than 10%, which in the present case is 5.93%, no addition is called for. - AT
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Denial of Foreign Tax Credit (FTC) - (i) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67; (ii) filing for Form No. 67 is not mandatory but a directory requirement and (iii) DTAA overrides the provision of the Act and the rules cannot be contrary to the Act. - credit allowed - AT
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TDS u/s 194A - IPO - other borrowing cost and financial charges - Inasmuch as the liability is not depending upon the debt or CCDs, but contingent upon the happening of the IPO, such payment cannot be called as payment of interest. Consequently, the provisions under section 194A or 40(a)(ia) of the Act are not attracted. - AT
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Disallowance of interest on customs duty - As customs duty is allowable only on payment basis under section 43B, interest levied on arrears or late payment of customs duty is also allowable on actual payment basis under section 43B. - AT
Customs
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Interest under Section 27A of the Customs Act, 1962 - refunds were made allegedly after delay of more than 90 days of receipt of applications for refund - memo of deficiencies were issued and after compliance of such memo of deficiencies refund has been made within the time prescribed under the statute - Authorities directed to consider the dispute raised by the petitioner - HC
IBC
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CIRP - Seeking Formulation and implementation of a scheme that conclusively addresses the grievances of other home buyers who may not have the capacity to approach courts/forums to seek redressal against builders - There is a proper regimen available to redress the grievances of a home buyer and also in view of the Master Circular issued by the Reserve Bank of India, no further Orders and directions are required to be passed in the instant petition. - Petition dismissed - HC
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Legality of approved Resolution Plan - ineligibility of the erstwhile promoters - the whole case of the Appellant to dislodge the claim of the SRA revolves around the letter dated 03.06.2015 i.e. alleged personal guarantee, in order to attract the rigour of Section 29A(h) of the Code but since, Respondent No. 2 had not executed any guarantee, vide letter dated 03.06.2015, rather it was stated that it may execute a guarantee on failure of certain event that may happen at the instance of the Corporate Debtor, therefore, Section 29A(h) was not at all attracted to the present lis. - AT
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Mainability of applicable u/s 65 while the application for initiation of CIRP is pending before NCLT - in case where application is filed under Section 65 of the Code, it would be maintainable after the application is filed either under Section 7, 9 or 10 of the Code. - AT
Service Tax
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Extended period of limitation - Classification of services - there being confusion in the mind of Department itself and position having become clear through case laws in years 2014 or around, the extended period of demand cannot be invoked. - AT
Central Excise
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CENVAT Credit - forged documents - the Revenue has failed to discharge the onus as regards the source of receipt of raw materials from any other alternative source rather have made a bald allegation on the manufacturers that they have diverted the imported raw materials on payment in cash in market. - AT
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CENVAT Credit - It is clear that Fuel and Oils are by-product that are inevitably required to be removed from the ship in the course of commencing the activity of breaking the ship and if that be so, there is no reason for denial of cenvat credit of CVD paid on any part of the Ship including its stores viz. fuel and oil - AT
Case Laws:
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GST
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2023 (3) TMI 683
Territorial jurisdiction of the High Court to entertain and try the writ petition - Levy of GST on purchase and sale of lottery tickets - Seeking deletion from the array of respondents - can a notification issued under a statute could be made a subject matter of challenge? - According to the appellant, a notification issued under a statute enacted by a State legislature cannot be subjected to judicial scrutiny within the jurisdiction of a high court of a different State, more so when no cause of action has arisen within the jurisdiction of that high court. Whether the High Court was justified in returning the finding that at least a part of the cause of action has arisen within the jurisdiction of this Court and premised on such a finding, to dismiss the applications? HELD THAT:- The High Court, while delivering the impugned judgment and order, proceeded to hold that the writ petitioners were aggrieved not only by the impugned notification issued by the appellant under the GGST Act but also by the act of the Central Government in issuing the impugned notifications under the CGST Act as well as the IGST Act seeking to levy tax (GST) on lotteries organized, promoted and conducted by the State of Sikkim. The High Court further noted that it was not the actual incidence of GST under the GGST Act which is impugned in the writ petitions but the provisions of law made by the Parliament as well as the respective State Governments including the State of Goa by which they sought to levy GST on lotteries. Considering the prayers made in the writ petition, the High Court was further of the view that, at least, a part of the cause of action had arisen with its jurisdiction. This is a case where clause (2) of Article 226 has been invoked by the High Court to clothe it with the jurisdiction to entertain and try the writ petitions. The Constitutional mandate of clause (2) is that the cause of action , referred to therein, must at least arise in part within the territories in relation to which the high court exercises jurisdiction when writ powers conferred by clause (1) are proposed to be exercised, notwithstanding that the seat of the Government or authority or the residence of the person is not within those territories. The expression cause of action has not been defined in the Constitution - the party invoking the writ jurisdiction has to disclose that the integral facts pleaded in support of the cause of action do constitute a cause empowering the high court to decide the dispute and that, at least, a part of the cause of action to move the high court arose within its jurisdiction. Such pleaded facts must have a nexus with the subject matter of challenge based on which the prayer can be granted. Those facts which are not relevant or germane for grant of the prayer would not give rise to a cause of action conferring jurisdiction on the court. These are the guiding tests. The High Court ought not to have dismissed the applications of the appellant without considering the petition memo which has no semblance of a case having been made out as to how part of cause of action arose within the territorial limits of the High Court or without any pleading as to how any right has been affected within the territory of Sikkim. There are no hesitation to hold that the High Court erred in dismissing the applications filed by the appellant. Consequently, the impugned judgment and order dated 6th June, 2018 is set aside - appeal allowed.
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2023 (3) TMI 682
Seeking grant of anticipatory bail - appellant submitted that there is no final assessment made under GST Act and unless such determination is made, the appellant cannot be said to be under a legal liability to make any payment much less deposit any amount as a condition for grant of anticipatory bail. HELD THAT:- In an identical matter in Criminal Appeal No. 186/2023, Subhash Chouhan Vs. Union of India, this Court vide Judgment dated 20.01.2023 [ 2023 (1) TMI 1168 - SC ORDER] set aside the order passed by the High Court imposing a condition of deposit while granting bail to the appellant therein. It is provided that in case the appellant is arrested, he shall be liable to be released forthwith, subject to such terms and conditions which the Trial Court/Investigating agency may deem fit and proper to impose. Appeal allowed.
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2023 (3) TMI 681
Application for pre-arrest bail - Fraudulent availment of ITC - allegation is that the third party or operator obtained the registration with the intent to utilize the Input Tax Credit (ITC) - HELD THAT:- It prima facie appears that the matter needs to be investigated thoroughly by the first respondent. The applicant must cooperate with the investigation. On the basis of the materials i.e. whatsapp chats, the statements of the accused, invoices, the first respondent is justified in contending that it is necessary to record the statement of the applicant to find out his involvement in the case and other operators of the scam of M/s. Platinum Trading Company . The applicant has not attended to record his statement despite issuing witness summons on 20/5/2022, 30/5/2022 and 3/6/2022 and he is not cooperating with the investigation. In paragraph 9 of the reply filed by the first respondent, it is stated that in the summons to witness the first respondent never mentioned about the arrest of the applicant. The first respondent just wants to record his statement and to verify any books of account he is having regarding M/s. Platinum Trading Company. From the record it appears that the applicant is not cooperating with the investigation and even not willing to attend pursuant to the issuance of the witness summons - the present application is premature and the apprehension that the applicant will be arrested without following due procedure of law is unfounded. The first respondent is bound to comply with the mandate of the law and upon adhering to the dictum laid down by the Hon ble Supreme Court before effecting arrest. The apprehension of the applicant that he will be arrested is without any basis. The applicant is not cooperating even for the purpose of recording his statement pursuant to the issuance of the summons to witness. The first respondent submitted that they have reasons to suspect the involvement of the applicant. Undoubtedly, after recording the statement, if the first respondent had reason to believe that the arrest is imperative, the applicant may at that stage have an apprehension that he is likely to be arrested. It is open for the applicant at the appropriate stage to apply for anticipatory bail. The applicant must first cooperate with the investigation which according to the first respondent is only for the purpose of recording his statement and to verify the books of accounts the applicant is having regarding M/s. Platinum Trading Company. Reserving the liberty of the applicant to apply for anticipatory bail, at a later stage, the present application is rejected as premature.
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2023 (3) TMI 680
Cancellation of the GST registration of petitioner - vague SCN issued - violation of principles of natural justice - HELD THAT:- After having carefully perused all the material documents placed in this appeal, it is found that the show cause notice, which was issued to the appellants is devoid of any material and is absolutely vague. The appellants have not been informed as to what was the alleged fraud and alleged willful mis-statement made by the appellants. The appellants denied the allegations. However, the authority confirmed the proposal of cancellation by a single line order once again without any reason. When the matter was carried on appeal to the appellate authority, certain fresh facts have been brought in and an elaborate order has been passed by the appellate authority. It is no doubt true that an appellate authority or any administrate or quasi-judicial authority is expected to give detailed reasons to support its conclusion. Nevertheless, the authority has to consider the aspect as to whether the original authority had, at the first instance assigned any reason in support of its conclusion. On examining the order passed by the original authority, it is found that the same is devoid of any reason. If that be so, the appellate authority ought to have set aside such an order and remanded the matter back to the original authority instead of taking the trouble of trying to validate the order with certain reasons by bringing in fresh facts - the registration granted to the appellants has to be restored. The appeal and the writ petition are disposed of and the order passed by the appellate authority and the original authority are set aside and the original authority is directed to restore the appellants registration of the address at 3rd Floor, 119 Cotton Street, Kolkata 700 007 within a period of seven days from the date of receipt of the server copy of this judgment and order.
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2023 (3) TMI 679
Cancellation of GST registration of petitioner - non-filing of GST returns - reason for seeking cancellation of the registration was disclosed as Discontinuance of business/Closure of business - HELD THAT:- Since the petitioner s business was closed and he had applied for cancellation of his GST registration, he did not file his GST returns for the subsequent period. The respondents passed the impugned order dated 24.08.2022, cancelling the petitioner s registration with effect from 02.07.2017 - Notice in the present petition was issued on 10.02.2023. However, the respondents have not filed any response to this petition. Apparently, there is no reason why the petitioner s cancellation was effected with retrospective effect. It is also clear that the order rejecting the petitioner s application for cancellation of registration, is unsustainable as it discloses no reason. The show cause notice issued earlier to the petitioner is also cryptic and does not set out any particulars as to why the petitioner s application for registration was proposed to be rejected. The present petition is required to be allowed. The respondents are directed to cancel the petitioner s registration with effect from 31.07.2021, as requested by the petitioner.
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2023 (3) TMI 678
Power of respondent to attach the bank account of petitioner - petitioner is not the tax payer against whom any proceedings have been initiated - petitioner also contends that the respondent has no extra territorial jurisdiction to pass such draconian order in respect of persons who are not tax payers - HELD THAT:- The petitioner is a registered dealer in Delhi. Its bank accounts in Delhi have been attached and, therefore, we do not consider it apposite that the petitioner be relegated to avail its remedies in another jurisdiction - Concededly, there is no material against the petitioner, at this stage, except that a sum of Rs.16,50,000/- were transferred from the bank account of M/s. Hello Enterprises to the petitioner. The action of attachment of bank accounts is a draconian measure and must be resorted to as a measure of last resort. As an interim measure, it is considered apposite to suspend the order of attachment of the petitioner s bank account in question and direct that the petitioner be permitted to operate the same subject to the petitioner depositing a sum of ₹16,50,000/- with the Registry of this Court within one week from date. List on 10.05.2023.
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2023 (3) TMI 677
Refund of CGST and SGST paid alongwith interest - typographical error had crept in the return regarding the declared turnover - petitioner s request for processing of refund has been rejected as the return was not rectified - HELD THAT:- The respondents, states that she has received instructions that the petitioner has provided documents for rectification of the error that had crept in its return and if the matter is remanded to the Adjudicating Authority, the petitioner s request for refund would be considered afresh. The order dated 11.12.2020 passed by the Adjudicating Authority rejecting the petitioner s application for refund as well as the order dated 25.10.2021 (sent on 01.11.2021) are set aside - the petitioner s application for refund is restored before the Adjudicating Authority to be decided afresh. The petition is disposed of.
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Income Tax
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2023 (3) TMI 676
TP Adjustment - upward adjustment on account of ALP of marketing intangible created by the assessee for the associate enterprises - HELD THAT:- After examining the facts, the Tribunal found that the revenue had only assumed that the assessee had promoted the brand of the AE by incurring AMP expenditure in India thereby warranting any compensation. On facts, it was found that the assessee had not paid any royalty or trade-mark fee to its Associated Enterprises and had been benefited by the excess premium return in the same price of goods.Tribunal found that AMP expenditure is duly factored into the said pricing fixed by the Associated Enterprises. Tribunal found that the international transactions with the Associated Enterprises of purchase of raw materials, purchase of finished goods, sale of finished goods and recovery of expenses have been duly accepted to be at arm s length. Selling expenses which were sought to be included as part of AMP expenditure by the TPO and the DRP - Tribunal after thoroughly examining the factual position found that these expenses are purely related to products of the assessee and not for any brand. Further, it found that the total expenditure towards AMP and selling expenditure had duly bifurcated the same by identifying at the time of incurrence itself, whether the said expenditure constitutes AMP expenditure or selling expenditure. This bifurcation of expenditure was ignored by the revenue and this has been rightly pointed out by the learned Tribunal in the impugned order. Thus, we are fully satisfied that the Tribunal, on facts, was convinced with the case of the assessee and granted relief and in the absence of any perversity in the order passed by the learned Tribunal, we find no grounds to interfere with the same. Decided against the revenue.
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2023 (3) TMI 675
Entitled to claim the left over portion of depreciation being the carry forward figure from the previous year u/s 32(1)(iia) - HELD THAT:- Same issue arose in the assessee s own case for the assessment year 2006-07 [ 2015 (5) TMI 647 - ITAT KOLKATA ] the appeal filed by the revenue is dismissed. Thus, following the said decision, the substantial question of law (ii) is answered against the revenue. Disallowance u/s 14A r.w.r. 8D - assessee has sufficient own funds - HELD THAT:- Tribunal after taking note of the factual position found that the assessing officer has not examined the accounts of the assessee and there is no satisfaction recorded by the assessing officer about the correctness of the claim of the assessee and without doing so, he has invoked Rule 8D(2)(ii) of the Income Tax Rules which is impermissible in law. Furthermore, the learned Tribunal had perused a chart which was produced by the assessee before the learned Tribunal setting out the financial position of the assessee. From the said chart the learned Tribunal found that the assessee had sufficient own funds which are several times more than the investments made by the assessee and, therefore, it can be concluded that the borrowed funds have not been utilised for the purpose of making investments. After recording such a factual position, the learned Tribunal rightly held that the assessing officer could not have invoked Rule 8D(2)(ii) of the Income Tax Rules. See Century Plyboards (I) Ltd., [ 2022 (9) TMI 1040 - CALCUTTA HIGH COURT ] - Decided against the revenue.
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2023 (3) TMI 674
Computation of income - business of carrying out life insurance viz-a-viz investment amortization - Whether the Tribunal misdirected itself in law and on facts in not appreciating that the profits and gains of the appellant/assessee were to be computed in accordance with the provisions of Section 44 read with First Schedule of the Income Tax Act, 1961? - HELD THAT:- What emerges upon perusal of Section 44 of the Act is that it contains a non-obstante clause, which excludes the application of all provisions contained in the Act which relate to computation of income chargeable under the heads referred to therein, by providing that computation of income qua the said heads will be made in accordance with rules contained in the First Schedule. Section 44 provides for a statutory mechanism for computing profits and gains of an insurance business and includes, in this context, business carried on by a mutual insurance company or even by a cooperative society. In that sense it moves away from the usual and general method of computing income chargeable to tax by bearing in mind the heads of income of income referred to in Section 14 of the Act. This is plainly evident, since there is a specific reference to Section 199, [which broadly deals with granting credit to the person from whose income tax has been deducted at source] and the Sections spanning between 28 to 43B. Therefore, Ms Jha s submission that in the computation of profits and gains of the appellant/assessee insofar as its insurance business is concerned, only the provisions of Section 44 of the Act would apply, has weight and hence will have to be accepted. Tribunal, however, has in Ms. Jha s opinion, veered off course by adverting to other provisions of the Act, which stand specifically excluded. Interest on TDS - Tribunal has indicated that the same is inadmissible and for this purpose, reliance has been placed on Section 40(a) of the Act - insofar as unpaid bonus and unpaid leave encashment are concerned, the Tribunal has brought to the fore Section 43B of the Act - There is, inter alia, a specific reference to the provisions of the Act which will not apply to an assessee which is carrying on an insurance business, and these include provisions spanning between Sections 28 and 43B of the Act. The rules contained in the First Schedule appended to the Act will determine the manner in which the profits and gains of insurance business are to be ascertained According to us, the Tribunal has committed an error in law, which needs to be corrected. We may note that for AYs 2005-16, 2008-19 and 2010-11, a coordinate bench of this court in the matter of Principal Commissioner of Income Tax vs Sahara India Life Insurance Co Ltd., ( 2019 (8) TMI 409 - DELHI HIGH COURT] has taken a similar view. Decided in favour of assessee.
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2023 (3) TMI 673
Revision u/s 263 - Large other expenses claimed in profit and loss account, Payments made to related parties under Section 40(A)(2)(b), Current liabilities, Payments made to the contractors and Payment made towards stamp duty - ITAT set aide order passed by the PCIT - HELD THAT:- Tribunal with regard to inquiry not being held by the AO under Section 133(6) of the Act, we are of the opinion, that the Tribunal was right, for two reasons. Firstly, this was the most pragmatic view, given the fact that in the construction industry, labourers do move from one worksite to another, quite frequently.Secondly, and this is in our view a more important aspect, the job work was carried out in 2014-15, and therefore, to commence an inquiry after nearly three years would have not led to any fruitful results. In our view, if the facts obtaining in the case are juxtaposed with the admitted fact, that the total value of contract receipts was Rs.141.89 crores, against which the expenses incurred towards job work was only Rs.10.87 crores, the absence of inquiry vis-a-vis job works would not render the assessment order passed by the AO, in these facts, erroneous. The expense incurred on job work was only 7.6% of the total contract value. It is not disputed, that in the preceding period, the expenditure towards job work as percentage of the contract value worked to 8.61%. PCIT, in our view, has in a sense attempted a reappreciation of the material placed before the AO and concluded that the examination of issue at hand should have been conducted in a particular manner. Having regard to the factors referred to hereinabove i.e., the manner in which the payments were made, production of bills, deduction of withholding tax, the amount which was claimed as expenditure when compared with the contract receipts, in our view, the AO s approach could not have been found flawed with by the PCIT, while exercising powers u/s 263 of the Act. A close perusal of the same would show, that they arose in a different fact situation. The judgment of the Division Bench of this Court in Commissioner of Income-tax vs. Ashok Logani [ 2011 (5) TMI 564 - DELHI HIGH COURT] was concerned with a situation, where in a search action conducted against the assessee, Rs.62,30,300/- was found at his residence. At that juncture, the assessee had offered for tax, out of the total amount recorded, Rs.61.30 lakhs as undisclosed income. However, when the return was filed for the period in issue, the same was not offered for tax. AO overlooked this fact, and accepted the return filed by the assessee. It is in these circumstances, that the proceedings u/s 263 of the Act were initiated. According to us, the facts in the said case are, as noted above, clearly distinguishable from those obtaining in the instant case. Likewise, in the case of Commissioner of Income-tax, Central-I, Kolkata vs. Maithan International [ 2015 (4) TMI 479 - CALCUTTA HIGH COURT] the situation that arose was starkly different. Revenue Appeal dismissed.
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2023 (3) TMI 672
Rectification of mistake u/s 254 - Ex-parte order - assessee had asserted that it had not received notice of the date when the concerned appeals were fixed for hearing - Tribunal went on to hold that it was a well-settled principle of law that opportunity of hearing should be accorded to the disputants and that no disputant should be condemned unheard. Accordingly, the Tribunal, in the interest of justice, recalled its ex parte order which had been passed on merits - HELD THAT:- As noted hereinabove, there was certainly a mistake in recording the appearances in the matter. Besides this, even if, for the moment, we were to agree with Mr Kumar that the order could not have been recalled by the Tribunal by taking recourse to Section 254(2) of the Act, we are, certainly, of the view that this was an incidental and ancillary power available to the Tribunal. [See Income Tax Officer, Cannanore v M.K. Mohammed Kunhi AIR [ 1968 (9) TMI 5 - SUPREME COURT] Under Section 254(2) of the Act, the Tribunal has the power to rectify an error which emanated from a mistake committed by it. The mistake can arise from an act of omission or commission. In this case, the Tribunal failed to notice that the respondent/assessee did not have information concerning the date fixed for hearing in the appeal. Given this position, contrary to what Mr Sanjay Kumar has contended, the Tribunal could have corrected its mistake, to do right by the party who was inadvertently wronged. [See Honda Siel Power Products Ltd. [ 2007 (11) TMI 8 - SUPREME COURT] ] As is evident from the discussion above, sufficient cause having been provided, the Tribunal felt impelled to recall its order dated 26.10.2018. It is more than well-established that even if a judicial or a quasi-judicial authority does not refer to the source of its power in support of its action, as long as the power is otherwise available, no fault can be found with the exercise of the power. This is one such instance. We find no merit in the above-captioned appeals. The appeals are, accordingly, dismissed.
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2023 (3) TMI 671
Addition u/s 68 - Bogus LTCG - addition to the income, treating the transaction as an accommodation entry with a particular broker in relation to the equity share of a particular company, merely because the investigation was done by income-tax department or the SEBI against brokers or the companies or their promoters - HELD THAT:- We note that the assessee was engaged in penny stock transactions wherein phenomenal return of 17,960% was obtained in a short time period and this is only possible through a colorable device. The orders of AO and ld. CIT (A) are quite speaking and elaborate and we do not find any infirmity in the same. Hence, we uphold the order of the ld. CIT (A). Assessee s appeal stands dismissed.
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2023 (3) TMI 670
Estimation of income - Bogus purchases - HELD THAT:- Admittedly, the Assessing Officer in the instant case has accepted the sales and books of account have not been rejected. Further, the payments for the alleged bogus purchases have been made through proper banking channels and the Revenue is not in appeal against the order of the CIT (A) allowing 75% of such purchases as genuine and only 25% of the bogus purchase has been sustained by the CIT (A). In the case law compilation, the learned Counsel for the assessee has filed certain decisions, wherein in such type of cases, the additions have been sustained ranging from 3% to 5% of such purchases. Considering the totality of the facts of the case and considering the fact that the profit shown by the assessee is more than the case law cited by the learned Counsel for the assessee, we are of the considered opinion that the disallowance of 15% of such bogus purchases in the instant case will meet the ends of justice. We, therefore, modify the order of the CIT (A) and direct the Assessing Officer to restrict the addition to 15% of such bogus purchase as against 25% restricted by the CIT (A) - Decided partly in favour of assessee.
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2023 (3) TMI 669
Addition based on statement recorded during the course of survey - Additional income admitted by the Director of the company during the course of survey which was not declared in the return of income - CIT-A deleted the addition - HELD THAT:- Since in the instant case, AO has made the addition merely on the basis of a statement recorded during the course of survey of Shri P. Satya Prasad, Director of the assessee company who had admitted additional income for the year under consideration and since such statement has been retracted by the Director before the Dy.Director of Income Tax (Inv.) Unit-I Hyderabad through an affidavit which has not been controverted and since the Revenue has no other material before them except the statement which has subsequently been retracted therefore, in the light of the CBDT Circular/Instruction and the various other decisions relied on by assessee to the proposition that the statement recorded during the course of survey has no evidentiary value unless the same is backed by credible evidence, the addition made by the AO was rightly deleted by the CIT (A). Director of PL Raju Constructions (P) Ltd Shri P. Venkatapati Raju in his statement u/s 132(4) during the course of search on 22.4.2019 in his reply to question No.6 has specifically stated to cover up any deficiencies in the matter of DCS Ltd and any other deficiencies that may arise to give quietus to the litigation that may emerge in the matter of DCS Ltd, the company has admitted the additional income of Rs.32.00 crores out of which Rs.5,57,65,000/-relates to the impugned A.Y. In view of the above and in view of the detailed reasoning given by the CIT (A) we do not find any infirmity in the order of the CIT (A) deleting the addition.Grounds raised by the Revenue are dismissed.
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2023 (3) TMI 668
Revision u/s 263 - addition u/s 68 - HELD THAT:- AO, during the course of assessment proceedings, called for the relevant records, also issued notices to the persons to whom the alleged cotton sales were made and after due consideration of material on hand, treated 50% of the agricultural income as unaccounted income taxable under section 68 r.w.s. 115 BBE of the Act. Therefore, in our view it is not a case where the AO had not made due enquiries and also not the case where the AO had not applied his mind during the course of assessment proceedings on the issue in hand. Regarding the scope of proceedings u/s 263 of the Act, if an inquiry made by the Assessing Officer is considered inadequate by the Commissioner of Income Tax, this itself cannot make the order of the AO erroneous. In our view, the order can be erroneous if the AO fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries that are required to be made by the AO - It is Assessing Officer s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. Delhi High Court in the case of CIT Vs. Sunbeam Auto [ 2009 (9) TMI 633 - DELHI HIGH COURT] made a distinction between lack of inquiry and inadequate inquiry. The Hon ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 on the ground of inadequate inquiry. It is a well-settled principle of law that 263 proceedings cannot be taken recourse to only for the purpose of supplanting the view of the PCIT in place of the view taken by the AO during the course of proceedings simply on the ground that the alternate view would have levelled higher rate of taxation on the assessee or the alternate view taken by the PCIT seems to be more plausible view in the instant set of facts. The AO, in the instant set of facts had applied his mind to the issue under consideration and had taken a view, which in our view, was not a legally implausible view. Genuineness of 50% agricultural income - The second issue for consideration before us that the assessee had appealed against the order passed by AO before Ld. CIT(Appeals), who on consideration of material on hand had passed an order on the issue under consideration. Therefore, once the issue under consideration has already been adjudicated by the Ld. CIT(Appeals), then the question that arises for our consideration is whether the PCIT can again pass order under section 263 of the Act with respect to the taxability of the same agricultural income (although from a different perspective) and substitute his opinion by holding that the original assessment order was erroneous and prejudicial to the interests of the revenue. In our considered view, once the issue of taxability of agricultural income has been examined by the AO and also by the Ld. CIT(Appeals) in appellate proceedings, the PCIT is precluded from taxing the same agricultural income, albeit from a different perspective, since the subject income has already been taken into consideration by Ld. CIT(Appeals) in the appellate proceedings. ITAT Rajkot in the case of Parin Furniture Ltd. [ 2022 (7) TMI 957 - ITAT RAJKOT] held that when an appeal is preferred by the assessee under section 250 of the Act for CIT Appeals is pending against order passed by the learned AO under section 147 of the Act, the same cannot be revised under section 263 of the Act. In view of the above observations, since the issues is in respect of which 263 proceedings were initiated and the order passed by the AO was held to be erroneous and prejudicial to the interest of revenue, have been adjudicated upon by Ld. CIT(Appeals) in appeal filed by the assessee under section 250 of the Act, then, the Principal CIT cannot proceed to simultaneously assume jurisdiction with respect to the same issues which have been considered before CIT(Appeals). - Decided in favour of assessee.
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2023 (3) TMI 667
Penalty u/s 271(1)(c) - assessee was subjected to pay taxes u/s. 115JB - Levy of penalty deleted by CIT(A) - HELD THAT:- CBDT vide circular dated 31.12.2015 has held that where the Income Tax is payable on the basis of book profit u/s.115JB of the Act, then penalty u/s. 271(1)(c) is not attracted with reference to the additions disallowances made under normal provisions The issue in the present ground is with respect to th. We find that the CIT(A) after considering the submissions of the assessee has given a finding that assessee was subjected to pay taxes u/s. 115JB of the Act, even after taking into consideration all the additions made by the AO in the assessment order. He thereafter by relying on the CBDT circular held that the penalty u/s. 271(1)(c) was not leviable. Before us Revenue has not pointed to any fallacy in the findings of CIT(A) nor has demonstrated that the reliance placed by CIT(A) on the CBDT circular (supra) is misplaced. In such a situation we find no reason to interfere with the order of CIT(A) and thus grounds of Revenue is dismissed.
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2023 (3) TMI 666
Income from other sources u/s. 56(2)(x) - difference of stamp duty value and the actual consideration - tolerance band limit from 5% to 10% under section 56(2)(x) to be treated as clarificatory/curative - Assessee argued amendment by Finance Act, 2020 to section 56(2)(x) wherein the safe harbour limit (tolerance band) has been increased from 5% to 10% and as such if the difference between valuation for stamp duty and the actual consideration is 10% or less, the same shall be ignored - HELD THAT:- Considering the submissions made by the assessee and the undisputed facts relating to quantum of difference and by placing reliance on the observations and finding of the Coordinate Bench of ITAT, Mumbai in the case of Maria Fernandes Cheryl [ 2021 (1) TMI 620 - ITAT MUMBAI] followed in the case of Karb Associates Pvt. Ltd. [ 2021 (8) TMI 1184 - ITAT KOLKATA] we unhesitatingly hold that the amendment of increasing the tolerance band from 5% to 10% under section 56(2)(x) brought in by Finance Act, 2020 had to be read retrospectively being clarificatory/curative in nature and, therefore, since the difference between the valuation for stamp duty and the actual consideration is less than 10%, which in the present case is 5.93%, no addition is called for. Accordingly, grounds taken by the assessee in this respect are allowed.
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2023 (3) TMI 665
TDS u/s 194I - TDS on common area maintenance charges - payment made to the landlord, other than under the head rent - HELD THAT:- As relying on M/s. Johnson Watch Company Pvt. Ltd. [ 2022 (11) TMI 1106 - ITAT DELHI ]Tax Authorities below have fallen in error in holding that the assessee was required to pay TDS @10% towards the common area maintenance charges. Consequently the grounds raised by the assessee are allowed.
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2023 (3) TMI 664
Disallowance of bad debt u/s 36(1)(vi) - assessee did not produce any documentary evidences in support of the claim - HELD THAT:- We also notice that the claim of the assessee that the amount to Mr. Ranjan is paid towards property advance is not supported by any documents which the AO called for during the assessment proceedings and the assessee also failed to provide details with respect to the identity of the person, his address, etc. As further noticed that the amount written off against the salary advance was also not substantiated and that the assessee could not even submit the basic details to support whether Mr. Girish was actually in employment with the assessee. Given the facts of the case, in our considered view, the claim of bad debts is rightly denied by the lower authorities on the ground that the assessee has not substantiated the claim with proper documentary evidence to prove that it is incurred in the regular course of business and that the amount could not be recovered. Accordingly, we see no reason to interfere with the decision of the CIT(Appeals). Professional and consultancy charges - disallowance is that whether the expenditure was incurred wholly and exclusively for the purpose of business? - HELD THAT:- On perusal of return of income filed by Mr.Sheetal, we notice that the said income of Rs.2 crore has been offered as Compensation received under the head Income from Other Sources and not as professional fees. As already stated the main ground on which the expenditure is disallowed by the AO and CIT(A) is that the assessee could not substantiate the claim in terms of commercial expediency to incur the expenditure and the nexus between the expenditure and the business. We therefore in the interest of justice remit the issue back to the CIT(A) to examine the issue afresh based on evidences that the assessee may submit in this regard. The assessee is directed to furnish the necessary documents to substantiate the claim and cooperate with the proceedings. Capital gains - AO during the course of assessment noticed that the assessee had entered into a joint development agreement (JDA) - Based on the various terms of the joint development agreement, the AO held that capital gain arises in the hands of the assessee and computed the short term capital gain by considering the sale consideration - HELD THAT:- Relevant clause of JDA agreement it becomes clear that the assessee has given only the permissible possession of the land to the developer at the time of executing the JDA and the ownership is not transferred. We also see merit in the submission of the ld. AR that the assessee has offered the capital gains to tax as and when the developer handed over the flat as per cl. 6.1 of the JDA. In our view, no taxable event happened during the year under consideration and the basis on which the capital gain is computed by the AO is not tenable. We therefore hold that the capital gain computed by the AO is to be deleted. This ground is allowed in favour of assessee.
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2023 (3) TMI 663
Parallel proceedings under Income-tax Act, 1961 and IBC, 2016 - liquidation proceeding has commenced - IBC Code overriding anything inconsistent contained in any other enactment including the Act - liquidation proceedings had commenced as per the order of NCLT - HELD THAT:- As per the stated order of NCLT, Kolkata in the case of the assessee by appointing the Official Liquidator. We are aware that from the time of appointment of Official Liquidator, the assessee company became defunct and the Official Liquidator stepped into the shoes of the assessee. In the present case, it is seen that the Official liquidator has not appeared before us so far to present the case of the assessee. Pertinently, it is to be observed that in case of parallel proceedings under Income-tax Act, 1961 and IBC, 2016, the IBC has an overriding effect over the provisions of the Income-tax Act which has been decided by Hon ble Apex Court in Principal Commissioner of Income-tax Vs Monnet Ispat Energy Ltd [ 2018 (8) TMI 1775 - SC ORDER] wherein had observed that as per section 238 of IBC, the IBC Code will override anything inconsistent contained in any other enactment, including the Income-tax Act. Similar issue was dealt by the Coordinate Bench of Mumbai ITAT in the case of Pratibha Industries Ltd. [ 2022 (6) TMI 1362 - ITAT MUMBAI] appeals filed by the Revenue and the assessee were dismissed with the liberty to recall the matter on application made for the same within the permissible limitation. We dismiss the appeal by the assessee with the liberty to the assessee/liquidator to file the application for recall this order as and when the occasion warrants. The issue of limitation in filing fresh appeal, if need be, will be governed by the decision of Hon ble Supreme Court in the case of New Delhi Municipal Counsel [ 2022 (5) TMI 1123 - SUPREME COURT] Appeal of the assessee is dismissed.
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2023 (3) TMI 662
Denial of Foreign Tax Credit (FTC) - assessment was selected for limited scrutiny regarding foreign financial interest - AO did not allow the credit for FTC on the ground that the assessee did not furnish form 67 on or before filing return of income within the prescribed due date u/s 139(1) as required under Rule 128 of I.T. Rules - CIT(A) confirmed the view taken by the AO and held that failure to comply with the mandatory requirements under Rule 128 of I.T. Rules and non filing of Form 67 within the due date prescribed under Section 139(1) of the Act cannot be condoned - HELD THAT:- As stated that this was a bona fide mistake and the said dividend income has already been taxed outside India. It is claimed that since the due date for filing the revised return of income was lapsed the assessee could not file the revised return of income. However, she recomputed the total income and filed Form 67. The assessee had also duly remitted the tax on the said income and requested the AO to allow the due FTC. The same has been denied solely for the reason that Form 67 has not been filed within the due date prescribed for filing return under Section 139(1) of the Act. This issue is no longer res-integra and the same is covered in favour of the assessee by the coordinate bench order of the Tribunal in the case of Shashidhar Seetharam Sharma[ 2022 (9) TMI 1430 - ITAT BANGALORE] The coordinate bench order of the Bangalore Tribunal had considered other coordinate benches orders and had held that (i) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67; (ii) filing for Form No. 67 is not mandatory but a directory requirement and (iii) DTAA overrides the provision of the Act and the rules cannot be contrary to the Act. It was concluded by the Tribunal that non-furnishing of Form No. 67 before the due date under Section 139(1) of the Act is not fatal to the claim for FTC. We direct the AO to allow the claim of FTC. Appeal filed by the assessee is allowed.
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2023 (3) TMI 661
Penalty u/s 271B - assessee has not filed the tax audit report u/s 44AB before the due date - HELD THAT:- Respectfully following the case of Balaji Logistics v. ACIT [ 2022 (9) TMI 1432 - ITAT CHENNAI] for the assessment year 2015-16 when the Tax Audit Report was made available to the AO before completion of assessment proceedings, then for venial technical breach without any mala fide intention, penalty cannot be levied u/s.271B , thus we are of the considered opinion that it is not a fit case for the levy of penalty under section 271B of the Act and accordingly, the penalty levied stands deleted. As decided in P.Senthil Kumar v. PCIT [ 2019 (1) TMI 222 - MADRAS HIGH COURT ] for venial technical breach without any mala fide intention, penalty cannot be levied. Decided in favour of assessee.
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2023 (3) TMI 660
Penalty u/s 271F - rejecting the claim of the assessee in respect of indexed cost of improvement based on valuation report of the registered valuer being construction made by the assessee - HELD THAT:- From the arguments of assessee, it is observed that the assessee had resubmitted the desired documents on three occasions before the ld. CIT(A) on 17-01-2021, 11-03-2022 and lastly on 22-09- 2022 but the ld.CIT(A) had not asked for documents like building plan approval, property tax receipt if any, cost of improvement with sources and bills and vouchers during the period of three years. The Bench has deeply considered the submissions of the ld. AR of the assessee and found that it does not suffer from any infirmity as no building approval is required for construction area of 870 Sq. Fts and property tax was not leviable on the residential house property. The assessee has shown the investment of source like (i) Rs.1,80,000/- (given by the wife of the assessee out of her Istri Dhan (ii) Rs.90,000/- (given by the father of the assessee in instalments) (iii) Rs.78,000/- (out of the funds available with the assessee) for which the assessee has filed an affidavit (PB 30-31). The assessee has also filed an affidavit of Contractor Shri Om Prakash Kumawat (PB 32-33). As decided in assessee own case [ 2022 (9) TMI 875 - ITAT JAIPUR ] AO has passed the assessment order ex-parte taking into consideration the assessee has not advanced any documents pertaining to sale of house in question. It is also noted from the record that the assessee is not having any taxable income and the AO has not given the benefit of indexed cost of acquisition and indexed cost of improvement on the immovable property in question and thus in that eventuality the capital gain arose on the sale of immovable property would have been below taxable limit. This plea of the ld. AR of the assessee tantamounts to reasonable cause as is prescribed u/s 273B - Appeal of assessee allowed.
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2023 (3) TMI 659
Addition u/s 68 - assessee HUF suffered heavy loss from speculation business for which payment of the heavy losses the assessee had shown excess income in his ITR from undisclosed sources - HELD THAT:- AO did not reject the books of account of the assessee. The assessee had filed complete details and discharged his primary burden and the AO had not made further enquiry. It is also noteworthy to mention that in the case of CIT vs P.K. Noorjahan [ 1997 (1) TMI 6 - SUPREME COURT] held that if explanation is dissatisfactory even though the addition is not sustainable and that provision of Section 68 is discretionary and discretion must be used as per law and decided judgements and not according to the presumption. Since the assessee has submitted the entire details, books of accounts etc. and the AO did not reject the books of account of the assessee, hence the addition so made on presumption basis does not support in view of the decision of Hon ble Supreme Court in the case of CIT vs P.K. Noorjahan (supra). Therefore, we do not concur with the findings of the ld. CIT(A) and this Ground No. 2 of the assessee is allowed. Addition u/s 68 - undisclosed source - assessee filed affidavit relating deposit of Khem Chand Khatri HUF but considered Rs.1,00,000/- in name of Khem Chand Khatri (Ind.) and remaining not considered and ld. CIT(A) sustained addition - HELD THAT:- As in the case of Shweta Goyal [ 2021 (4) TMI 398 - ITAT JAIPUR] wherein the Bench has observed once the AO has examined the documents so produced by the assessee and recorded his satisfaction regarding the identity of the donors, the genuineness of the gifts and the source of such gifts, the assessee has discharged the necessary onus cast on her and no addition can be made in her hand - hence, the addition so made is deleted. Hon ble Supreme Court in the case of M/s. Mehta Parikh Co.[ 1956 (5) TMI 4 - SUPREME COURT] wherein the head note is Income Tax Income from undisclosed sources- assessment assessee s explanation based on accounts supported by affidavit, Accounts accepted as genuine and statements in affidavits not controverted- Finding based on no evidence- Inference from proved or admitted facts-If question of law Principle of interference from Income Tax Act- Indian Income Tax Act (XI of 1922, ss 62(3), 26A. The Bench taking into consideration the submissions of the assessee and the case laws cited above do not concur with the findings of the lower authorities in disallowing the addition so made amounting u/s 68. Decided in favour of assessee.
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2023 (3) TMI 658
Revision u/s 263 - depreciation on goodwill - HELD THAT:- Claim of depreciation in the hands of the demerged company was enquired during the course of assessment proceedings - we also observe that during the course of assessment, the assessee had furnished various factual and legal submissions in respect of its claim of depreciation on goodwill vide submission dated 19-12-2017, wherein the assessee relied on the case of Smifs Securities [ 2012 (8) TMI 713 - SUPREME COURT] in support of its claim for depreciation of goodwill by assessee company. As observe that the extract of board resolution passed by the meeting of board of directors and order passed by the Hon ble Gujarat High Court granting approval to the aforesaid said of demerger and also the valuation report prepared by the approved valuer dated 04-10-2014 were all submitted before the AO during the course of assessment proceedings, for his consideration. Accordingly, in the light of the above, we are of the considered view that the AO had examined the aspect of assessee s claim of depreciation during the course of assessment proceedings, factually as well as legally, while allowing the assessee s claim of depreciation on goodwill. Whether the assessee took a view which is legally plausible/sustainable in law? - High Court of Gujarat in the case of Pr. CIT vs. Zydus Wellness Ltd. [ 2017 (10) TMI 373 - GUJARAT HIGH COURT] has held that assessee company is entitled to claim depreciation on goodwill expended at the time of amalgamation of companies. In the said order, the Hon ble Gujarat High Court placed reliance on the decision in the case of CIT vs. Smifs Securities [ 2012 (8) TMI 713 - SUPREME COURT] , while deciding the issue in favour of the assessee. We are of the considered view that the AO has placed reliance on the case of Smifs Securities supra while allowing the claim of depreciation on goodwill for the impugned assessment year and hence the view taken by ld. Assessing Officer can be held to be legally plausible view. Regarding the scope of enquiry u/s 263 of the Act, it may be useful to refer to jurisdictional Gujarat High Court decision in the case of Principal Commissioner of Income Tax-3 v. Minal Nayan Shah [ 2020 (9) TMI 825 - GUJARAT HIGH COURT] - we are of the view that CIT has erred in facts and in law invoking the provisions of section 263 in the instant set of facts. Accordingly, we direct that the order passed by the Pr. CIT u/s. 263 of the Act may be set aside. Appeal of assessee allowed.
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2023 (3) TMI 657
TDS u/s 194A - Disallowance u/s 40(a)(ia) - expenditure was incurred by the assessee under the head other borrowing cost and financial charges - whether the payment made by the assessee to the secured creditors pro rata inter se, towards additional amount till the date of IPO, amounts to interest under section 2(28A) of the Act, or it is in the nature of compensation? - HELD THAT:- It is an admitted fact that the assessee entered into an SOA with its secured creditors and members proposing to restructure the debts as well as the capital and filed an application before the Hon ble High Court of Andhra Pradesh. The liability to pay the additional amount has nothing to do with the debt or CCDs, inasmuch as the CCDs were extinguished by such date, but it gets triggered only till the assessee goes to the IPO. When the payment has nothing to do with the debt or CCDs, in our considered opinion such payment does not fall under section 2(28A) of the Act. Inasmuch as the liability is not depending upon the debt or CCDs, but contingent upon the happening of the IPO, such payment cannot be called as payment of interest. Consequently, the provisions under section 194A or 40(a)(ia) of the Act are not attracted. Such an amount partakes the character of compensation accrued to the secured creditors because of the default committed by the assessee in going to the IPO and the moment the assessee goes to the IPO such a liability comes to an end. With this view of the matter, we find it difficult to sustain the addition. We, therefore, direct the learned Assessing Officer to delete the addition made on this account and consequently allow the grounds of appeal relating to this aspect. In view of our finding on the issue relating to the application of section 40(a)(ia) of the Act, the other amounts relating to the alternative plea of the assessee become academic. Grounds in respect of the interest on refund received by the assessee and verification of claim of the assessee that there was no warrant for the addition of prior period expenses is not pressed and accordingly dismissed.
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2023 (3) TMI 656
TP Adjustment - AMP Expenses - whether AMP expenditure is an international transaction or notselection of MAM? - HELD THAT:- As relying on Maruti Suzuki India Ltd [ 2015 (12) TMI 634 - DELHI HIGH COURT] we delete the AMP TP adjustment and the mark up thereon. Disallowance of provision for leave encashment - AO disallowed the said provision under section 43B(f) for the reason that leave encashment can be claimed as deduction only on actual payment basis - HELD THAT:- The Calcutta High Court in Exide Industries Ltd v UOI [ 2007 (6) TMI 175 - CALCUTTA HIGH COURT] struck down the provisions of section 43B(f). However, the Supreme Court in UOI v Exide Industries Ltd [ 2008 (9) TMI 921 - SC ORDER] held that clause (f) of section 43B is constitutionally valid and operative for all purposes. Thus, the provision for leave encashment was righty disallowed by the AO and we confirm the same. The assessee has taken an alternate plea that AO be directed to grant relief in respect of payment made towards provision for leave encashment in subsequent years. The direction to allow deduction for subsequent years is not pertaining to the year under consideration and hence we refrain from giving such directions. However, we direct the AO to verify the actual payments made during the previous year relevant to the assessment year under consideration towards leave encashment and allow the same as deduction under section 43B(f). The AO shall also ensure that the assessee does not get double deduction on provision basis and payment basis. Disallowance of depreciation on intangibles - AO has disallowed the same following the earlier years assessment orders - HELD THAT:- The Kamataka High Court in assessee's own case for AY 2000-01 [ 2020 (12) TMI 672 - KARNATAKA HIGH COURT ] has decided this issue in favour of the assessee. Disallowance of interest on customs duty - AO disallowed the same for the reason that interest on customs duty is allowable on actual payment basis u/s 43B - HELD THAT:- In the instant case, the AO has not examined the nature of levy of interest on customs duty. If the interest on customs duty is payable for keeping the imported goods in the customs warehouse beyond the statutory period the said interest would not be covered by section 43B and would be allowable as deduction even if it is not paid. However, if the interest on customs duty is payable for the arrears of customs duty or delayed payment of customs duty then the said interest would be regarded as part and parcel of the customs duty. In such circumstances, the assessee cannot get deduction for interest payable as such interest is directly linked to non-payment or late payment of customs duty. As customs duty is allowable only on payment basis under section 43B, interest levied on arrears or late payment of customs duty is also allowable on actual payment basis under section 43B. The AO is directed to verify the nature of levy of interest on customs duty and decide the allowability of deduction as per our above direction. It is ordered accordingly. Negative movement of deferred revenue - HELD THAT:- As decided in own case 2022 (3) TMI 1506 - ITAT BANGALORE] AO is directed to grant consequential relief in accordance with the decision of the coordinate bench of the Tribunal in terms of adjustment of TDS credit and negative movement in the deferred revenue. The AO is directed accordingly and that a reasonable opportunity of being heard to be given to the assessee before the final decision.
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2023 (3) TMI 655
TP Adjustment - Advertising, Marking and Promotion(AMP) - assessee pointed that the distribution agreement in the impugned assessment year is the same and is renewed automatically on year to year basis - HELD THAT:- There is no change/modification in the terms and conditions of the distribution agreement. Tribunal has been consistently relying on same distribution agreement while passing the order in the preceding assessment years. A copy of the distribution agreement has been placed before us - Revenue has not been able to controvert the submissions of assessee nor any decision contrary to the decision of Tribunal in assessee s own case has been furnished by the Revenue. Thus, we find no reason to take a contrary view, hence, ground of the appeal are allowed in similar terms. TP Adjustment on account of Convention Expenses incurred in normal course of business - HELD THAT:- Admittedly, the TPO/DRP had made a similar alternative adjustment in respect of the convention expenses in the case of the assessee for the aforementioned preceding years viz. A.Y. 2011-12, A.Y. 2012-13 and A.Y. 2013-14. We have perused the orders of the Tribunal for the said respective years and find that the said alternative adjustment on appeal was vacated by the Tribunal. Accordingly, finding ourselves to be in agreement with the view taken by the Tribunal in respect of the issue under consideration in the aforementioned preceding years, we vacate the said alternative adjustment made by the TPO/DRP. TP Adjustment on account of reimbursement of expenses - primary contention for the assessee is that the TPO had made adjustment - TPO had made adjustment of Rs.1,22,62,124/-, however, the DRP enhanced the adjustment to Rs.4,04,53,708/-. It is contended that before enhancement no show cause notice was issued to the assessee - HELD THAT:- Taking into consideration entirety of facts we deem it appropriate to restore this issue back to the file of AO for denovo consideration after affording reasonable opportunity of hearing to the assessee, in accordance with law. Consequently, ground of the appeal are allowed for statistical purpose. Working capital adjustment while computing operating margin of comparable companies - HELD THAT:- After allowing working capital adjustment the operating margin of the assessee company was within permissible 3% range of tolerance limit of revised arm s length mean of comparable companies. Consequently, the adjustment in assessment year 2014-15 was deleted. In the impugned assessment year the ground are restored back to the file of AO with similar directions. Disallowance of expenditure on account of payments to Doctors/Convention expenses, printing and equipment, hiring charges, grants to medical association, accommodation expenses of the medical practitioners, conducting of medical education meetings, expenditure on food, travel facilities, registration charges, car hiring charges, etc. - HELD THAT:- Expenditure on medical practitioners be restored to Assessing Officer for reconsideration in the light of decision rendered by Hon'ble Supreme Court of India in the case of Apex Laboratories Pvt. Ltd.[ 2022 (2) TMI 1114 - SUPREME COURT] Without commenting on merits of the issue raised they are restored to the file of Assessing Officer for adjudication in accordance with the decision rendered in the case of Apex Laboratories Pvt. Ltd. vs. DCIT(supra). Disallowance of depreciation on buildings - HELD THAT:- The stand of the assessee is that building in question forms part of the block of assets and continue to exist even after manufacturing was discontinued. We find that for similar reasons in assessment year 2008-09 assessee s claim on depreciation on plant, machinery and building was disallowed by the Assessing Officer. Non-granting of credit of TDS - HELD THAT:- The issue is restored back to the file of AO for the limited purpose of ascertaining the correct amount of TDS credit to be allowed to the assessee. AO is directed to re-examine the issue and grant TDS credit accordingly.
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2023 (3) TMI 654
TP Adjustment - Period of limitation in terms of section 92CA(3A) - transfer pricing order passed during 60 days prior to the due date of completion of assessment is time barred - HELD THAT:- Since the order passed by the TPO u/s 92CA of the I.T.Act for A.Y.2010-2011 and 2011-2012 are beyond the period of limitation and bad in law, the addition in respect of international taxation (TP adjustments) stands quashed. Therefore, grounds on merits on TP adjustments in both the appeals of the assessee are not adjudicated.
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2023 (3) TMI 653
TP Adjustment - determination of ALP of the financial guarantee given by the Appellant to its AEs @ 1.25% per annum by the DRP - DRP has while reducing the rate of guarantee commission from 2.07% as determined by the TPO to 1.25% relied upon the order of DRP for the Assessment Year 2013-14 and 2014-15 - HELD THAT:- Respectfully following the said decisions of the co-ordinate benches of the Tribunal in the case of the Appellant for the Assessment Years 2011-12 [ 2021 (10) TMI 822 - ITAT MUMBAI ], 2012-13 [ 2021 (4) TMI 254 - ITAT MUMBAI ], 2013-14 [ 2021 (10) TMI 453 - ITAT MUMBAI ] and 2014-15 [ 2021 (4) TMI 254 - ITAT MUMBAI ], we hold that corporate guarantee commission determined by the Appellant at the rate of 0.40 per cent per annum is at arm s length not requiring any transfer pricing adjustment. Adoption of interest rate @ LIBOR plus 3.332% per annum as appropriate rate to benchmark interest charged on loan to AEs - TPO had determined ALP taking interest rate of 6.17 percent per annum which was reduced to LIBOR plus 2.9% by the DRP - HELD THAT:- Since the same loan is continuing during the relevant assessment year, we do not see any reason to depart from a view consistently taken by the Tribunal in the case of the Appellant for the immediately preceding assessment years in respect of the same loan transaction. We delete the addition on account of upward transfer pricing adjustment relating to interest charged to AEs. Disallowance u/s 14A of the Act read with Rule 8D - necessity of recording satisfaction - HELD THAT:- We note that the Appellant had methodically identified actual expenses which can be reasonably treated as relatable to the exempt income and disallowed such expenses under Section 14A. However, the Assessing Officer had, without recording dissatisfaction, rejected the computation/statements furnished by the Appellant. The Tribunal has, in identical facts and circumstances, decided this issue in favour of the Appellant vide order [ 2021 (10) TMI 822 - ITAT MUMBAI ] pertaining Assessment Year 2011-12 holding that the satisfaction recorded by the Assessing Officer in rejecting Appellant s computation was not in accordance with the mandate envisaged under section 14A(2) of the Act - we delete the disallowance made by the Assessing Officer under Section 14A of the Act read with Rule 8D(2)(iii). Grant credit of tax deducted at source - intimation u/s 143(1) - HELD THAT:- Appellant not being satisfied filed appeal before the Tribunal which was disposed off vide order [ 2020 (2) TMI 21 - ITAT MUMBAI ] giving certain directions to the Assessing Officer. The Ld. Authorised Representative for the Appellant submits that the Assessing Officer has not taken any steps pursuant to the order passed by the Tribunal. In the interest of justice we deem it appropriate to comply with the order passed by the Tribunal while passing appeal effect order.
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2023 (3) TMI 630
Additional depreciation - Tribunal justification in allowing the claim of additional depreciation in the subsequent year because as per provisions of Section 32(1)(iia) any new (and not any old) machinery or plant acquired or installed is eligible for additional depreciation - HELD THAT:- It cannot be disputed by the revenue that substantial question of law, admitted for consideration in this appeal, has been answered against the revenue. Several decisions have been referred to in this connection, in the case of Principal Commissioner of Income Tax, Central - 1, Kolkata Vs. Ramkrishna Forging Limited [ 2022 (7) TMI 1312 - CALCUTTA HIGH COURT] and in the case of Commissioner of Income Tax, Chennai Vs. Aztec Auto (P.) Ltd. [ 2020 (9) TMI 541 - MADRAS HIGH COURT] - Following the said decision, the substantial question of law has to be answered against the revenue.
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Customs
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2023 (3) TMI 652
Interest under Section 27A of the Customs Act, 1962 - refunds were made allegedly after delay of more than 90 days of receipt of applications for refund and for which respondents are liable to pay interest under Section 27A of the Customs Act, 1962, according to the petitioner - HELD THAT:- The claim of the petitioner under Section 27A of the Customs Act, 1962, for the alleged delayed refunds cannot be granted for the reason that the Section 27A of the aforesaid Act provides the condition that a person is entitled for the refund on receipt of application under Section 27(1) of the Customs Act, and on fulfilling the conditions under Section 27 (1) of the aforesaid Act which in this case is not admitted and is highly disputed as to whether the applications under Section 27 (1) of the Act were made by the petitioner in proper Form and manner as prescribed under the law - On a plain reading of Section 27 (2) of the Customs Act it appears that such application for refund can be allowed on the satisfaction of the Assistant Commissioner of Customs and which according to the respondent Customs authority, in this case, has not been fulfilled which is established from the fact that memos were issued pointing out the deficiencies and the petitioner has responded to those memos of deficiencies in the applications for refund, under the aforesaid Act. Considering all the relevant provisions of Section 27 (1), 27(2), 27A of the Customs Act, 1962, and Regulation 2 along with Explanation under Regulations 2(3) of the Customs Refund Application (Form) Regulations Act, 1995, that the petitioner is not entitled to get interest on the refund on all those applications submitted by the petitioner making claim of refund, where memo of deficiencies were issued and after compliance of such memo of deficiencies refund has been made within the time prescribed under the statute and petitioner will be entitled to get interest only in those cases in which even after responding and compliance to deficiencies of memos and submitting the requisitioned documents, refund has been made by the respondent authorities beyond the time prescribed under the statute. Respondents authorities shall make payment of interest to the petitioner within four weeks from the date of communication of this order if any amount of interest found due after verification from record and after taking into consideration the discussion, observation and law laid down in this judgment. Writ petition disposed off.
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Insolvency & Bankruptcy
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2023 (3) TMI 651
CIRP - Seeking Formulation and implementation of a scheme that conclusively addresses the grievances of other home buyers who may not have the capacity to approach courts/forums to seek redressal against builders - Seeking issuance of directions to the Central Government to draft and implement a comprehensive scheme to address the grievances of home buyers availing home loans - grant of full tax benefit from the date of payment of- first instalment of EMI to the Bank to all those home buyers who have taken home loan from the banks but possession of their dream home is delayed due to the fault of the builder. HELD THAT:- In SMALL SCALE INDUSTRIAL MANUFACTURES ASSOCIATION VERSUS UNION OF INDIA (UOI) AND ORS. [ 2021 (3) TMI 1214 - SUPREME COURT ] , the Apex Court while placing reference to the observation made in PEERLESS GENERAL FINANCE INVESTMENT CO. LTD. VERSUS RESERVE BANK OF INDIA [ 1992 (1) TMI 337 - SUPREME COURT ], proceeded to hold that the courts ought not to supplant themselves for government expert authorities fully competent in the domain of economic and fiscal policy, which in this instance is the RBI. In INTERNET AND MOBILE ASSOCIATION OF INDIA VERSUS RESERVE BANK OF INDIA [ 2020 (3) TMI 364 - SUPREME COURT ] , the Apex Court held that directions issued by the RBI are supplemental to the statutory force of the RBI Act, 1934. Statutory directives issued by RBI are done in exercise of powers under Sections 21 and 35A of the Banking Regulation Act, 1949. The master circulars in the counter affidavit sets out extensive detailed norms for lending activities which would include housing loans, for banks to follow and implement. What emerges thus on a reading of the foregoing is that the RBI being a regulatory body is equipped with requisite expertise to advise on and to formulate economic policies, that have a binding effect on the banking system which is backed by statutory force - it is well settled law that while considering matters pertaining to economic policy, courts ought to yield to the wisdom of policy makers who are fully equipped to decide on matters of policy in their domain, and therefore to refrain from exercising powers of judicial review. A perusal of the same shows that a well structured regimen has been created by the RBI which includes guidelines to the various banks on the issue of advancing loans to home buyers. A perusal of the said Master Circular shows that RBI has given advice to various banks as to which all projects should loans be advanced and the precautions which the banks have to take while extending loans. The Master Circular also advices that the quantum of loans which are to be granted by the banks for housing finance and also to maintain loan to value ratio in case of individual housing loans. When the projects proponent defaults in completing a project, it is always open for the banks to approach the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 for getting a Insolvency and Resolution Professional appointed and to take measures to ensure that project is revived and the project is completed because the banks are also anxious to recover their money - Other than the remedies in Insolvency and Bankruptcy Code, 2016, it is always open for the home buyers to approach the Real Estate Regulatory Authority (RERA) to ensure that the project is completed. There is a proper regimen available to redress the grievances of a home buyer and also in view of the Master Circular issued by the Reserve Bank of India, no further Orders and directions are required to be passed in the instant petition. The petition is dismissed.
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2023 (3) TMI 650
Seeking permission to petitioner no. 1 to place its indents on the e-indenting system of the respondent relating to supply of raw materials - right over the siding or a license to use the siding - HELD THAT:- The decision in West Bengal State Electricity Distribution Company Limited vs. Sri Vasavi Industries Limited [[ 2022 (7) TMI 580 - CALCUTTA HIGH COURT] ] make it clear that any claim not made during the course of CIRP and before approval of resolution plan shall automatically be extinguished and the corporate debtor is deemed to start its operations with a clean slate after the resolution plan is approved. In the present case, the respondent Railways admittedly failed to lodge its claims before the Resolution Professional or the Committee of Creditors during the CIRP. Simply put, the dues which the Railways omitted to claim are no longer in existence by operation of law. It is further evident that the Railways is attempting to foist its demands on the petitioners through a belated window which it cannot do after the law laid down by the Supreme Court. It is also significant that the letter of 21st September, 2015 is addressed to Ramswarup Loh Udyog which merged into the petitioner no. 1 in 2007. This letter does not raise any other issue save and except that Ramswarup Loh Udyog has been de-licensed from 1st September, 2014 for non-payment of dues amounting to Rs. 12,51,416/-. Hence, the claim of the Railways is a monetary claim, simpliciter. Since the claim stood extinguished on and from 4th September, 2019 when the petitioner no. 1 emerged successful from the CIRP, the Railways cannot penalize the petitioners for non-payment of dues including creating operational firewalls on the e-indenting system. Application allowed and disposed of with a direction on the respondent South Eastern Railway to permit the petitioner no. 1 to place its indents for supply of raw material on the e-indenting system within 7 days from the date of communication of this judgment.
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2023 (3) TMI 649
Violation of principles of natural justice - Resolution Applicant was a party to the Application or not - legality of Resolution Plan - transfer of development rights and rights of sale to Brys International Pvt. Ltd. by way of Collaboration Agreement is non-est or not - HELD THAT:- The Collaboration Agreement transferred the Sale Rights in the land without obtaining the approval of the Noida. The Brys International Pvt. Ltd. in pursuance of the Sale Rights took financial liabilities by allotting units to various Homebuyers. In the CIRP of Brys International Pvt. Ltd., the land which has been leased out, could not be made the subject matter of the Resolution Plan, nor the leased land could be dealt in the CIRP of Neo Infrastructure Pvt. Ltd. without there being any prior approval of the Noida. The Application was filed by the Noida much before the Resolution Plans came to be considered before the CoC. It is true that one of the prayers in the Application was that Respondent be directed not to consider the composite Resolution Plans, which prayer made in the Application still survives and has rightly been considered by the Adjudicating Authority in the impugned order. The submission of the Appellant that Application has become infructuous cannot be accepted. When it has been pointed out before the Adjudicating Authority that the terms of the Lease Deed under which the land was leased out is being violated and the said land is sought to be dealt in the Resolution Plans, Adjudicating Authority had every jurisdiction to direct that composite Plan be not considered. There are no substance in the submission raised on behalf of the learned Counsel for the RP that Adjudicating Authority had no jurisdiction in the matter. The submission is wholly unfounded and is uncalled from the RP, who is duty bound to ensure that provisions of the Code and Regulations are complied with. When the question that composite Plan submitted by Resolution Applicant for approval, does not fulfil the criteria and is not valid or legal, the RP cannot be heard in saying that issues be not looked into by Adjudicating Authority. All acts of RP should be to ensure that Resolution Plan submitted in CIRP, does not violate any provision of law and is not in contrary to the interest of stake holders. The submission on behalf of learned Counsel for the RP that Adjudicating Authority has no jurisdiction is unfounded submission, which need to be strongly rejected. On looking into the facts of the present case, it is clear that composite Resolution Plan submitted with regard to two different Corporate Debtors, whose CIRP is being conducted by RP simultaneously, without there being any order of consolidation of the CIRP and Resolution Applicant has submitted a composite Resolution Plan, dependent on each other, is nothing but clever device adopted to harm the interest of the stake holders, specially Respondent No.1 - there are no error in the impugned order passed by the Adjudicating Authority. Appeal dismissed.
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2023 (3) TMI 648
Seeking approval of the resolution plan - whether the employees/workmen whom the Appellants are representing as various office bearers of the trade unions had put up their claim with proof in order to recover the said amount as has been done by 11 other employees of the same Corporate Debtor who had filed their applications in accordance with Regulations? HELD THAT:- It has been repeatedly held that IBC is a complete code in itself. Various Regulations have been made in terms of various provisions of the Code in which Regulations have also been made which came into force w.e.f. 01.12.2016. Chapter IV of the Regulations, dedicated to the proof of claims, of various class of creditors in which Regulation 9 is related to the claims of the workmen/employees. A close reading of Regulation 9(2) of the Regulations says that where there are dues to be paid to the workmen or employees of the Corporate Debtor, they may collectively choose an authorised representative to submit their claim with proof but in Form-E of the Schedule. The word used in Regulation 9(2) of the Regulations is may as against shall in Regulation 9(1) of the Regulations which means that Regulation 9(2) of the Regulations is provided more as a matter of convenience for the workmen or employees but still demands a declaration in respect of claim with proof and verification of the Form Particulars mentioned therein. In the present case, firstly, there is no such claims set up by the workmen/employees individually in terms of Regulation 9(1) of the Regulations by resorting to form-D as is evident from Annexure B appended with the application i.e. CA (IB) No. 650/KB/2019. Besides, it has been the positive case of Respondent that even this list was never received by the RP because it has been mentioned in the letter dated 11.03.2019 (Annexure A4) that the said list shall be sent by the office bearers of the Appellants by registered post but no evidence is brought on record in this regard that the list was ever sent by registered post to the RP who has categorically denied it by way of an affidavit filed before the Adjudicating Authority. Evidently, there is a total non-compliance of Regulation 9(1) of the Regulations. Similarly, there is non-compliance of Regulation 9(2) of the Regulations as well because Annexure A4 dated 11.03.2019 in no manner an authority given to the authorised representative rather it is more of a covering letter by the office bearers of the trade unions of the workmen and the clerks association. Therefore, even the provisions of Regulation 9(2) of the Regulations has not been complied with. It has also come on record that a provision has been made to the extent 20% of total amount of Rs. 12.78 Crore in order to satisfy any amount in future which is yet to be claimed but it cannot be said that the amount which has been admitted has not been paid or made a provision in the resolution plan by the RP/SRA. There are no illegality in the order by which the application has been dismissed - appeal dismissed.
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2023 (3) TMI 647
Legality of approved Resolution Plan - ineligibility of the erstwhile promoters - case of appellant is that Respondent had given their personal guarantee in favour of the creditor on behalf of the Corporate Debtor on 03.06.2015 then their case would be covered by Section 29A(h) of the Code and they would be held to be ineligible to submit a resolution plan - case of respondent is that the letter dated 03.06.2015 is not a guarantee but it is only an intention to execute a personal guarantee in case of the happening of an event. It is further submitted that such a guarantee has to be invoked by the creditor and remained unpaid in full or part. HELD THAT:- In order to appreciate, the rival contention in this regard, the language of the letter dated 03.06.2015 has to be appreciated. Counsel for the Respondent has rightly argued that Section 29A(h) of the Code talks of an event which has already taken place i.e. has executed (a guarantee) whereas letter dated 03.06.2015 says that in case of failure on the part of POGGENAMP to pay to POSCO-IPPC the said outstanding dues, as mentioned herein, we (the undersigned) shall provide/execute Personal Guarantees in our respective individual capacities in favour of POSCO-IPPC within 30 days from the date of such failure . A close scrutiny of the aforesaid language used in the letter dated 03.06.2015 indicates that Respondent No. 2 had not executed any guarantee rather it had offered to execute a guarantee in case of the happening of a particular event. There is no other document placed on record besides the letter dated 03.06.2015 to clinch this issue that personal guarantee had already been executed by Respondent No. 2 at the time when they had submitted their resolution plan and that guarantee had been invoked by the creditor and the amount remained unpaid in full or part, therefore, was ineligible in view of Section 29A(h) of the Code. There are no substance in the arguments raised by Counsel for the Appellant for the purposes of reversing the order in the application which has been allowed by the impugned order. After perusal of the record, we are satisfied that neither the issue of review nor res-judicata is made out on the facts and circumstances of the present case. Lastly, the Appellant has tried to argue that the Respondent No. 2 was not entitled to the benefit of Section 240A(1) of the Code whereas the case of Respondent No. 2 is that it is not seeking the benefit of Section 240A(1) and has neither claimed such a benefit. It is rather submitted that the letter of MSME was withdrawn - As a matter of fact, from the perusal of the entire record, we have found that the whole case of the Appellant to dislodge the claim of the SRA revolves around the letter dated 03.06.2015 i.e. alleged personal guarantee, in order to attract the rigour of Section 29A(h) of the Code but since, Respondent No. 2 had not executed any guarantee, vide letter dated 03.06.2015, rather it was stated that it may execute a guarantee on failure of certain event that may happen at the instance of the Corporate Debtor, therefore, Section 29A(h) was not at all attracted to the present lis. There is no error in the order impugned herein at the instance of the Appellant and therefore, the appeal is found without any merit and the same is hereby dismissed.
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2023 (3) TMI 646
Mainability of applicable u/s 65 while the application for initiation of CIRP is pending before NCLT - Fraudulent or malicious initiation of proceedings - Application filed under Section 65 of the Insolvency Bankruptcy Code, 2016, has been dismissed on the ground that such an application would be maintainable only after the main petition is admitted and CIRP is initiated - whether an application filed under Section 65 of the Code is maintainable after the filing of the application under Section 7, 9 or 10 of the Code or could be maintainable only after the admission of such an application? HELD THAT:- The application under Section 65 has been filed at the stage of initiation of the proceedings for the purpose of CIRP and is not maintainable after the admission of the application as has been held by the Learned Tribunal. The question posed herein before, is answered in favour of the Appellant and against the Respondents. It is hereby held that in case where application is filed under Section 65 of the Code, it would be maintainable after the application is filed either under Section 7, 9 or 10 of the Code. The view taken by the Learned Tribunal that the said application would be maintainable only after admission and initiation of the CIRP proceedings is totally fallacious and is hereby overruled. The present appeal is hereby allowed - the impugned order is hereby set aside and the matter is remanded back to the Learned Tribunal to proceed further after taking into consideration the fact that the application of the Appellant is maintainable .
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PMLA
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2023 (3) TMI 645
Money Laundering - no scheduled offence - whether registration of a scheduled offence is a condition precedent for initiating ED proceeding? - HELD THAT:- Admittedly, the respondent No.1 ED had registered the ECIR in question, pursuant to the registration of an FIR i.e. scheduled offence/predicate offence, which predicate offence now stands closed. This Court in the case of State of Maharashtra v/s Bhimrao Vithal Jadhav, [[ 1974 (9) TMI 137 - BOMBAY HIGH COURT] ] had observed that granting of C Summary amounts to an acquittal. Similarly, in Vijay Madanlal Choudhary [[ 2022 (7) TMI 1316 - SUPREME COURT] ], the Apex Court had observed that if a person is discharged or acquitted of a scheduled offence by a competent Court, there can be no offence of money laundering against him. Admittedly there is no scheduled offence as against the petitioner in both the petitions, in view of the closure report filed by the police, which was accepted by the Courts. There being no predicate offence i.e. scheduled offence, the impugned ECIR registered by the respondent No.1 ED will not survive and as such the said ECIR will have to be quashed and set aside. Petition allowed.
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Service Tax
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2023 (3) TMI 644
Appropriate Forum - High Court or not - Levy of service tax - manpower recruitment /supply agency service - construction services other than residential complex, including commercial / industrial buildings or civil structures / erection/ commissioning and installation service - Works Contract service - HELD THAT:- No useful purpose would be served either to the appellant or to the revenue in keeping the writ petition pending since the order impugned in the writ petition is an order of adjudication and the correctness of such an order is required to be tested by the appropriate appellate authority, who will be able to re-appreciate the factual position and also decide on any jurisdictional issue that may be raised by the appellant. The appeal and the writ petition are disposed of by directing the appellant to file an appeal to the appropriate appellate authority challenging the order dated 29th April, 2022 and such appeal shall be filed within a period of three weeks from the date of receipt of server copy of this judgment and order after complying with the pre-deposit condition of paying 7.5% of the disputed tax.
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2023 (3) TMI 643
Need of pre-consultation before issuance of Show Cause Notice - Liability of service tax imposed on the petitioner - ocean freight charges - petitioner states that the goods imported were CIF imports and, therefore, there is no question of any service tax being paid on any service relating to ocean freight since the petitioner has not received any such service and the service, if any received, has been received by the exporter from the overseas. HELD THAT:- The Department shall give full opportunity to the petitioner to respond to the observations in the special audit report and if the explanation is found, not satisfactory, then issue a fresh Show Cause Notice, also correcting the errors that have crept in the Show Cause Notice dated 21.04.2022. Mr. Tarun Gulati, learned Senior Counsel appearing for the petitioner submits that although the audit report itself is liable to be set aside but the suggestion from the respondent would meet the ends of justice. The Department is at liberty to issue a fresh notice for pre-consultation. It is also directed that the Show Cause Notice, if any, would be issued only after the explanation of the petitioners in respect of observations made in the special audit report have been duly considered and after reflecting on the figures. The petition is disposed off.
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2023 (3) TMI 642
Rejection of application filed under Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 - rejection on the ground that the same pertains to deposit of only interest and not tax dues as per Section 123 of The Finance Act (No.2), 2019 and thus no relief can be granted purely for the amount of interest u/S 124 of the said Act - HELD THAT:- The Instructions dated 06.10.2022 issued by the Central Board of Indirect Taxes and Customs in specific terms clarified that the expression Tax Dues would include cases where interest has been demanded by a show cause notice or order in original. Revenue needs to revisit the claim of the petitioner - The Designated Committee (SVLDRS) under Sabka Vishwas Legacy Dispute Resolution Scheme 2019 /respondent No.1 is directed to reconsider the claim of petitioner and pass appropriate orders within 60 days in accordance with law keeping into account the instructions issued by Central Board of Indirect Taxes and Customs. Petition allowed.
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2023 (3) TMI 641
Levy of Service tax - liquidated damages - Section 66E(e) of the Finance Act, 1994 - HELD THAT:- The CBIC has issued a circular No.178/10/2022-GST dated 3rd August, 2022 in which it has stated its stand on the issue of taxability of various transactions claimed to be liquidated damages . At the time of adjudication by commissioner and hearing before tribunal, this circular was not available on record and therefore, the adjudicating authority could not take benefit of the same. While the issue of levibility of service tax on liquidated damages is a debatable issue, the CBIC has vide Circular No. 178/10/2022-GST clarified its stand on the subject in respect of GST - The said circular also clarified the stand of CBIC on the issue of forfeiture of salary or payment of bond made in the event of employee leaving the employment before the minimum agreed period. Para 5(e) of Schedule-II of CGST Act, is identically worded as Section 66E(e) of the Finance Act, 1994 - The circular was not available to the adjudicating authority when the matter was decided and he could not examine the issue in the light of the aforesaid circular. The issue in dispute can be decided in the light of the aforesaid circular. The matter is remanded to the original adjudicating authority to decide the issue afresh.
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2023 (3) TMI 640
CENVAT Credit - input services - contravention of Rule 4A(2) of Service Tax Rules, 1994 read with Rue 9 (1) of the CENVAT Credit Rules, 2004 - it is alleged that the Zonal offices were neither registered as input service distributors nor did the assessee receive the original invoice/bill from the Zonal offices - HELD THAT:- The Ld. Adjudicating authority had categorically found that the Respondents have obtained Central Excise Registration and is a Input Service Distributor. In that circumstances, there are no infirmity in the impugned order. Therefore the same is upheld. The Appeal filed by the Revenue is dismissed.
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2023 (3) TMI 639
Classification of services - Technical Testing and Analysis Service or Survey and Exploration of Minerals Service? - providing services relating to Well Testing, Well Activation Works, Slick Line Services, Inspection and Monitoring of Well Testing Services, Inspection and Monitoring of Well Testing Services, Acquisition of Reservoir Data in relation to all exploration - Extended period of limitation - HELD THAT:- Reliance upon the decisions in the matter of M/S MINERAL EXPLORATION CORPORATION LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NAGPUR [ 2015 (1) TMI 388 - CESTAT MUMBAI] as well as on COMMISSIONER OF SERVICE TAX, MUMBAI VERSUS FUGRO GEONICS PVT. LTD. [ 2014 (3) TMI 266 - CESTAT MUMBAI] to support that activities like providing exploration report based on survey and retail expression of mineral deposit is the service in the nature of Survey And Exploration Of Minerals Service and is not Scientific or Technical Consultancy Service Classification being a legal issue, the appellants can contest the same at any time specially when legal position brings greater clarity later on. It is further found that the decisions relied upon by the appellants are inconsonance with board circular and largely covered the activities of the appellant s under Survey and Exploration of Minerals Service . In any case, as the cited case laws shows, department itself issued Show Cause Notices for same type of services under various different service classification. Under, the circumstances the extended period with intent to evade cannot sustain. Accordingly, there being confusion in the mind of Department itself and position having become clear through case laws in years 2014 or around, the extended period of demand cannot be invoked. The appeal allowed both on merits as well as limitation.
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2023 (3) TMI 638
Levy of service tax - appellants constructed houses for Essar Limited. and the said houses were used by Essar Limited for their own staff - appellant argued that the service provided by them is not covered under the construction of complex service, since the residential construction was for personal use - HELD THAT:- It is not in dispute that the residential house constructed by the appellant were used by Essar Limited for its own staff. The appellants have claimed that the said use amounts to the personal use as defined in the definition of residential complex and therefore, the service provided by them is not covered under the definition of construction of complex service. The appellants are making residential properties for the use of Essar Group for their employees - The identical service has been defined by Tribunal in the case of CR PATEL VERSUS C.C.E. S.T. -SURAT-I [ 2023 (3) TMI 570 - CESTAT AHMEDABAD] where it was held that service provided by the appellant is to be treated as service provided to Govt. of India directly and end use of the residential complex by Govt. of India is covered by the definition Personal Use in the explanation to definition of residential complex service, the other aspects need not be considered. Appeal allowed - decided in favour of appellant.
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Central Excise
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2023 (3) TMI 637
CENVAT Credit - forged documents - it is alleged that the imported inputs/ raw materials in respect of which Respondent availed the Cenvat Credit of CVD during the period January 2003 to March 2007, was transported from Nhava Sheva Ports to the Respondent s Godowns at Navi Mumbai and was sold in cash at Navi Mumbai and was not transported to its factory at Daman - revenue failed to discharge onus to prove - reliance placed on the third party evidences - Reliance placed on the RTO reports by the revenue - HELD THAT:- In the entire investigation the evidences which were brought on records are transporters statements and their records i.e Daily Loading Reports (DLR) and Monthly Loading Reports (MLR) and RTO reports according to which the vehicles mentioned in the Challans/records of respondents have not entered into Gujarat via Bhilad Check Post. It is found that contrary to this evidences the fact that the respondent have recorded the receipt of the goods in their Raw materials account i.e. RG-23 Part I and RG-23 Part-II, the purchase of the imported goods under the Bills of Entry in question were booked in books of account. The Respondent has also shown the use of disputed inputs in their factory premises for manufacture of finished goods, even the payment of transportation was also made by cheque. The Revenue could not bring any evidence that the goods covered under the Bills of Entry were diverted to any other place. There is absolutely no evidence to show the substitution of raw material which in our view would cut the root of the allegation as the statutory records show that goods were manufactured. No shortage of raw material was detected during search of factory. No single buyer of diverted raw material was found by the revenue. In the present case no such inculpatory statement of alleged diverted imported inputs buyer is available, there was no shortage found in the stock if had the respondent availed the credit without receipt of inputs, there must be shortage of inputs which is not the case here. Thus, the Revenue has failed to discharge the onus as regards the source of receipt of raw materials from any other alternative source rather have made a bald allegation on the manufacturers that they have diverted the imported raw materials on payment in cash in market. The facts are established that the respondent have received the inputs in their factory used in the manufacture of final product and same was cleared on payment of duty. Further, the investigation is silent as to how the respondent-manufacturers, manufactured finished material without receiving the inputs. The law is settled that as long as duty payment is accepted on outputs, the benefit of credit available cannot be denied. Therefore, there are no substantial evidences which result the disallowance of credit. In this circumstance, there are no infirmity in the impugned order. Reliance on third party evidence - HELD THAT:- In the present case the department for denying the Cenvat Credit placed reliance on third party evidence i.e. transporters documents /statements and RTO records. It is necessary to check the evidentiary value of the third party evidence as held in the judgments in the case of BAJRANGBALI INGOTS STEEL PVT. LTD., SURESH AGARWAL VERSUS CCE, RAIPUR [ 2019 (1) TMI 966 - CESTAT NEW DELHI ] held that the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods - Thus, it has been consistently held that demands of whatever nature cannot be confirmed solely on the basis of third party s evidence/records. Reliance placed on the RTO reports by the revenue - HELD THAT:- It is common that truck drivers in order not to pay local tax or/ toll tax for some other reasons, take their vehicle through alternate routes. In such case, only on the basis of check-post report, it cannot be concluded that the truck did not transport the goods to the respondent s factory. Further the said report appears to be of no evidentiary value as observed that it does not give true and correct details of the inward or outward details of vehicles. The said report is erroneous because if the vehicle has made an inward entry it must have an outward entry before making an inward entry and vice versa - the Revenue has not concluded the proper investigation to ascertain the truth, moreover, have relied upon third party documents/evidence which cannot be an evidence to deny credit - the respondent has correctly taken the credit. Once it is clear that the respondent were sought to be issued show cause notice without furnishing copies of relied upon documents and even the efforts were made on the part of the respondents to get the same did not yield any fruitful result and even today the copies of the documents are not made available to the respondents - the finding of the adjudicating authority on the point of non availability of relied upon documents can not be found faulted which does not warrant interference in the impugned order. There are no infirmity in the impugned order, hence the appeals of the revenue are not tenable - appeal of Revenue dismissed.
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2023 (3) TMI 636
Wrongful availment of CENVAT Credit - seeking recovery alongwith penalty - SCN alleged that Respondent has wrongly availed cenvat credit of the CVD paid on Bunkers viz. Fuel Oil, Marine Gas Oil, Lube Oil etc. in violation of provisions of Rule 3 read with Rule 2 (k) and Explanation III to sub-rule (3) of Rule 6 of the Cenvat Credit Rules, 2004 as the same were not their input used in or in relation to manufacture of their final products - HELD THAT:- Section XV covers all goods and materials falling under section 72 to 83 of the Schedule 1 appended to the Central Excise Tariff Act, 1985. Thus, all such goods and materials obtained by such process are considered as excisable goods being subject to levy of duties of excise as per section 2 (d) of the Central Excise Act, 1944. As a corollary the goods and materials, except those covered under section XV (Chapter 72 to 83) are considered as non-excisable irrespective of the fact that they are obtained by breaking up of ships. Thus, Fuels and Oils are non-excisable. It is in this context the cenvat credit of CVD paid on fuel and oils was denied to the Respondent by the adjudicating authority. It is clear that Fuel and Oils are by-product that are inevitably required to be removed from the ship in the course of commencing the activity of breaking the ship and if that be so, there is no reason for denial of cenvat credit of CVD paid on any part of the Ship including its stores viz. fuel and oil on the ground that they do not form part and parcel of the ship or that they are removed at a stage before commencing the activity of breaking ship or that their classification is under different heading. It is settled law that in the course of manufacturing activity any by-product emerges; cenvat credit on that part which pertains to by-product cannot be denied on the ground that such by-products are non-excisable goods or that they are not used in or in relation to manufacturing activity of manufacturer of excisable goods. There can be no doubt that for the purpose of carrying out the manufacturing activity as envisaged under note 9 to section xv viz. obtaining goods and material by breaking of ship, the entire ship as imported is the input for a ship breaker. Ordinarily, ship when imported for breaking purpose would contain fuel and oil whether in the engine, machinery or in the bunker/tanks. There is no reason to treat the same not part of the ship imported for breaking purpose. It has been rightly held by Learned Commissioner (Appeals) that removal of fuel and oil is the initiation of ship breaking activity and cannot be said as separate activity. The impugned order is required to be upheld and appeal of department is liable to be dismissed.
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2023 (3) TMI 635
Recovery of CENVAT Credit - Inputs - cement - welding electrode - MS plate - MS angle - channel - penalty in terms of Rule 15(2) of CENVAT Credit Rules, 2004 read with Secion 11AC of the Central Excise Act, 1944 - HELD THAT:- The issue is no more res integra since the period of dispute is 2007-08 and 2008-09 and the amendment to the definition of input was made on 07.07.2009 and which was made to be not retrospective. It is the case of the Appellant that the disputed items of iron and steel, cement, welding electrodes etc. were used in the factory in the manufacture of storage tank and also for pollution control system and thus are eligible as inputs and are squarely covered by the definition of input . Reliance has been made on the decision of the Tribunal in the case of M/S. SINGHAL ENTERPRISES PRIVATE LIMITED VERSUS THE COMMISSIONER CUSTOMS CENTRAL EXCISE, RAIPUR [ 2016 (9) TMI 682 - CESTAT NEW DELHI] where it was held that applying the User Test to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of Capital Goods as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat credit. The impugned orders cannot be sustained and are therefore set aside - Appeal allowed - decided in favor of apellant.
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2023 (3) TMI 634
Denial of CENVAT Credit - Input Service distribution - input services has been distributed only to Parryware situated at Ranipet, though there were other three manufacturing units at Perundurai in Tamilnadu, Alwar in Rajasthan and Dewas in Madhya Pradesh - non-maintenance of separate records - common input services proportionate to trading activity - HELD THAT:- One of the contentions raised by the Department is that the input service credit availed under the category of business auxiliary services which is accounted in nature of reimbursement of freight charges, manager salary, etc., is not eligible for credit. The category of service is not disputed. During the relevant period the definition of input services had a wide ambit as it included the words activity relating to business . For this reason the view taken by the Commissioner (Appeals) that the credit on the impugned services is eligible is legal and proper. Credit has been distributed only to single unit by the Head Office - HELD THAT:- Even if the services are availed at the Head Office the same is available for credit since it is not necessary that the input services should be consumed in the factory itself. Another ground raised by the Department is that the credit has been distributed to one unit only. Prior to the amendment in 2012, Rule 7 did not provide any manner of distribution of input service credit. An assessee had an option to decide the distribution of the credit. Reversal of Credit relating to Trading Activity - HELD THAT:- The Commissioner (Appeals) has directed to reverse the credit which is attributable to trading activity. Though Rule 6 (3A) was introduced with effect from 01.04.2008, the Commissioner (Appeals) has correctly noted that the respondent is not eligible for the credit availed on common input services used for trading activity. Prior to 01.04.2008 the law did not provide a method for calculation of reversing the credit attributable to trading activity - when the formula has been put in effect as per the Rule 6(3A) from 01.04.2008, adoption of the said formula to resolve situation where the credit has been availed on trading activity does not require interference. The Commissioner (Appeals) has given direction to the respondents to furnish before the Department work sheets of the proportionate credit relating to trading activity within a period of one month from the date of order. It is also directed to furnish Chartered Accountant Certificate to support the veracity of the figures. Department appeal is dismissed.
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2023 (3) TMI 633
Valuation - free materials used in connection with the manufacture of the final product Tiltable Tile Cab Assembly which was cleared back to ALL on payment of duty without following the procedure laid down in notification no 214/86 CE dated 23/05/86 as amended - deviation from the provisions of Rule 4 (5) (a) of Cenvat Credit Rules, 2004 (CCR) or not - HELD THAT:- Tribunal had occasions to go through a similar issue in its judgment in the case of SRF LTD. VERSUS COMMISSIONER OF C. EX., CHENNAI-I [ 2007 (3) TMI 613 - CESTAT, CHENNAI] wherein it had set aside the order of the lower authority wherein the issue regarding the manufacture of goods involving free receipt of inputs by the appellant at the intermediate stage of manufacture was involved. The Hon ble Tribunal relied upon the Hon ble Apex Court s judgment in INTERNATIONAL AUTO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BIHAR [ 2005 (3) TMI 132 - SUPREME COURT] , where in it was held that in a case where a manufacturer supplied inputs free of cost to the manufacturer of intermediate products, it was not necessary to include the cost of such material in the assessable value of the intermediary products as the manufacturer of the final product was eligible for the credit of duty paid on all inputs and the intermediary product for clearance of the final product. Operation of the MODVAT scheme on the manufacturer of final product has rendered the valuation dispute of the intermediary product in question of no consequence. Appeal allowed.
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CST, VAT & Sales Tax
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2023 (3) TMI 632
Attachment of petitioner's Bank Account - even without passing an assessment order for the respective assessment years, the impugned proceedings has been issued by the first respondent, exercising its power under Section 45 of the TNVAT Act 2006, which according to the petitioner is arbitrary and illegal. HELD THAT:- Admittedly, only after passing the assessment orders, any coercive recovery proceedings can be initiated by the first respondent against the petitioner - This Court requested the learned Government Advocate appearing for the first respondent to get instructions as to whether any assessment orders were passed in respect of the respective assessment years prior to issuing the impugned proceedings dated 30.01.2023. Unless and until the assessment orders are passed in respect of all the assessment years, for which the attachment order has been passed, which is the subject matter of challenge in this writ petition, the first respondent cannot exercise its power under Section 45 of the Tamil Nadu Value Added Tax Act, 2006 to enforce the sums alleged to be due and payable by the petitioner towards tax liability. If at all, the first respondent can take coercive steps against the petitioner under Section 45 of the TNVAT Act only in respect of the assessment years, where the assessment orders are passed. But being a single proceeding dated 30.01.2023, covering all the assessment years right from 2006-07 to 2016-17, it/the proceeding has to be declared as invalid as in respect of some of the assessment years, mentioned in the impugned proceeding dated 30.01.2023, no assessment orders were passed by the first respondent prior to the issuance of the impugned proceedings. The petitioner also categorically contends that in respect of all the assessment years, for which the impugned proceedings dated 30.01.2023 has been passed, the respondents have not passed any assessment order. Necessarily for the aforementioned reasons, the impugned proceedings dated 30.01.2023 passed by the first respondent has to be quashed and the writ petition will have to be allowed. Petition allowed.
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2023 (3) TMI 631
Works contract of the Tyre Retreading Division - expenses incurred for payment of labour charges and other labour related charges like, P.F., F.P.F., and E.S.I etc. (tyre division) - Permissible deduction under Section 3-B(2)(e) of the TNGST Act, 1959 or not - HELD THAT:- The non-production of supporting document is a question of fact and not a question of law as claimed by the revision petitioner. Nowhere the authorities have declined the entitlement of exemption of the expenses incurred towards labour or incidental charges. They have only pointed out the absence of supporting document from the assessee, the request to grant exemption is untenable. This Court finds no error in the said reasoning, since no substantial question of law involved in this Tax Case Revision, this Tax Case Revision is dismissed.
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