TMI Tax Updates - e-Newsletter
April 13, 2024

Case Laws in this Newsletter:

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

Articles

1. Online Gaming: A GST Perspective

   By: PRAVEEN SHARMA

2. Assessing Officer is to consider the Assessee's reply with an open mind before concluding the assessment

   By: Bimal jain

3. EFFECT OF ACCEPTANCE OF A BILL OF EXCHANGE UNDER NEGOTIABLE INSTRUMENTS ACT, 1881.

   By: DR.MARIAPPAN GOVINDARAJAN

4. Merely uploading SCN under the category "Additional Notices" instead of "Notices" on the GST portal does not constitute sufficient intimation to the taxpayer

   By: Bimal jain

News

1. Extension of GSTR-1 due date to 12th April 2024

2. Sixteenth Finance Commission (XVIFC) invites applications for Young Professionals (YPs)/Consultants on contract basis

3. 7th round of the India-Peru Trade Agreement Negotiations concludes in New Delhi

Notifications

GST

1. 08/2024 - dated 10-4-2024 - CGST

Seeks to extend the timeline for implementation of Notification No. 04/2024-CT dated 05.01.2024 from 1st April, 2024 to 15th May, 2024 - Special procedure by a registered person engaged in manufacturing of the certain goods

Circulars / Instructions / Orders

DGFT

1. Policy Circular No. 01/2024 - dated 12-4-2024

Clarification on discharge of export obligation of Advance Authorisation (AA) bearing Customs Notification No. 18/2015-Customs as amended and Customs Notification No. 21/2015-Customs as amended both dated 01.04.2015 by making physical exports or by making domestic supplies

Customs

2. Public Notice No. 16 / 2024 - dated 10-4-2024

Inclusion of gender specific infrastructure facilities to be provided by the Custodian CCSP-CFS/AFS/ICD under the HCCAR, 2009-reg

Highlights / Catch Notes

GST

• Court Questions GST Demand Validity Due to Lack of Notice Service After Registration Cancellation.

  Case-Laws - HC : Service of Notices after cancellation of GST registration - Validity of assessment order and demand of GST - The High Court observed that the registration was cancelled, and there was no evidence of revival or attempts to seek revival. As a result, the petitioner was not under an obligation to check the GST portal for any notices. - The Court noted that there was no evidence of physical or offline notices being served to the petitioner before the issuance of the impugned order.
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• Court Rules IGST Refund Denial Unjust; Exporters Entitled to Refunds with Interest for Delayed Zero-Rated Supplies Processing.

  Case-Laws - HC : Refund of IGST on goods exported - The High court found the denial of the IGST refund, based on the administrative discrepancies between the ICEGATE and GST Common Portals, to be legally unsustainable. It held that the petitioner's exports were eligible for a refund under the provisions of the CGST and IGST Acts, emphasizing the procedural rights of exporters to claim refunds for zero-rated supplies. Recognizing the petitioner's entitlement to the refund and the undue delay caused by the authorities, the court awarded interest on the refund amount, underlining the state's accountability in adhering to statutory timelines for refunds.
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Income Tax

• Clear Link Between Evidence and Assessment Years Required for Reassessment u/s 153C, Rules Court.

  Case-Laws - HC : Initiating proceedings u/s 153C - The High court held that the power under Section 153C necessitates the presence of incriminating material directly pertinent to the AYs under reassessment. This principle was steadfastly applied across various cases, underlining the need for a direct correlation between the evidence found during the search and the AYs for which the reassessment notices were issued. - The court observed that in many instances, the satisfaction notes and the subsequent notices failed to establish a clear link between the discovered incriminating material and the AYs to which the notices pertained. This lack of specificity rendered the assumption of jurisdiction for those AYs as legally unsound. - However, it leaves room for the department to reassess if concrete, incriminating evidence pertinent to the AYs in question emerges from the search operations.
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• Court Rules Referral to DVO Unlawful Without Initial Rejection of Audited Books; Upholds Deletion of AO Additions.

  Case-Laws - HC : Validity of Referring the matter to DVO - Additions based on valuation report - The High Court noted that the assessee had filed its return for the relevant assessment year supported by audited books of accounts. The AO, without rejecting these books, referred the matter to the DVO. The High Court observed that the books of accounts were not rejected before a certain date, and the rejection occurred later based on the DVO's report. Citing precedent, the High Court emphasized that the AO could not refer the matter to the DVO without first rejecting the books of account. - The High Court upheld the ITAT's decision to delete the addition made by the AO based on the valuation report. It reiterated that the reference to the DVO was not lawful, and therefore, the estimation made by the DVO could not be relied upon for making the assessment.
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• Court Quashes Proceedings After Settlement Commission Grants Immunity, Citing Finality and Compliance.

  Case-Laws - HC : Prosecution u/s 276CC - Settlement Commission has already granted immunity from prosecution to the petitioner - The High Court highlighted the importance of the Settlement Commission's decision and its finality once not challenged by the Income Tax Authorities. - The Court found merit in the petitioner's arguments, emphasizing compliance with relevant notices and the finality of the Settlement Commission's decision. Drawing from precedent, the Court concluded that continuing the complaint would constitute a misuse of the legal process and hence quashed the proceedings.
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• Payments to Ex-Trustees for Construction Deemed Genuine, Not Taxable Income, High Court Upholds Tribunal's Decision.

  Case-Laws - HC : Nature of Payment - Construction Activities and Taxability - relinquishment of trusteeship - Another set of appeals revolved around payments made to erstwhile trustees for construction activities and whether these amounts were genuinely for construction or disguised payments for relinquishing trusteeship. The Tribunal had found construction activity to be genuine and the payments for construction not taxable as income from the relinquishment of trusteeship. The High Court upheld the Tribunal's decision, finding no reason to interfere, particularly noting the reliance on audited balance sheets and TDS payments.
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• Trustees' Relinquishment Compensation Ruled as Taxable Income, Not Capital Receipt; Tribunal to Reassess Case.

  Case-Laws - HC : Nature of receipt - relinquishment of trusteeship - additions to the income of the trustees by way of excess consideration received for the sale of the rubber plantation - The High Court concluded that consideration received by trustees for the relinquishment of their trusteeship could not be treated as a capital receipt but should be regarded as income and taxed under the appropriate head. The court remanded the matter back to the tribunal to pass a fresh order in light of its findings.
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• Capital Asset Holding Period Starts from Allotment Date for Capital Gain, Not Buyer's Agreement, Tribunal Rules.

  Case-Laws - AT : Capital gain computation - determination of holding period of asset - The dispute centered around whether the holding period of a capital asset should be computed from the date of allotment of a flat or the date of the buyer's agreement - Relying on relevant judicial precedents and CBDT circulars, the tribunal concluded that the date of allotment should be considered as the date of acquisition for computing capital gains tax. As a result, it allowed the long-term capital loss as reported by the assessee.
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• Interest-Free Loans for Business Purposes Not Subject to Interest Disallowance, Tribunal Rules on Commercial Expediency.

  Case-Laws - AT : Disallowance of interest u/s 36(1)(iii) - Interest free loans granted - The Co-ordinate Bench of the Tribunal had previously ruled in favor of the assessee on a similar issue, highlighting that no disallowance can be made for amounts paid to parties in earlier years, which were standing as loans and advances. The Tribunal also emphasized that the concept of "commercial expediency" is crucial, and no disallowance can be made under Section 36(1)(iii) for amounts advanced for commercial reasons.
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• Tribunal Adjusts Taxation on Demonetization Deposits, Reduces Unexplained Income Tax Rate from 60% to 10% of Deposits.

  Case-Laws - AT : Addition of cash deposited during the demonetisation period in bank account - unexplained income - taxation @ 60% as provided u/s. 115BBE - The tribunal acknowledged the appellant's submission regarding the source of cash deposits during demonetization and found that the addition made by the Assessing Officer was erroneous. They directed the Assessing Officer to make an addition of equal to 10% of the cash deposit and tax it under normal provisions instead of section 115BBE of the Act.
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• Tribunal Validates Brokerage Expenses in Capital Gains Case, Dismisses Late Construction Cost Claims Due to Lack of Evidence.

  Case-Laws - AT : Computation of capital gains enshrined in section 48 - Deduction of Brokerage expense, Transfer expenses and indexed cost of improvement - Tribunal found the assessee provided adequate documentation supporting brokerage expenses. Despite absence of formal agreements, payment through banking channels established genuineness. - However, the Tribunal noted inconsistencies and lack of clarity in the assessee's submissions regarding the construction expenditure. While some payments were verified, cash payments lacked adequate documentation and supporting evidence. New arguments raised by the assessee were dismissed due to their late introduction and absence of reasonable cause. Tribunal upheld the disallowance of construction costs, citing lack of substantiating evidence.
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• Tribunal Approves Hybrid Method for Real Estate Transfer Pricing, Criticizes Reliance on Generic Circle Rates.

  Case-Laws - AT : Transfer Pricing Adjustments - Selection of the most appropriate method (MAM) for determining the arm's length price (ALP) - The assessee's choice to adopt the 'other method' (average of Sales Comparable Method and Discounted Cash Flow Method) as the MAM is defended by the tribunal. It is seen as appropriate because it accounts for what the transaction price "would have been" under comparable uncontrolled conditions, addressing the lack of directly comparable uncontrolled transactions in the real estate sector. - The tribunal criticizes the lower authority's rejection of the Sales Comparable Method and the application of circle rates for valuation. It argues that real estate transactions should be valued based on specific parameters relevant to the parties and the property, rather than generic circle rates, indicating a preference for a more nuanced and detailed valuation approach that reflects the property's unique attributes.
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• Tribunal Rules Out Transfer Pricing Adjustments for Omitted Clause in Capital Transactions; Circle Rates Not a Benchmark.

  Case-Laws - AT : Transfer Pricing Adjustments - Purchase of Development Rights - capital transactions and their treatment - The tribunal addressed several crucial issues regarding the purchase of development rights, including the applicability of transfer pricing provisions to transactions capitalized in the books of accounts and not directly affecting the profit and loss account. One of the most contentious issues was the use of circle rates for determining the arm's length price of the transaction. Circle rates, usually used for stamp duty purposes, were considered by the TPO as a benchmark for the arm's length price. - The tribunal concludes that the omission of clause (i) of section 92BA of the Income Tax Act, 1961, should be treated as if the clause had never been part of the statute, thereby precluding transfer pricing adjustments on specified domestic transactions from the date of omission.
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• Tribunal Rejects Addition for Over-Invoicing Due to Unreliable Evidence and Lack of Legal Authority; Orders Deletion.

  Case-Laws - AT : Assessment u/s 153A - Addition made on account of over invoicing in purchases - protective addition - The Tribunal meticulously examined the evidence and submissions presented by both parties. It found the statements obtained during the search to be unreliable, lacking corroborative evidence and contradicted by subsequent actions of the assessee. Additionally, the Tribunal criticized the comparison of purchase prices undertaken by the AO, highlighting its flawed nature and absence of legal authority. Ultimately, the Tribunal concluded that the addition made by the AO on account of alleged over-invoicing was unsustainable. It directed the AO to delete the addition across all assessment years.
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• Interest from Bank Investments Not Deductible u/s 80P(2)(d), Tribunal Upholds Tax Commissioner's Order.

  Case-Laws - AT : Revision u/s 263 - Deduction u/s 80P on interest received from Cooperative Bank - After considering the submissions and the relevant statutory provisions and precedents, the Appellate Tribunal upheld the Revision order passed by the PCIT under section 263. The Tribunal concluded that interest earned from investments made in any bank, including cooperative banks, is not deductible under section 80P(2)(d) of the Income Tax Act, in accordance with the decision of the Hon. Gujarat High Court in Katlary Kariyana case.
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• Tribunal Upholds Company's Right to Use DCF Method for Fair Market Valuation of Shares Over AO's Objections.

  Case-Laws - AT : Addition u/s 56(2)(viib) - Method of valuation of shares - closely held company issues its shares at a premium - The tribunal sided with the assessee, affirming the FMV as per the Discounted Cash Flow (DCF) method. It held that when the law provides for a valuation method and the assessee chooses one of the prescribed methods, the AO cannot disregard the assessee's valuation without substantial grounds. The tribunal referenced multiple judgments supporting the assessee's right to choose between the Net Asset Value (NAV) method and the DCF method for valuation.
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Customs

• Court Allows IGST Refunds on Exports, Permits Amendments to Bills of Entry for Compliance with Customs Act.

  Case-Laws - HC : Refund of IGST on Export of Goods - Conditions were complied with post-export - Amendment of Bills of Entry for imported goods under the Advanced Authorisation Scheme and the Export-Oriented Unit (EOU) Scheme - The Court recognized the petitioners' entitlement to IGST refunds on exported goods, provided they complied with the statutory requirements, including the payment of IGST and interest on imported inputs. - Contrary to the respondents' stance, the Court found that the Bills of Entry could be amended post-clearance to reflect subsequent IGST payments, relying on judicial precedents and the discretionary power under Section 149 of the Customs Act, 1962. - Consequently, the Court directed the authorities to amend the petitioners' Bills of Entry, reflecting the IGST payments and enabling them to claim IGST refunds on exported goods.
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• Flight Simulators Import Exemption: Ground Testing Prototype Denied, Upgrade Prototypes Approved; Penalty Dismissed.

  Case-Laws - AT : Benefit of Exemption - Import of flight simulators and avionics for M/s. Hindustan Aeronautics Limited (HAL), Bangalore and others - The Tribunal concluded that the first prototype, used solely for ground testing and not fitting into the aircraft, did not qualify for the exemption. This prototype did not directly contribute to the aircraft's maintenance, repair, or servicing in an operational context. - In contrast, the Tribunal found the other two prototypes to be integral to the aircraft's upgrade, thus fitting within the broader interpretation of parts used for maintenance or repair. These prototypes were deemed to replace existing parts, aligning with the exemption's intent to facilitate aircraft upgradation and maintenance. - Given that the appellant had proactively paid the differential duty and interest before the show cause notice issuance, the Tribunal saw no ground to sustain the penalty, citing precedence that pre-emptive duty payment negates the imposition of penalties.
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• Tribunal Questions Witness Reliability, Finds Insufficient Evidence to Prove Alleged Gold Smuggling Case.

  Case-Laws - AT : Smuggling - Gold of foreign origin - Absolute Confiscation - town seizure - reliability of statements/retraction of statements - The tribunal highlighted inconsistencies and retractions in the statements of the prosecution's witnesses. It questioned the voluntariness and reliability of these statements, noting the lack of corroborative evidence to substantiate the claims of smuggling. The tribunal underscored the principle that statements made under duress or without proper verification lack evidentiary value. - The tribunal observed that the seized gold's irregular shape and size did not conform to the characteristics typically associated with foreign-origin gold, which is usually marked and of standard dimensions. - The tribunal concluded that the prosecution failed to provide conclusive evidence that the gold was smuggled.
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• Appeal on Interest for Delayed Customs Duty Refund Remanded for Reassessment u/s 18(4) of Customs Act.

  Case-Laws - AT : Interest on delayed refund - Interest for the delay in payment of additional duty - calculation of relevant time - The Tribunal noted that the appellant had already been sanctioned the principal amount by the proper authority, rendering the provisions of unjust enrichment under Section 18(5) of the Customs Act, 1962, inapplicable. - Regarding the objection raised by the respondent, the Tribunal held that since the appellant's prayer was to allow interest as per the law, they had the right to raise the question of law at the appeal stage. However, considering that the adjudication/appellate authority had not considered the provisions of Section 18(4) of the Customs Act, 1962, the appeal was remanded to the adjudication authority to reconsider the appellant's entitlement to interest under the said provision.
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Corporate Law

• Court Broadly Interprets Lease Clause to Include Both Voluntary and Involuntary Property Transfers, Validating Amalgamation.

  Case-Laws - SC : Lease Agreement - Transfer of Property - Appellant argued that the clause in the lease agreement only applies to voluntary transfers, not to mergers or amalgamations - The Supreme Court interpreted the clause in the lease agreement broadly, finding that it covers both voluntary and involuntary transfers, including mergers. It noted that the clause's language did not exclude involuntary transfers, and thus, the amalgamation fell within its purview. - The Court affirmed that the amalgamation, despite being governed by company law, resulted in a transfer of properties from the transferor to the transferee company. - Thus, the dispute concerning the interpretation of the lease agreement clause in the context of the company amalgamation was resolved in favor of the DDA.
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Indian Laws

• Supreme Court Upholds Arbitral Award, Favors Contractors in Embankment Construction Dispute Over Measurement Method.

  Case-Laws - SC : Interpretation of a contract condition, which required the measurement of quantities used for payment for embankment construction with soil or with pond ash - Section 34 of the Arbitration and Conciliation Act, 1996 - The Supreme Court meticulously dissected the contractual provisions, the arbitral awards, and the technical specifications, emphasizing the need for a harmonious interpretation. The Court underscored the value of technical expertise in arbitration, particularly in disputes involving complex technical questions. The majority opinion of the arbitration tribunal, which favored a composite measurement approach, was considered plausible within the contractual framework. The Supreme Court overturned the judgments of the High Court that had favored NHAI's interpretation, reinstating the majority arbitral awards that supported the contractors' perspective.
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IBC

• Secured Creditor Status Upheld in Insolvency Case, Respondent's Charge Validated Under UP Industrial Area Development Act.

  Case-Laws - AT : CIRP - GNIDA is Secured Creditor or not - The NCLAT affirmed the validity of the charge claimed by the respondent under Section 13-A of the Uttar Pradesh Industrial Area Development Act, 1976. - The appellate tribunal upheld the respondent's status as a secured creditor, citing recent Supreme Court precedent. It affirmed the validity of the charge under Section 13-A of the Uttar Pradesh Industrial Area Development Act, 1976, and concluded that the respondent's classification as a secured creditor did not warrant interference.
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• Tribunal Upholds Decision Excluding Late Arbitration Documents in Insolvency Case, Citing Irrelevance to Section 9 Application.

  Case-Laws - AT : CIRP - Admissibility of two additional documents - The Appellate Tribunal analyzed the timing of the documents in question. It noted that the arbitration petition and the order were both initiated after the filing of the Section 9 Application. Considering the observations of the Hon’ble Supreme Court and the relevance of the documents to the ongoing proceedings, the Tribunal upheld the decision of the Adjudicating Authority to dismiss the application for additional documents. - It concluded that the arbitration proceedings initiated by the Corporate Debtor were subsequent to the Section 9 Application and thus had no bearing on it.
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• Resolution Plan Upheld: Foreign Award Holder Rishima Classified as Other Creditor, Not Financial Creditor, by Tribunal.

  Case-Laws - AT : Approval of Resolution Plan - Validity of the order of Adjudicating Authority (NCLT) wherein it held that Rishima cannot be called as a Financial Creditor and Rishima being a Decree Holder of a foreign award can be treated as other creditor. The application of the respondent was partly allowed by the Adjudicating Authority - The Appellate Tribunal, in its decision, focused on the approval of the Resolution Plan by the Adjudicating Authority. Despite the ongoing dispute regarding the nature and status of the foreign arbitral award obtained by Rishima, the Resolution Plan allocated a nominal amount to Rishima's claim. The Tribunal concluded that the Resolution Plan had effectively addressed the issues raised in the appeal, rendering further consideration unnecessary. As a result, the appeal was dismissed.
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• Tribunal Denies SBI's Request for Interim Funds, Upholds Liquidation Value Date from Restructuring Plan.

  Case-Laws - AT : CIRP - The State Bank of India (SBI) filed an application for interim distribution of funds from the Escrow Account of the company, as IL&FS had not been servicing the debt since October 2018. - The Tribunal dismissed all three applications, citing the submission of the Restructuring Plan and the majority decision of lenders regarding the Liquidation Value calculation date. It upheld the use of Liquidation Value as on 30.09.2018, in accordance with previous orders and the terms of the Inter-Creditor Agreement. Consequently, SBI's requests were denied, and the Tribunal's decision was final.
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Service Tax

• Appellate Tribunal exempts municipal amenities from service tax; telecom services taxable; case remanded for tax recalculation.

  Case-Laws - AT : Levy of service tax - various public amenities provided by the Municipal Corporation such as market space, bus stands, vehicle stands, slaughter houses etc. - After considering the submissions and evidence, the Appellate Tribunal ruled in favor of the appellant regarding the taxability of civic amenities, stating that they were sovereign functions exempt from tax. However, they upheld the tax demand for telecom services, as part of the amounts received were deemed payments for services rendered. The Tribunal also accepted the Commissioner's methodology for tax calculation but set aside the demand for the extended period due to lack of evidence of intent to evade payment. The matter was remanded for redetermination of taxes considering factual errors and duplication of taxes. All penalties were set aside.
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• Road Construction in Power Project Exempt from Service Tax Due to Distinctive Contractual Clauses and Subcontractor Use.

  Case-Laws - AT : Benefit of service tax exemption - construction of a road as part of a broader works contract service for a thermal power project - The Tribunal concluded that the construction of the road was indeed identified as a separate activity within the contract, with its value determinable as per specific contractual clauses. The appellant’s engagement of a subcontractor for the road construction further substantiated the argument that it was a distinct activity. The Tribunal distinguished this case from scenarios where construction activities are so intertwined within a project that they cannot be segregated for tax purposes. - It ruled that the service tax demand on the value of road construction within the composite contract was unjustified. Demand of service tax set aside.
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• Service Contract Ruled as Continuous Supply, No Tax Until Milestones Met; Tax Demand Overturned.

  Case-Laws - AT : Point of taxation - Continuous supply - The appellant contended that their service contract with ONGC was a continuous supply of service and that the point of taxation had not been triggered, as they had not yet delivered oil/gas to ONGC. They argued that the activities undertaken were intermediate steps toward fulfilling the contract's scope and did not constitute a taxable service per se, as they had not yet received consideration for the supposed services rendered. - The tribunal found merit in the appellant's arguments, emphasizing the nature of the contract as a continuous supply of service, where taxation could only be applied upon the completion of specific milestones. - Demadn of service tax set aside.
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• Subcontractors in SEZs Exempt from Service Tax; Tribunal Affirms Overriding SEZ Act Authority Over Procedural Rules.

  Case-Laws - AT : Exemption under N/N. 9/2009-ST - Service provided by a subcontractor to a unit located in SEZ - The appellant, subcontracted by a main contractor, contested the denial of exemption by the Adjudicating Authority based on procedural grounds. The Appellate Tribunal, after considering submissions and relevant legal precedents, ruled in favor of the appellant. It affirmed that services provided to a SEZ unit, regardless of the subcontractor's involvement, qualify for exemption under the notification. Additionally, the Tribunal dismissed the requirement of Form A-1 for the period before March 2011 and highlighted the overriding effect of the SEZ Act in exempting services consumed within the SEZ.
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VAT

• Rice Bran Oil Manufacturer Wins Case: Reassessment Order Quashed for 2012-13 Due to Lack of Legal Basis.

  Case-Laws - HC : Validity of reassessment proceedings - The petitioner sought to quash an order and notice for reassessment under the UP VAT Act for the assessment year 2012-13. The petitioner, a manufacturer of Rice Bran Oil, purchased Rice Bran and produced both RBO and DORB. The revenue acknowledged sales of both products and granted Input Tax Credit accordingly. However, a judgment established that the sale value of both taxable and exempt products should be considered together. Following Supreme Court guidance, the High Court ruled in favor of the petitioner, quashing the reassessment proceedings as they lacked legal basis.
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Case Laws:

• GST

• 2024 (4) TMI 463
  Service of Notices after cancellation of GST registration - Validity of assessment order and demand of GST - HELD THAT:- It does merit acceptance that the petitioner was not obligated to visit the GST portal to receive the show cause notices that may have been issued to the petitioner for 2017-18 through e-mode, preceding the adjudication order dated 31.12.2023 passed in pursuance thereto - It is also not the case of the revenue that any physical/offline notice was issued to or served on the petitioner before the impugned order came to be passed. Thus, no useful purpose may be served in keeping the petition pending or calling counter affidavit at this stage or to relegate the present petitioner to the forum of alternative remedy. Since essential requirement of rules of natural justice has remained to be fulfilled, the order dated 31.12.2023 set aside. The petitioner may treat the said order itself to be the notice and submit its final reply thereto within a period of four weeks from today - petition disposed off.

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• 2024 (4) TMI 462
  Refund of IGST on goods exported - Petition challenged the Order for refusal to grant refund - Non-alignment of export data between the ICEGATE Portal maintained by the Customs Department and the Common Portal - whether the petitioner at the relevant time, on presentation of the shipping bills in regard to the confirmed sales, was entitled to refund of the IGST amounts, paid on the goods - HELD THAT:- It may also be observed that the obvious implication as brought about by Rules 96 and 96A as may be applicable and the statutory Scheme which permitted the petitioner to make payment of IGST after the exports were undertaken, has been completely overlooked by respondent Nos. 3 and 4. Once confirmation of the sale was evident from the shipping bills as presented by the petitioner, which were in relation to the goods on which IGST was paid, and the confirmed sales admittedly being zero rated supplies, there was no question of respondent Nos. 3 and 4 retaining the IGST amounts paid on such confirmed sales. The presentation of shipping bills as per the requirement of Rules 96 / 96A, which were squarely applicable, itself entitled the petitioner to refund of the IGST amount based on the principles of zero rated supplies as recognized u/s 16 of the IGST Act. Thus, there was no question of the circular dated 18 July 2019 being made applicable to the petitioner and/or confining the petitioner to a procedure of refund application to be filed u/s 54. Hence to compel the petitioner to file the refund application at a belated stage and after a long period of the shipping bills being presented by the petitioner (being itself a refund application) and thereafter, to hold that the refund application filed u/s 54 is time barred, was wholly illegal and unwarranted in the facts and circumstances of the case. Thus, the entire approach of respondent Nos. 3 and 4, not only in denying the refund to the petitioner, but also compelling the petitioner to apply for a refund under the said circular which was issued subsequent to the shipping bills being presented, was a patent illegality. This more particularly when respondent Nos. 5 and 6 (Custom Authorities) had clearly confirmed the export and re-imports thereby confirming the sales to the foreign parties, in respect of which respondent Nos. 3 and 4 have not raised any dispute. It is stated that respondent no. 6 is not the competent authority to sanction or reject the IGST claim. It is, hence, clear that both the authorities are disowning their obligation and/or authority to refund the IGST as paid by the petitioner while not denying that the petitioner was entitled to the refund. The position is something which is not only disturbing but a shocking state of affairs in the authorities inter se not resolving such issues. We also do not find that any attempt was made to resolve the issues by both the parties. Any internal or departmental conflicts cannot cause prejudice to the assessee. Such approach on the part of the authorities is certainly not conducive to international trade and commerce. Considering the clear position in law in the present case, the petitioner was entitled to the refund of the IGST amounts. We are of the opinion that in cases where exports involving payment of IGST are concerned, in which refund applications are made, a special mechanism is required to be devised so that both electronic portals are compatible, and refund of duties, which could not be retained, are processed expeditiously and the assessees do not suffer on account of ineffective systems being followed by the CGST as also the Customs Authorities. Although some circulars are issued to clarify the position, however, no effective steps are being taken to appreciate the core issues as involved in each of such cases and refunds are not being processed. The present case is a clear example of such confusion. Unless the loose ends on such issues are tied up and a robust mechanism is immediately created and implemented, trade and commerce would continue to suffer. Interest - In facts of the case, certainly the petitioner would be entitled to interest as the amount has been illegally retained by the respondents without authority in law. Considering the position in law as prescribed under the GST Laws and the constitutional principles as evolved in several decisions, the assessees were held to have become entitled to alongwith appropriate interest. In a similar situation, the Division Bench of Gujarat High Court in M/s. Vimla Food Products vs. Union of India Ors. [ 2021 (12) TMI 1328 - GUJARAT HIGH COURT] and concerning a supply which was zero rated supply referring to the decision in Amit Cotton Industries Vs. Principal Commissioner of Customs [ 2019 (7) TMI 472 - GUJARAT HIGH COURT] as also to the relevant circulars and notifications and the decisions of the Court in that regard, had held that the petitioner was entitled to interest at the rate of 9% from the date on which the bills for refund of IGST were raised by the petitioner, till its actual payment. In our opinion, the petition needs to succeed. It is accordingly allowed in terms of the following order:- (i) The impugned Circular dated 18 July, 2019 is declared to be not applicable to the petitioner s refund applications / claim; (ii) The petition stands allowed in terms of prayer clauses (b), (c), (d) and (e). (iii) The rejection of the refund applications by the impugned orders dated 5 August 2022 is declared to be illegal. (iv) The amounts be refunded to the petitioner within a period of three weeks from today along with simple interest at the rate of 9% p.a., failing which the petitioner shall be entitled for realization of further interest at the rate of 9% till its actual payment.

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• Income Tax

• 2024 (4) TMI 464
  Validity of order passed by the Income Tax Settlement Commission [ITSC] - full and true disclosure of its income or not? - manner of disclosure made by the respondent and insofar as it related to the purchase of a land parcel admeasuring 20 acres - petitioner principally asserts that since the respondent had failed to surrender the amount representative for the aforenoted transaction to tax in the statement filed before the ITSC, the acceptance of settlement is clearly vitiated and the order passed by the ITSC liable to be quashed on this ground alone. HELD THAT:- The procedure as contemplated under Chapter XIX-A does not detract from the right of an assessee to question an addition or view that may have been taken by the taxing authorities - an addition suggested or a view taken with respect to a particular item of income is incorrect or flawed. What the assessee is essentially doing in such a scenario is calling upon the ITSC to examine all such questions and render its decision, enabling the assessee to obtain closure of all disputes. Viewed in that light, it would be wholly incorrect for the writ petitioner to assert that the respondent had failed to make a full and true disclosure. What the law proscribes is an applicant seeking to either amend an application or taking contrarian positions in proceedings before the ITSC. As was explained by the Supreme Court in Ajmera Housing [ 2010 (8) TMI 35 - SUPREME COURT] , the sine qua non for a settlement order being entered is a full and true disclosure of income being made by the applicant. As the Supreme Court explained, what is impermissible is a revision of a disclosure. A particular contention with respect to taxability and which is made in order to invite a conclusive pronouncement from the ITSC cannot possibly be viewed as a revision of the application made. In our considered opinion, therefore, in the facts of the present case, the test of full and true disclosure had clearly been met. We note that the ITSC while accepting the surrender of income, has not indicted the respondent-assessee. It has taken note of the perceived conflict in versions which were alluded to by the Commissioner and the respondent having been unable to proffer a satisfactory explanation. It had, however, and for the purposes of a holistic examination, voiced its doubts and confronted the respondent- assessee seeking its unequivocal stand in respect of the transaction relating to sale of immovable property. It is at that stage that the respondent appears to have offered to voluntarily surrender the said amount and thus agreeing to the same being subjected to tax. While ultimately accepting the voluntary surrender, it was not the case of the ITSC that the respondent was guilty of suppression or falsification of facts. What appears to have ultimately weighed upon it was the imperatives of the controversy being resolved and the matter being conferred finality. Extent and intensity of judicial review which must govern while considering a challenge to orders passed by the ITSC - As relying on JYOTENDRASINHJI VERSUS SI TRIPATHI AND OTHERS [ 1993 (4) TMI 1 - SUPREME COURT] and KOTAK MAHINDRA BANK LIMITED VERSUS COMMISSIONER OF INCOME TAX BANGALORE AND ANR. [ 2023 (9) TMI 1231 - SUPREME COURT] we find ourselves unable to hold that the procedure adopted by the ITSC was either palpably incorrect or manifestly erroneous. The decision ultimately rendered by it also cannot possibly be characterized as being contrary to any provision of the Act. This was not a case where the respondent had failed to make a disclosure. Details in respect of the subject transaction were duly disclosed. This was therefore not a case where a full and true disclosure had not been made. The dispute essentially was with respect to the character of the receipt. The assessee had contested the position taken by the writ petitioner of the same being an accommodation entry. The ITSC has ultimately and upon due consideration of the rival stands as struck before it, exercised its adjudicatory function bearing in mind the larger purpose and intent of the settlement process. The same consequently merits no interference under Article 226 of the Constitution. WP dismissed.

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• 2024 (4) TMI 461
  Proceedings u/s 153C - issuance of the notice was preceded by the drawl of a Satisfaction Note by the jurisdictional AO - importance of material recovered in the course of a search or a requisition made and a right to reassess u/s 153A and 153C - petitioners contended that in the absence of any incriminating material having been unearthed in the search, it would be impermissible for the respondents to initiate action u/s 153C for the six AYs preceding the year of search or for that matter, the relevant assessment year . Distinction between Section 153A and Section 153C - HELD THAT:- It is only when the transmitted documents and material reaches the desk of the jurisdictional AO that it becomes empowered to initiate action u/s 153C of the Act. This is evident from a plain textual reading of that provision and which speaks of the commencement point being the handing over of documents or assets seized or requisitioned to the AO of the other person and it in turn proceeding to issue notice to assess or reassess the income of the non-searched entity in accordance with Section 153A. However, the initiation of action u/s 153C is significantly premised upon the AO being satisfied that the books of account or documents and assets seized or requisitioned having a bearing on the determination of the total income of such other person . Issuance of a notice u/s 153C is clearly not intended to be an inevitable consequence to the receipt of material by the jurisdictional AO. That the AO before commencement of action u/s 153C is also obliged to be satisfied that the material so received would have a bearing on the determination of the total income of such other person is an aspect of significance and constitutes a fundamental point of distinction between Section 153A and Section 153C. This distinguishing element of the two provisions would become further apparent from the discussion which ensues. It becomes apparent from the legislative mandate of those two provisions being applicable to searches undertaken in a particular time period, the principles of abatement being replicated and the search assessment power being available to be invoked for the relevant assessment year , and which extended the power to be exercised over a ten year block, being simultaneously introduced in those provisions. The Legislature clearly intended both these provisions to form part of a cohesive scheme and to be complementary to each other. The aspects of satisfaction and of the material likely to implicate or influence were not added in Section 153A. The fact that any additions that may be ultimately made upon a culmination of assessment under Section 153A being indelibly founded on the material gathered in the course of the search is a separate issue all together. The usage of the expression have a bearing would necessarily lead one to conclude that the mere discovery of books, documents or assets would not justify the initiation of proceedings under that provision. Upon receipt of that material, the jurisdictional AO must additionally be satisfied that those are likely to have an impact on the determination of the total income . Bearing would include something which would lend support or credence. It has also been defined to mean something which may have a practical relation or effect upon, influence or relevance. This leads us to the inevitable conclusion that the initiation of action under Section 153C would have to be founded on a formation of opinion by the jurisdictional AO that the material handed over and received pursuant to a search is likely to influence the determination of the total income and would be of relevancy for the purposes of assessment or reassessment. Incriminating material - Cascading effect - The spectre of abatement insofar as the other person is concerned would arise only after the jurisdictional AO has formed the requisite satisfaction of the material having a bearing on the determination of the total income of such other person and having formed the opinion that proceedings u/s 153C are liable to be initiated. It would be pertinent to bear in mind that Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] was a decision rendered in the context of Section 153A. It was in the aforesaid backdrop that the Court significantly observed that once a search takes place u/s 132 of the Act, notice under Section 153A(1) would mandatorily issue. The abatement of assessment and reassessment pending on that date would, in the case of a Section 153A assessment, be a preordained consequence. However, and in light of what has been observed hereinabove, it is apparent that Section 153C constructs a subtle and yet significant distinction insofar as the question of commencement of proceedings or assumption of jurisdiction is concerned. Nature of the incriminating material that may be obtained and the years forming part of the block which would merit being thrown open - Section 153C enables and empowers the jurisdictional AO to assess or reassess the six AYs or the relevant assessment year . Ultimately Section 153C is concerned with books, documents or articles seized in the course of a search and which are found to have the potential to impact or have a bearing on an assessment which may be undergoing or which may have been completed. The words have a bearing on the determination of the total income of such other person as appearing in Section 153C would necessarily have to be conferred pre-eminence. Therefore, and unless the AO is satisfied that the material gathered could potentially impact the determination of total income, it would be unjustified in mechanically reopening or assessing all over again all the ten AYs that could possibly form part of the block of ten years. A reading of the aforesaid Satisfaction Notes would establish that jurisdictional AOs appear to have proceeded on the premise that the moment incriminating material is unearthed in respect of a particular AY, they would have the jurisdiction and authority to invoke Section 153C in respect of all the assessment years which could otherwise form part of the relevant assessment year as defined in Section 153A. In our considered opinion, the aforesaid understanding of Section 153C is clearly erroneous and unsustainable. As explained hereinabove, the discovery of material likely to implicate the assessee and impact the assessment of total income for a particular AY is not intended to set off a chain reaction or have a waterfall effect on all AYs which could form part of the relevant assessment year . This, more so since none of the Satisfaction Notes record any reasons of how that material is likely to materially influence the computation of income for those AYs . The Satisfaction Notes would thus have to evidence a formation of opinion that the material is likely to be incriminating for more than a singular assessment year and thus warranting the drawl of Section 153C proceedings for years in addition to those to which the material may be directly relatable. Conclusion - On an overall consideration of the structure of Sections 153A and 153C, we thus find that a reopening or abatement would be triggered only upon the discovery of material which is likely to have a bearing on the determination of the total income and would have to be examined bearing in mind the AYs which are likely to be impacted. Thus be incorrect to either interpret or construe Section 153C as envisaging incriminating material pertaining to a particular AY having a cascading effect and which would warrant a mechanical and inevitable assessment or reassessment for the entire block of the relevant assessment year . In our considered view, abatement of the six AYs or the relevant assessment year u/s 153C would follow the formation of opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs that may form part of the block of ten AYs . Abatement would be triggered by the formation of that opinion rather than the other way around. This, in light of the discernibly distinguishable statutory regime underlying Sections 153A and 153C as explained above. While in the case of the former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. We would thus recognize the flow of events contemplated u/s 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an evaluation and examination of their contents and an assessment of the potential impact that they may have on the total income for the six AYs immediately preceding the AY pertaining to the year of search and the relevant assessment year . It is only once the AO of the non-searched entity is satisfied that the material coming into its possession is likely to have a bearing on the determination of the total income that a notice u/s 153C would be issued. Abatement would thus be a necessary corollary of that notice. However, both the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity. Therefore, and in our opinion, abatement of the six AYs or the relevant assessment year would follow the formation of that opinion and satisfaction in that respect being reached. We come to the firm conclusion that the incriminating material which is spoken of would have to be identified with respect to the AY to which it relates or may be likely to impact before the initiation of proceedings under Section 153C of the Act. A material, document or asset recovered in the course of a search or on the basis of a requisition made would justify abatement of only those pending assessments or reopening of such concluded assessments to which alone it relates or is likely to have a bearing on the estimation of income. The mere existence of a power to assess or reassess the six AYs immediately preceding the AY corresponding to the year of search or the relevant assessment year would not justify a sweeping or indiscriminate invocation of Section 153C. The jurisdictional AO would have to firstly be satisfied that the material received is likely to have a bearing on or impact the total income of years or years which may form part of the block of six or ten AYs and thereafter proceed to place the assessee on notice under Section 153C. The power to undertake such an assessment would stand confined to those years to which the material may relate or is likely to influence. Absent any material that may either cast a doubt on the estimation of total income for a particular year or years, the AO would not be justified in invoking its powers conferred by Section 153C. It would only be consequent to such satisfaction being reached that a notice would be liable to be issued and thus resulting in the abatement of pending proceedings and reopening of concluded assessments. Operative Directions - We find that except for a few exceptions which were noticed in the introductory parts of this judgment, the writ petitions forming part of this batch, impugn the invocation of Section 153C in respect of AYs for which no incriminating material had been gathered or obtained. Satisfaction Notes also fail to record any reasons as to how the material discovered and pertaining to a particular AY is likely to have a bearing on the determination of the total income for the year which is sought to be abated or reopened in terms of the impugned notices. Respondents have erroneously proceeded on the assumption that the moment any material is recovered in the course of a search or on the basis of a requisition made, they become empowered in law to assess or reassess all the six AYs years immediately preceding the assessment correlatable to the search year or the relevant assessment year as defined in terms of Explanation 1 of Section 153A. The said approach is clearly unsustainable and contrary to the consistent line struck by the precedents noticed above.

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• 2024 (4) TMI 460
  Validity of additions based on valuation report - Referring the matter to DVO without first rejecting the books of account - Best Judgement Assessment - Without rejecting the books of accounts, AO proceeded to make reference u/s 142A to Departmental Valuation Officer (DVO) but later, acting solely on the strength of estimation made by the DVO in his report, AO proceeded to reject the books of accounts and make the Best Judgement Assessment wherein he relied on the estimation of investment made by the assessee, as disclosed by the DVO. HELD THAT:- Undeniably, books of accounts of the assessee were not rejected on or before 5.4.2006. That consequence in law arose later after submission of the DVO report dated 14.9.2006. As decided in Sargam Cinema, Haldwani [ 2009 (10) TMI 569 - SC ORDER] Tribunal decided the matter rightly in favour of the assessee inasmuch as the Tribunal came to the conclusion that the assessing authority (AO) could not have referred the matter to the Departmental Valuation Officer (DVO) without books of accounts being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived. Also see Lucknow Public Educational Society [ 2011 (3) TMI 1326 - ALLAHABAD HIGH COURT] as held language of section 142A mean that before proceeding to call for a report of the Valuation Officer, the books of account must be rejected. Decided against revenue.

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• 2024 (4) TMI 459
  Prosecution u/s 276CC - Settlement Commission has already granted immunity from prosecution to the petitioner - HELD THAT:- In Ashirvad Enterprises and others Vs. State of Bihar and another, 2004 (3) TMI 10 - SUPREME COURT there were allegations of tax evasion. Complaint u/s 276C of the Act was filed. However, on application moved before the Settlement Commission, the orders were passed according immunity from prosecution. Said order was passed before the institution of the proceedings for prosecution. The decision was not questioned by the Income Tax Authorities and attained finality. In these circumstances, Hon ble Supreme Court quashed the proceedings. In Mohan Lal Darshan Kumar and others Vs. S.P. Bookal Income Tax Officer and another, 1996 (3) TMI 124 - PUNJAB AND HARYANA HIGH COURT , quashing under Section 482 CrPC was sought in respect of offence under Section 276(c)(1) of the Act besides Section 193, 467, 471, 34 IPC. The application of the petitioner under Section 245H of the Act was allowed by the Settlement Commission vide which the immunity from prosecution under the Act/IPC was granted. In these circumstances, this Court allowed the quashing of the complaint. Both the aforesaid authorities are applicable to the facts of the present case. In the present case also, after filing of the complaint, but before framing of charge, the Settlement Commission has already granted immunity from prosecution to the petitioner. Therefore, continuation of the complaint will be gross misuse of the process of law. The complaint pending in the Court of ld. Chief Judicial Magistrate, Ludhiana, u/s 276CC of Income Tax Act, 1961, besides summoning order framing charges against the petitioner and all the consequential proceedings arising from are hereby quashed.

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• 2024 (4) TMI 458
  Nature of receipt - additions to the income of the trustees by way of excess consideration received for the sale of the rubber plantation - amounts received by the assessees as consideration for relinquishment of their trusteeship - Assessing Authority and the First Appellate Authority had found that the excess sale consideration received by the said assessees was in fact amounts towards consideration paid by the Believers Church for their relinquishment of their trusteeship in the Carmel Educational Trust and was liable to be assessed in their hands, the Tribunal, in the order impugned in these appeals, found otherwise. resignation/relinquishment by the assessees of their position as trustees HELD THAT:- We find ourselves unable to accept the finding of the Tribunal that the amounts received by the assessees as consideration for relinquishment of their trusteeship would qualify as a capital receipt for the purpose of the I.T. Act, and further that in the absence of any statutory provision under the I.T. Act that provides for a determination of the cost of acquisition of the asset, the capital gains cannot be assessed. A perusal of the trust deed in the instant cases does not indicate that any power was conferred on the trustees to relinquish their position as trustees en banc . Rather, as noticed by the Supreme Court in Sheikh Abdul Kayum and Others v. Mulla Alibhai and Others and Others [ 1962 (8) TMI 83 - SUPREME COURT] a person who is appointed as trustee is not bound to accept the trust, but having once entered upon the trust he cannot renounce the duties and liabilities except with the permission of the court or with the consent of the beneficiaries or by the authority of the trust deed itself. We are therefore of the view that the resignation/relinquishment by the assessees, of their position as trustees of the Carmel Educational Trust, that too for a consideration, cannot get the imprimatur of this Court. The consideration received by them for such relinquishment cannot be treated as a capital receipt for the purposes of assessing the same under the head of capital gains. The consideration will have to be treated as the individual income of the assessees and assessed accordingly under the appropriate head. We therefore set aside the said findings in the impugned order of the appellate tribunal and remand the matter back to the tribunal to pass a fresh order on this issue in the light of our findings above. Amount received by Gracy Babu and Jose Thomas from which is said to be towards the on-going construction work as mentioned in clause 5 of the agreement although the revenue strenuously argued that the Tribunal erred in not finding that the consideration received by the assessees was in fact a part of the remuneration for the relinquishment of their trusteeship in the Carmel Educational Trust, we find no evidence to support such a contention. As the Tribunal has relied on the audited balance sheet of the Believers Church and the TDS payments made to the Department in relation to the payments made to the assessees, we see no reason to interfere with the aforesaid finding of the Tribunal. Enhancement made by the CIT (A) in respect of an amount allegedly paid by the Trust to its erstwhile trustees for construction of building on behalf of the Trust - Tribunal deleted the said additions as relying on own case in relation to assessment year 2010-11 there was construction activity carried out by those two assesses as evidenced by the agreements cited supra and the construction was reflected in the balance sheet of the present assesses which was subjected to TDS. Thus, by any stretch of Imagination, it cannot be said that there was no construction activity carried out by the assesses and it cannot be said that payments were not made towards construction of building which was for the establishment of educational institution. Thus, this ground of appeals of the assessee is allowed. Accounting treatment to be accorded to the donations received by St. Thomas Education Trust, which the Department alleged was nothing but an amount received by the assessees as consideration for the relinquishment of their trusteeship in the Carmel Educational Trust - While this was the stand of the Assessing Authority, the CIT (A) found that the amount of Rs. 8 crores received as donation by St. Thomas Education Trust could not be considered as income in the hands of the above assessees who were trustees in the said St. Thomas Education Trust. This view of the CIT (A) against which the Department had preferred an appeal before the Tribunal, was upheld by the Tribunal. We also see no reason to take a different view since it is not in dispute that the payments in question were actually made to the trust and not to the trustees in their individual names.

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• 2024 (4) TMI 457
  Disallowance u/s 14A r.w.r. 8D - Addition being 0.5% of average value of investments appearing in the balance sheet as expenditure incurred for earning dividend income - HELD THAT:- In the case of Joint Investment Pvt. Ltd. [ 2015 (3) TMI 155 - DELHI HIGH COURT] held that the disallowance u/s 14A r/w Rule 8D cannot exceed more than the exempt income. In so far as the contention of the Ld. DR that the amendment brought in by the Finance Act 2022 to section 14A is concerned, we observe that the Hon ble Jurisdictional High Court in the case of PCIT Vs. M/s Era Infrastructure (India) Pvt. Ltd. [ 2022 (7) TMI 1093 - DELHI HIGH COURT] held that the said amendment which was brought in by the Finance Act 2022 is for removal of doubts and, therefore, cannot presumed to be retrospective. Therefore, we restrict the disallowance u/s 14A read with Rule 8D(2)(iii) to Rs. 930/- which is the exempt income earned by the assessee during the year under consideration. This ground is partly allowed. Disallowance u/s 40(a)(ia) - non-deduction of TDS on interest paid by the assessee - contention of the assessee that the AO disallowed not only the interest but also processing fee and pre-closure charges treating them as interest for non deduction of TDS - HELD THAT:- Assessing Officer shall examine all the above contentions of the assessee and should decide afresh keeping in view the decisions of Ansal Landmark Township P. Ltd. [ 2015 (9) TMI 79 - DELHI HIGH COURT] and Dr. Jaideep Kumar Sharma [ 2015 (11) TMI 1638 - DELHI HIGH COURT] wherein held that as long as the payee/resident has filed its return of income disclosing payment received and has also paid taxes on such income the assessee would not be treated as a person in default - Thus, this issue in ground is restored to the file of the AO for deciding afresh - Assessee ground allowed for statistical purpose.

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• 2024 (4) TMI 456
  Penalty levied u/s 271(1)(c) - non assigning specific charge - defective notice u/s 274 - Counsel submits that the AO did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income - HELD THAT:- The notice issued by the AO was bad in law if it did not specify under which limb of section 271(1)(c) of the Act the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. Ratio of the full bench decision in MR. MOHD. FARHAN A. SHAIKH [ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] squarely applies to the facts of the assessee s case as the notice u/s. 274 r.w.s. 271(1)(c) of the Act was issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued. Thus, we hold that the penalty order passed u/s. 271(1)(c) of the Act by the AO is bad in law and accordingly the penalty order passed u/s. 271(1)(c) is quashed. Decided in favour of assessee.

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• 2024 (4) TMI 455
  Disallowance of interest u/s 36(1)(iii) - Interest free loans granted - AO observed that on one hand, assessee is paying interest on its loans borrowed and on the other hand, it had given interest free loans to some parties - HELD THAT:- This issue is decided in favour of the assessee by the co-ordinate bench of this Tribunal in assessee s own case [ 2019 (11) TMI 581 - ITAT DELHI] Payment was made from the current account held with the bank, are duly reflected in the ledger accounts. The details of party wise interest paid also reveals that no interest was paid to such bank. The said bank account is reflecting under the head current assets in the balance sheet. It is the case of the assessee that the assessee had to apply for the flat as a measure of commercial expediency in order to recover the fees amount. As mutually agreed between the assessee and the respective parties that the payment for fees will be made subject to the condition that the assessee applies for allotment of flat. Thus, assessee had to apply for allotment of flat as a measure of commercial expediency. The ledger account of such parties where in the receipt of money is reflecting was also placed on record. Further, a summary sheet reflecting the date of receipt of amount and the date of payment for flat is also submitted by the assessee. Assessee had applied the fees amount towards the purchase of flat as per the terms agreed upon. It can further emerges from the records that the assessee had duly offered such receipt amount to its income on cash basis in accordance with its method of accounting which is also evident from the ledger accounts of such parties. CIT(A) was not right in sustaining the addition in respect of interest incurred on account of amount standing as advance in respect of interest incurred on account of amount standing as advance in respect of such parties. Decided in favour of assessee. Capital gain computation - determination of holding period of asset - Date of reckoning of holding of capital asset - whether the date of allotment of flat or the date of buyer s agreement, would have to be considered for the purpose of considering the holding period of asset by the assessee? - HELD THAT:- This issue is no longer res integra in view of the decision of Vembu Vaidyanathan [ 2019 (1) TMI 1361 - BOMBAY HIGH COURT] wherein it was held that for computing capital gain tax, date of allotment of flat by DDA would be the date on which purchaser of flat can be stated to have acquired property. We allow the Ground raised by the assessee and direct the ld. AO to accept the long term capital loss reported by the assessee.

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• 2024 (4) TMI 454
  Unexplained money u/s. 69A - Limited scrutiny u/s. 143(2) verifying the large cash deposits made by the assessee in his bank account during the demonetization period - As the assessee in the course of proceedings before the first appellate authority had failed to explain the nature and source of the cash deposits in his bank account during the subject year, therefore, the addition made by the A.O was upheld by the CIT(A) - HELD THAT:- Admittedly, as stated by the Ld. AR, and rightly so, the provisions of Section 69A of the Act can be triggered only where the assessee is found to be the owner of any money that is not recorded in the books of accounts and the assessee fails to offer any explanation about the nature and source of acquisition of the money; or the explanation so offered by him is not in the opinion of the A.O satisfactory. Although it is the claim of the Ld. AR that the cash deposits made in the bank account of the assessee were duly recorded in his books of account, but we are unable to concur with the same. Assessee had prepared a consolidated cash flow statement for a period of three years, i.e. 01.04.2014 to 31.03.2017 to justify the source of the cash deposits in his bank account. As the aforesaid cash/fund flow statements filed by the assessee in the course of the assessment proceedings cannot not be construed as the regular books of account maintained by him, therefore, his aforesaid contention, for which, support had been drawn from the aforementioned judicial pronouncements would not carry his case any further. Apropos the cash deposits in the joint Agricultural Kisan Credit (KCC) Account, we find substance in the contention of the Ld. AR that as his brother, had by way of an affidavit dated 04.01.2024 [filed before the CIT(A)] deposed that the said bank account was solely being used by him and the deposits/withdrawals made in the same related to his farming business, therefore, there was no justification for the CIT(Appeals) to have summarily brushed aside the said material fact and without rebutting the contents of the same held the cash deposits in the said bank account as the unexplained money of the assessee u/s 69A - matter in all fairness requires to be restored to the file of the CIT(Appeals) with a direction to re-adjudicate the same after taking cognizance of the aforesaid affidavit filed by the assessee before him. Addition made by the A.O concerning the cash deposits made by the assessee in his savings bank account there is substance in the claim of the Ld. AR that as the government had demonetized the currency, therefore, it was for the said reason that the assessee was compelled to deposit the demonetized currency available with him in his bank account, which, thus, justified the change in trend concerning the cash deposits in his bank account as in comparison to the earlier period. Thus, the Ground of Appeal No.1 raised by the assessee is partly allowed/allowed for statistical purpose

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• 2024 (4) TMI 453
  Addition of cash deposited during the demonetisation period in bank account - unexplained income - taxation @ 60% as provided u/s. 115BBE - assessee has withdrawn the cash amount from bank and the unused amount of cash was redeposited in the bank account during the demonetization period - HELD THAT:- The unused cash was re-deposited in the bank account during the demonetization period. Assessee has also submitted the other documents and evidences before the assessing officer in response to notice u/s 142(1) of the Act. During the appellate proceedings also the assessee has narrated the same facts and submitted details and documents before the CIT(A), however, we note that both the authorities did not appreciate the documents and evidences submitted by the assessee. We note that in holding a particular receipt as income from undisclosed sources, the faith of the assessee cannot be decided by the revenue on the basis of surmises, suspicious and probabilities of Northern Bengal Jute Co. Ltd. [ 1967 (1) TMI 80 - CALCUTTA HIGH COURT] The overwhelming numbers of documentary evidences were submitted by the assessee before both the lower authorities, and these documents cannot be brushed aside on the basis suspicious. We note that AO had not specifically identified any specific defects in the purported evidences and documents submitted by the assessee, and also taking note of the fact that the AO has not held that the documents and evidences so submitted by the assessee are bogus. In our opinion the ends of justice would be met, if a net profit rate of 10% is adopted on the cash deposit during demonetization period. Therefore, we direct the assessing officer to make the addition in the hands of assessee to the tune of Rs. 2,50,250/- and should be taxed under normal provisions of the Act and not u/s 115BBE.

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• 2024 (4) TMI 452
  Mode of computation of capital gains enshrined in section 48 - AO negatived the claim of deduction of transfer expenses in full and disallowed the claim of the indexed cost of improvement claimed - This represents the amount being expenditure in cash for making payment to labourers on civil construction - HELD THAT:- AO has accepted that the assessee has submitted vouchers in support of transfer expenses and that payments were made through assessee s bank account. It is therefore evident that genuineness of the impugned payment as transfer expenses in connection with transfer of property is well established. Despite that disallowance is made only for the reason that copy of agreements with respect to commission services was not submitted. The contention of the assessee is that in real estate business there is no practice to enter into written agreement between the seller of the property and the commission recipients for rendering the services of arranging prospective buyers. The commission recipients act on oral instructions of the seller of the property. Undoubtedly, the commission has been paid through the bank account of the assessee with J K Bank. We are, therefore of the view that the impugned disallowance is not justified. The Hon ble Karnataka High Court has held in Govind Raju (N) [ 2015 (8) TMI 271 - KARNATAKA HIGH COURT] and CIT vs. Venkat Rajendran [ 2015 (7) TMI 656 - KARNATAKA HIGH COURT] that brokerage in connection with transfer is deductible expenditure. Ground No. 1 to 5 are accordingly decided in assessee s favour. Disallowance of cost of improvement - cash expenses allegedly spent for improvement are not supported by proper documentation and hence are not allowable deduction - HELD THAT:- As perused the copy of sale deed placed as describes the assessee as owner of land measuring 2 bighas and 16 biswas along with built-up house. No clear description of built-up house is given therein. Before the AO/DRP it was stated that on bare plot of land purchased in the year 2009 the assessee constructed during AY 2011-12 thereon two storey building having built-up area of 62659 meters on ground floor, first floor and terrace. There is thus no clarity about the house constructed on the land purchased. As stated before the Ld. AO/DRP that payments were made to the contractor, Mr. C Prasad for civil construction. No details of cash paid to the contractor were given nor the Contractor has given any details of disbursement of cash to the labourers for work done by them. The source of availability of the impugned cash is also vague. If relatives and friends provided cash, the assessee ought to have brought on record details of such friends and relatives who gave monetary help. No supporting evidence has been brought on record. How much cash was available with the assessee at the relevant time with supporting evidence was also not given. Ground relating to the above disallowance the assessee has raised new/fresh pleas e.g. (i) that the Ld. AO could have called Mr. C. Prasad, Civil Contractor for verification, though initially it was stated before the Ld. AO that he was no more and hence confirmation from him cannot be obtained. It was on 26.12.2022 when limitation to frame assessment was about to expire, copy of receipt and cash vouchers allegedly signed by Mr. C. Prasad was submitted. There is no whisper in the assessment order or in the direction of the Ld. DRP that the assessee requested for verification of the receipt cash vouchers by producing him before the Ld. AO. (ii) that the Revenue could have got the cost of construction valued through Departmental Valuation Officer. No such plea was ever taken before Ld. AO/DRP. (iii) that disallowance of brokerage and construction cost was in effect re-opening the assessment of AY 2011-12 which have since become time barred. Nothing of this sort of plea is forthcoming from the records. It is evident that the aforesaid new/fresh pleas involved investigation of facts. Nothing has been stated by the Ld. AR why such pleas were not raised before the Ld. AO/DRP. In the absence of any reasonable cause for not raising new/fresh pleas before the Ld. AO/DRP we decline to entertain them. The impugned disallowance of cost of improvement (indexed cost) is justified and therefore sustained. Ground No. 6 to 10 are accordingly decided against the assessee.

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• 2024 (4) TMI 451
  Transfer Pricing Adjustments - Purchase of Development Rights - capital transactions and their treatment - Right to Protest - Applicability of clause (i) of section 92BA as omitted from 01.04.2017 - validity of transfer pricing reference of a specified domestic transaction - Assesee had claimed that in view of the omission of clause (1) of section 92BA with effect from 01.04.2017 action taken under that clause is invalid and bad in law - HELD THAT:- We find no force in the contention of the ld. DR that as the assessee had prepared a transfer pricing report and had disclosed specified domestic transaction in Form 3CEB which is to be furnished u/s 92E of the Act disclosing international transactions and specified domestic transaction, therefore, the assessee cannot now escape from the liability to get this transaction benchmarked and so the TPO was justified to make the adjustments. DR has himself admitted that the assessee while filing the transfer pricing study report had mentioned that as a matter of abundant caution the transaction is being reported for the purpose of section 92E of the Act. We are of the considered view that when the law had provided for penalty in case of non-compliance of a provision of the Act and the assessee reserving a right to protest at appropriate stage, makes the compliance, the assessee cannot be estopped by own act and conduct to dispute the applicability of the said provisions during the assessment. Without much indulgence on our part, we would like to rely on the order of the Mumbai Bench of the Tribunal in the case of Siro Slimpharma Pvt. Ltd. [ 2021 (10) TMI 754 - ITAT MUMBAI] wherein while dealing with somewhat similar question of law, the Mumbai Tribunal has indicated that in the absence of judgment of Jurisdictional High Court, the non-jurisdictional High Court judgment has persuasive value and should be generally followed. We have also taken into consideration the order relied by ld. DR in the case of Firemenich Aromatics (India) Pvt. Ltd. [ 2020 (7) TMI 658 - ITAT MUMBAI] and the order of Yorkn Tech Pvt, Ltd. [ 2021 (8) TMI 1374 - ITAT DELHI] relied by ld. AR and there is no doubt the coordinate Bench at Delhi has distinguished the Mumbai Bench order in the case of Firemenich Aromatics (India) Pvt. Ltd. (supra) and held that even after the judgement of the Hon ble Supreme Court in the case of Shree Bhagwati Steel Rolling Mills [ 2015 (11) TMI 1172 - SUPREME COURT] and Fiber Boards Pvt. Ltd. [ 2015 (8) TMI 482 - SUPREME COURT] clause (i) of section 92BA which has been omitted from 01.04.2017 has to be considered to have never been part of the statute and, accordingly, no transfer pricing adjustment can be made on a domestic transaction. We will also like to distinguish the Mumbai Tribunal order in Firemenich Aromatics (India) Pvt. Ltd. (supra) by observing that in that case the issue was with regard to omission of sub-section (2A) of section 253 of the Act which was initially inserted by Finance Act, 2014 with retrospective effect from 01.06.2013 and which was then omitted by Finance Act, 2016 from 01.06.2016. The said provisions related to right to file appeal and in that case, the AO had filed the appeal during the currency of section 253(2A) of the Act and for that reason, the Mumbai Bench had considered the issue of repeal/omission made in a statute and the consequences thereof. Since right to appeal is a substantive and, certainly, if it was there in the statute when the appeal was filed and, subsequently, if the statute had omitted the provision, the substantive right of appeal vested in a party would not be taken away by holding the repeal to be retrospective. However, in the case in hand, a substantive provision, being infact a charging provision, has been omitted/deleted and consequently benefit of the same has to be given to the assessee. Thus, we are inclined to follow the Hon ble Karnataka High Court judgement and, on that basis, the additional ground raised by the assessee deserves to be allowed and consequently the whole exercise done by ld. AO to bench mark the transaction of purchase of development right, stands being void. Most appropriate method for benchmarking the transaction - Assessee has claimed that it has chosen the `Other method being average of Sales Comparable Method and Discounted Cash Flow Method. Ld. TPO has discarded the two methods applied for arriving the average for valuation of transaction and instead the Ld. TPO adopted Circle rate as most appropriate method of valuation - principles applicable to land acquisition matters where market value is determined on the bases of certain parameters peculiar to the parties and property - HELD THAT:- We find no fault in valuation arrived using the relevant parameters and adding premium or discounting, the value, on those parameters. The Valuer s Report is quite in conformity with the principles and method by which market value of a real estate property should generally be arrived at Discounted cash flow (DCF) refers to a valuation method that estimates the value of an investment using its expected future cash flows. DCF analysis attempts to determine the value of an investment today, based on projections of how much money that investment will generate in the future. In case of real estate project, initial cost, annual cost, estimated income, and holding period of a property are some of the variables used in a DCF analysis. We are of considered view that more than to determine the profitability, but to atleast ensure the viability, of an investment, DCF method is often used in real estate sector. DCF method is not only applicable where the assets-based approach is applied and the value of a business is derived from the FMV of the assets (tangible and intangible) less the liabilities. But in case of real estate development projects the income-based approach of the DCF method, is more appropriate method, as rightly applied by the valuer. Thus absence of tangibles could not have been basis to discard the DCF method. Now coming to the wisdom of TPO to apply circle rates to make adjustment we are in agreement with Ld. AR that certainly the circle rates never are correct reflection of the market rates. Circle rates are merely fair market value of the land for fiscal purposes but cannot be considered to be market value. When a transaction involving land is to be benchmarked, then the market value is more realistic parameter for making the adjustment and not the circle rates. Thus at one end, the Ld. CIT(A) and Ld. TPO have fallen in error in invoking the provisions of Section 92CA of the Act and on the other hand in discarding the valuation report and to substitute it with circle rate. Disallowance of claim of expense - disallowance is primarily on basis that no business income has been earned by the assessee during the year - HELD THAT:- It seems that Ld. AO completely blind folded himself to the nature of business activity of the assessee and as to in what mode the revenue will be generated over the years. As we examine the break-up of claim of expenses aggregating to Rs. 77.56,593/- coupled with audited financial statement, we find that the expenses appears to be of routine business expenses. However, as Ld. AO was not given relevant details and same require verification, we deem it justified to restore this issue back to the files of Ld. AO, and accordingly the ground no. 6 is allowed for statistical purposes. TP Adjustment u/s 92CA - interest paid to AE on CCD/OCD - assessee company has benchmarked the transaction based on CUP method and the ALP of interest was determined at 15% based on 47 comparables - TPO rejected the comparables so selected by the assessee company and coupon rate of 10.25% was treated as ALP based on 2 separate comparable - HELD THAT:- We are of considered view that Ld. CIT(A) has thoughtfully taken into consideration the facts in wholesome manner and has adopted a judicious approach by considering median @16% based on 49 comparables i.e. 47 comparables selected by assessee company as well as 2 by TPO. Even if the 2 comparables were not of same industry but as the assessee does not object to their inclusion, the order of Ld. CIT(A) cannot be faulted. There is no apparent infirmity requiring our indulgence. Accordingly, the grounds so raised have no substance.

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• 2024 (4) TMI 450
  Protective addition - Addition made on account of over invoicing in purchases - Assessment u/s 153A - AO made substantive addition on account of over-invoicing in hands of M/s IPCA Laboratories Ltd and correspondingly made protective addition in the hands of the assessee holding him to be the beneficiary of the over-invoicing - the assessee was found in possession of cash in the course of search conducted u/s 132 and he had admitted in his statement recorded u/s 132(4) of the Act that the amount belonged to M/s IPCA Laboratories Ltd and was generated out of over-invoicing done by M/s IPCA Laboratories Ltd. Later on, it is noted that the assessee had retracted his original statement HELD THAT:- We have already held in the case of IPCA Laboratories Ltd [ 2024 (4) TMI 405 - ITAT MUMBAI] that the company was not indulging in any over-invoicing of purchases and accordingly deleted the addition made by the AO held that although an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It was held that, it is open to the assessee who made the admission to show that it is incorrect. A statement is only a piece of evidence, and the weight to be attached to it must depend on the circumstances in which it is made. It is open for the assessee to show it to be erroneous or untrue. Hence, the position which emerges is that a statement u/s 132(4) of the Act by itself cannot be reason enough to justify an addition, if the assessee is able to show that the facts admitted by him was purely based on wrong assumption of facts and able to adduce evidence/material to show that he was wrong on the facts he admitted. So when an admission u/s 132(4) of the Act has been retracted on the aforesaid reasons, then the AO should cross-examine the person again to ascertain the correct facts. The AO ought to conduct proper investigation into the affairs of the assessee and gather corroborative material which would negate such retraction and prove that the facts admitted originally is correct and thus retraction can be discarded. Unless, the AO is able to bring on record tangible material or evidence that the assessee had paid excess price and got back monies / cash from suppliers, according to us, merely because there were rates differential amongst purchases from different vendors cannot be sole reason to infer over-invoicing / inflation of purchases. AO himself had ultimately not given any relevance to the enquiry and comparison made by him, which although was extensively discussed in the assessment order. It is noted that the AO had ultimately made the addition based on the value of over-invoicing as stated by the employees in their statements and not based on his comparison/ independent enquiry from these vendors. Statements of the employees had no bearing in the given facts of the assessee s case as the over-invoicing component admitted by them was in relation to purchases made. Thus we are therefore in agreement with the Ld. CIT(A) that since the substantive addition itself has been held to be unjustified, the impugned protective addition has no legs to stand on. Decided in favour of assessee.

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• 2024 (4) TMI 449
  Revision u/s 263 - Deduction u/s 80P on interest received from Cooperative Bank - HELD THAT:- As decided in Katlary Kariyana Merchant Sahkart Sarafi Mandali Ltd [ 2022 (1) TMI 1309 - GUJARAT HIGH COURT] wherein held as following the decision of Totagar s Co-operative Sale Society ltd. [ 2010 (2) TMI 3 - SUPREME COURT] it was held that interest earned from investments made in any bank, not being cooperative society, is not deductible under section 80P(2) (d) of the act. This Court further finds that by virtue of amendment in section 194A(3)(v) of the Income tax act, it has also excluded the cooperative banks from the definition of co-operative society by the Finance act, 2015. The High Court of Karnataka has taken note of this amendment in the case of Totagars Co-op/sale society [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] thereby holding that the effect of the aforesaid amendment explicitly makes clear intention of legislation that co-operative banks are not specie of genus co-operative society, which would entitled to exemption or deduction under the special provisions of Chapter VI-A in the form of section 80P of the Act. Thus the allowance of deduction of the income derived by way of interest from the investment in the form of FDR s with other banks was incorrect. No infirmity in the Revision order passed by the Ld. PCIT which does not warrant any interference. Thus the grounds raised by the assessee is devoid of merits liable to be rejected.

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• 2024 (4) TMI 448
  Addition on account of unexplained investment - addition on the basis of market price of the land and building whereas the assessee has declared the value of these assets as per cost incurred by it when the land was purchased in F.Y. 2010-11 - HELD THAT:- The basis of the addition is the valuation report submitted by the assessee during the course of assessment proceedings which was based on the market value of land and building as on the date of valuation - purchase price declared by the assessee is the cost incurred by the assessee and, therefore, AO grossly erred in taking market value of the assets from the valuation report. We do not find any reason to interfere with the findings of the CIT(A). Ground stands dismissed. Addition on account of notional rental value - AO found that market value of the constructed property is far more than what has been stated by the assessee and taking 8% as annual rental value as per the agreement, thus made addition - HELD THAT:- We find that the assessee has computed its rental income as agreed with the lessee and annual lettable value is also justified using average rent charged in nearby area at Noida. We, therefore, do not find any merit in taking notional rental value on the fair market value of the constructed property. Assessee has accordingly shown 8% rental income in the investment shown in the books of account. We, therefore, decline to interfere with the findings of the ld. CIT(A). Addition on account of sundry creditors - HELD THAT:- The only income of the assessee is income from house property. Therefore, there is no question of any sundry creditors/payables. Assessee has not claimed any expenditure. Therefore, there is no question of disallowance of any expenditure. We do not find any error or infirmity in the findings of the ld. CIT(A).

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• 2024 (4) TMI 447
  Addition u/s 56(2)(viib) - closely held company issues its shares at a price which is more than its fair market value then the amount received in excess of fair market value of shares - CIT(A) rejecting the working of fair market value of shares at Rs. 36.76/- per share by AO and allowing the fair market value of shares at Rs. 185.92 per share as per DCF method by assessee thus deleted addition - HELD THAT:- There has to be some enabling provision under the rule or the Act where AO has been given a power to tinker with the valuation report obtained by an independent Valuer as per the qualification given in the rule 11U. Here, in this case, AO has tinkered with DCF methodology and rejected by comparing the projections with actual figures. The Rules provide for two valuation methodologies, one is assets based NAV method which is based on actual numbers as per latest audited financials of the assessee company. Whereas in a DCF method, the value is based on estimated future projection. These projections are based on various factors and projections made by the management and the Valuer, like growth of the company, economic/market conditions, business conditions, expected demand and supply, cost of capital and host of other factors. These factors are considered based on some reasonable approach and they cannot be evaluated purely based on arithmetical precision as value is always worked out based on approximation and catena of underline facts and assumptions. Nevertheless, at the time when valuation is made, it is based on reflections of the potential value of business at that particular time and also keeping in mind underline factors that may change over the period of time and thus, the value which is relevant today may not be relevant after certain period of time. From time to time various courts/Tribunals have held that as per section 56(2)(viib) r.w.R 11UA, the assessee has the option to do valuation of shares and determine FMV either on DCF Method or NAV method and AO cannot substitute his own value in place so determined. Similar issue came for consideration before case of Cinestaan Entertainment P. Ltd. [ 2021 (3) TMI 239 - DELHI HIGH COURT] where in held if law provides the assessee to get the valuation done from a prescribed expert as per the prescribed method, then the same cannot be rejected because neither the Assessing Officer nor the assessee have been recognized as expert under the law. Decided in favour of assessee.

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• Customs

• 2024 (4) TMI 446
  Refund of IGST on Export of Goods - Conditions were complied with post-export - Amendment of Bills of Entry for imported goods under the Advanced Authorisation Scheme and the Export-Oriented Unit (EOU) Scheme - A significant bone of contention was whether Bills of Entry could be amended post-clearance to reflect IGST payments - HELD THAT:- The Central Board of Indirect Taxes and Customs (CBIC), relying on the difficulty faced by the importers in amending the Bill of Entry despite payment of IGST and compensation cess, had issued notification Circular No.16/2023 and provided a separate procedure for amending the Bill of Entry inspite of second proviso to section 149. The office of Principal Commissioner of Customs, Maharashtra had issued public notice dated 23rd February 2024 for amending the Bills of Entry as per the procedure prescribed in different scenarios mentioned in the said public notice. In view of the notification No.78/2017-Customs dated 13th October 2017 and the public notice, the stand of the respondents that the Bills of entry cannot be allowed to be amended as the petitioners have not paid the IGST at the time of clearance of the imported goods and as a Bill of entry can be amended only on the basis of the documents available at the time of clearance of the goods, does not hold a valid ground for rejecting amendment of the Bill of Entry. Rejecting the application for amendment of the Bills of Entry despite payment of IGST and interest except in Writ Petition No.4670 of 2024 where the interest has not been paid cannot be countenanced. Further, as noted, except for the petitioner in Writ Petition, the Commissioner of Customs vide order dated 4th March 2022 directed the petitioners to deposit the IGST along with interest for all the Bills of Entry for which erroneous refund was availed under Rule 96(10) of the CGST Rules, 2017 and submitted the report after making payments. Out of the 12 entities who were directed to remit the amount of IGST along with interest, in the case of two entities, the Bills of Entry have been amended. However in the case of the petitioners, amendment to the Bills of Entry have been refused. There is no explanation coming forth from the respondents for choosing a few to allow them to amend the bills of entries and denying the same relief to others. Therefore, the petitions are to succeed, and thus, allowed. Respondents are directed to amend the bills of Entry of the petitioners. The petitioner in the Writ Petition is directed to pay the interest, if already not paid, within a period of 15 days from today and on the payment of interest and verification of the documents of payment of IGST and interest, the Bills of Entry should also be amended. Thus, the Writ Petitions stand allowed.

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• 2024 (4) TMI 445
  Exemption under Sl. No. 303 of Notification No.12/2012-CE dated 17.03.2012 - import of flight simulators and avionics for M/s. Hindustan Aeronautics Limited (HAL), Bangalore and others - It is alleged that the appellant had wrongly claimed the benefit of the Notification claiming them as parts that are intended for servicing, repair or maintenance of aircrafts, thus evading duty of Countervailing Duty (CVD), Special Additional Duty (SAD) and Education cess. HELD THAT:- The benefit of the Notification is available only for the parts of the aircraft which are intended for servicing, repair or maintenance of the aircraft. The question to be decided is whether the imported prototype form part of the aircraft and whether they are intended for the said purpose mentioned in the Notification. The appellant themselves vide their letter dated 07.01.2013 have stated that the first prototype (engineering unit) imported by them is identical in terms of its functions and applications when compared to the other 2 prototypes imported by them but the only difference between the first unit and the other units is that the first unit is tested on the ground in the designers lab to verify that all functionalities, weight and power consumption, as required by the customers are incorporated - Admittedly, the first prototype unit imported by the appellant is only for testing the worthiness of the aircraft for the required upgradation and does not form part of the aircraft. Therefore, the Commissioner was right in disallowing the benefit of the Notification since admittedly; it does not form part of the aircraft. With regard to the other two imports, the technical write-up states that it is meant for upgrading the Engine and Flight Instrument System (EFIS) for DARIN III upgrade programme for Jaguar Aircraft. The set equipment is meant for replacement of the conventional Electro-mechanical instruments/sensors of DARIN Jaguar aircraft. The Commissioner in the impugned order states that the appellant has declared them as prototypes while the first one is not fitted to the aircraft and the other 2 are claimed to have been fitted for upgradation of the aircraft. This plea is rejected on the ground that the notice themselves refer to the goods in all the 3 imports as prototypes. As indicated earlier, prototypes by definition and by general understanding are for testing and evaluation and not for commercial use. Whether these imports which are intended for replacement/upgradation of the aircraft are eligible for the benefit of the Notification which is intended for servicing, maintenance or repair? - HELD THAT:- Since the benefit is being extended to the parts of aircrafts owned by Government of India, these terms must be understood in terms of their usage and practice. Therefore, in order to understand its true meaning under the said Notification, reference must be made to the Aircraft Rules, 1937 - contention of the Revenue is that these goods are meant for replacement and upgradation, which cannot be considered as an activity of servicing, repairing or maintenance and therefore, the appellant is not eligible for the benefit of the Notification No. 12/2012-Cus., dated 17-3-2012, is devoid of merit. The Flight Clearance Certificate for Engine dated 30.05.2013 issued by the Ministry of Defence states that the EFIS replaces the engine fuel hydraulic pressure standby flight instruments in the jaguar cockpit. These electro mechanical instruments are replaced with LCD display of EFIS. The EFIS system provides engine parameters, fuel parameters, hydraulic parameters and flight parameters. This establishes the fact that it forms the part of the aircraft - the benefit of the Notification is denied to the first prototype cleared vide Bill of Entry No.7362578 dated 11.07.2012 and the benefit of the Notification to the other two imports which are meant for upgradation of the aircraft is allowed. Appeal allowed in part.

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• 2024 (4) TMI 444
  Smuggling - Gold of foreign origin - Absolute Confiscation - town seizure - reliability of statements/retraction of statements - cross-examination of witnesses - recording of statements in gross violation of order given by the Apex Court in the case of Shafhi Mohammad vs The State of Himachal Pradesh [ 2018 (4) TMI 1830 - SUPREME COURT] - onus to prove u/s 123 of CA - HELD THAT:- It is found that the owner of the gold in question Mr. TPK, at the very initial stage of being questioned by Revenue, has stated that the gold is out of stock in trade. Further, he has lead evidence that as per his stock register, he was having 6303.804 gms of gold. Thus, issue of 1431.61 gms of gold, after adjusting the sales made till 23.08.2020 on the date on which gold in question was sent for conversion into ornaments through his employee Mr. CNR, stands fully explained. The Adjudicating Authority has made an attempt to compare the stock position as on 30.09.2020 which is not at all relevant and is wholly mis-conceived. In case of ascertaining stock position the relevant date is the date on which availability is claimed, which is fully satisfied in the facts of the present case. It is further found that the appellant has also shown and accounted for the seizure of 1431.61 gms of gold by the DRI, in his books of accounts, which is also reflected in their balance sheet. It is further found that both Mr. CNR and Smt. Padma Priya. V, of M/s JRV Jewellers have retracted their statements in reply to SCN. Further, it is found that these persons, in spite of the retraction being in the knowledge of Revenue, were not examined by the Adjudicating Authority in the adjudication proceedings. Thus the retraction goes un-rebutted. Further, it was the onus of the Revenue to establish that the statements were given voluntarily without any pressure or duress, as held by the Hon ble Supreme Court in the case of Vinod Solanki [ 2008 (12) TMI 31 - SUPREME COURT ]. It is an admitted fact that the seizure is by way of town seizure and further there were no markings on the gold bar/pieces indicating foreign origin. Further, it is evident from the report of the valuer that the bars are of irregular shape and size being of the weights 538.980 gms/842.550 gms/43.6 gms/6.480 gms. Thus, the shape and weight of the bars also speak for itself that these are not of any foreign origin as it is known in the trade circle that gold of foreign origin is of standard weight and shape of 100 gm/1 kg and also has the marking of the refiner with the unique serial number. The appellants have submitted various documents in support of their contention as regards source of gold being extract of their books of accounts and registers, financial statements like balance sheet and profit and loss account, copy of GST returns, copy of challan issued for sending gold to Coimbatore through Mr. CNR. Such documents have not been found to be untrue. Accordingly, the appellants have discharged the onus under section 123 of the Customs Act - the entire proceedings are vitiated as SCN has been issued after more than 6 months from the date of seizure. The appellant Mr. T. Pavan Kumar shall be entitled to release of 1431.61 gms of 24 ct gold and if the same has already been sold, shall be entitled to the sale proceeds with interest, as per Rules - the impugned order set aside - appeal allowed.

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• 2024 (4) TMI 443
  Interest on delayed refund - Interest for the delay in payment of additional duty - calculation of relevant time - HELD THAT:- As per Section 18(4) of the Customs Act, 1962, it is clear that on finalization of assessment of duty, assessee is entitled for refund and if refund is not made within 3 months from the date of such assessment, assessee is entitled for interest on such amount as per the rate fixed by Central Government under Section 27A of the Customs Act, 1962, till the date of refund of such amount. The ratio of the judgement relied by the appellant the matter of M/S GKN DRIVE LINE (INDIA) LTD. VERSUS COMMISSIONER OF CUSTOMS, NEW DELHI [ 2013 (8) TMI 355 - CESTAT NEW DELHI] , right to interest under Section 18(4) of Customs Act, 1962 is applicable if the due amount is not paid within 3 months from the date of final assessment and not to reckoned 3 months after submission of refund claim as per section 27 of the Customs Act, 1962. Only for the rate of interest, rate fixed by Central Government under Section 27A will apply. Considering the fact that adjudication/appellate authority has not considered the provisions of Sections 18(4) of Customs Act, 1962 in appellant s case, the appeal is remanded to adjudication authority to consider the plea of the appellant regarding their entitlement of interest under Section 18(4) of the Customs Act, 1962. The Adjudication Authority directed to consider and pass appropriate orders within 4 months after the receipt of the final order. Appeal is allowed by way of remand.

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• Corporate Laws

• 2024 (4) TMI 442
  Demand of unearned increase value - Amalgamation or merger of the two companies does not involve any transfer within the meaning of the Transfer of Property Act, 1882 or not - Interpretation of Lease Agreement Clause - HELD THAT:- There is a specific clause in the order of amalgamation which holds that the said plots stand transferred from the original permanent lessee to the transferee M/s. Jaypee Rewa Cement Ltd, which is now known as M/s. Jaiprakash Associates Ltd. Clause II(4)(a) covers all the categories of transfers as it provides that the lessee shall not sell, transfer, assign or otherwise part with the possession of the whole or any part of the commercial plots without the written consent of the lessor. The said clause does not exclude involuntary transfers. In the facts of the case, it cannot be said that there is an involuntary transfer, as the transfer is made based on a petition filed by the lessee and the transferee for seeking amalgamation. In a sense, this is an act done by them of their own volition. A similar issue arose for consideration before this Court in the case of DELHI DEVELOPMENT AUTHORITY VERSUS NALWA SONS INVESTMENT LTD. AND ANR. [ 2019 (4) TMI 2009 - SUPREME COURT] . The Court was dealing with a case where the Company Court passed an order of arrangement and demerger. As a result, the plot given on lease to a company was transferred to another company. In paragraph 5 of the decision, this Court had set out the policy instructions regarding charging an unearned increase. This Court was dealing with an order of the Company Judge, which provided that the property of a company shall stand transferred to the respondent before this Court, and therefore, it was a case of transfer to which clause 6(a) of the lease deed will be attracted. Clause 6(a) in the lease subject matter of the said case was identical to clause II(4)(a) of the perpetual lease in the present case. This Court also held that clause 2(d) of the policy determining unearned income was attracted in the case of transfer due to demerger. The same principles will apply to a merger, and an unearned increase will be payable. In the case of Indian Shaving Products Limited [ 2001 (10) TMI 1042 - HIGH COURT OF DELHI] , the High Court of Delhi dealt with the amalgamation of companies under the SICA and not under the Companies Act. In any event, this court confirmed the said decision by summarily dismissing the petition. In the present case, the relevant clause II(4)(a) of the leases covers involuntary transfers as well. The relevant clause II(4)(a) in the perpetual leases subject matter of this appeal is very wide. It not only covers transfers but also parting with possession. Therefore, the transfer contemplated by the said clause is much wider than what is defined under Section 5. Importantly, Section 5 clarifies that nothing contained therein shall affect any law for the time being in force in relation to the transfer of property to or by companies. Therefore, Section 5 of the TPA will not be of any assistance to the appellant. There is nothing illegal about the impugned judgment - appeal dismissed.

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• Insolvency & Bankruptcy

• 2024 (4) TMI 441
  Rejection of claim of the Appellant(s) to be declared as Financial Creditors of the Corporate Debtor - it was held by NCLAT that The condition for declaring the Appellant(s) as Financial Creditor are not satisfied in the claims submitted by the Appellant(s) and both Resolution Professional and Adjudicating Authority have rightly rejected their claims as Financial Creditor for valid reasons - HELD THAT:- There are no good ground and reason to interfere with the impugned judgment and hence, the present appeal is dismissed. In the present case, the appellant - Skil Infrastructure Limited is a corporate guarantor as per Section 5(5A) of the Insolvency and Bankruptcy Code, 2016. Its claim against the second/ new promoters/management will not make them a financial creditor against the corporate debtor itself. Section 140 of the Contract Act, 1872 cannot be pressed and is not applicable. Application disposed off.

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• 2024 (4) TMI 440
  Condonation of delay in filing appeal - Approval of Resolution Plan - it was held by NCLAT that The Appellant having been treated as Operational Creditor allocation of amount in the Resolution Plan cannot be said to be in violation of Section 30 (2)(b), thus, no ground has been made to interfere with the Impugned Order. HELD THAT:- The period of delay is 142 days which is in excess of the delay which can be condoned in terms of Section 62 of the Insolvency and Bankruptcy Code 2016. The Appeal is accordingly dismissed on the ground of limitation.

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• 2024 (4) TMI 439
  GNIDA is Secured Creditor or not - Submissions raised by the Resolution Professional objecting to the claim of the GNIDA as Secured Creditor was noticed and dealt by the Adjudicating Authority in the impugned order - Section 13 and 13-A of UPIAD Act are inconsistent with Section 238 of I B Code or not - HELD THAT:- CIRP commenced on 30.05.2019, claims were invited, the claim was set up by the Appellant as Financial Creditor, which was rejected and Appellant was treated as Operational Creditor. CoC approved the plan which was presented before the Adjudicating Authority and was approved by the Adjudicating Authority on 04.08.2020. Appellant after coming to know that plan has been approved has filed I.A. No.344 of 2021 questioning the Resolution Plan and decision of the Resolution Professional to treat the Appellant as Operational Creditor. The submission of the Appellant that Section 13-A was inserted in the Act subsequent to lease having been granted to the Corporate Debtor does not in any manner affect the claim of the Respondent No.1 as Secured Creditor. Section 13-A was inserted by U.P. Act 10 of 2016 in The Uttar Pradesh Industrial Area Development Act, 1976 - Any dues of the Authority is a charge as per Section 13-A over the property. The Corporate Debtor has not paid the dues of Respondent GNIDA, which has been brought before the Adjudicating Authority by means of an application giving all relevant details. In the present case, the Adjudicating Authority returned finding that Resolution Professional in its affidavit dated 05.05.2023 has admitted that the Corporate Debtor has committed a default in payment of lease rentals prior to the commencement of CIRP. The submission advanced by the Resolution Professional that charge has not been created under Section 77 of Companies Act has already been dealt and rightly rejected. Present is a case where charge on the assets of the Corporate Debtor was created by virtue of law i.e. Section 13-A and registration of charge under Section 77-78 of Companies Act is inconsequential. We, thus, endorse the above view taken by the Adjudicating Authority that non-registration of charge in favour of Greater Noida Authority was inconsequential. The Adjudicating Authority being aware that lease rentals are due on the Corporate Debtor also directed the parties to file affidavit. Judgment of Hon ble Supreme Court in State Tax Officer vs. Rainbow Paper Ltd. [ 2022 (9) TMI 317 - SUPREME COURT ] relying on Section 48 of Gujrat Vat Tax Act held that charge to be statutory, which judgment also fully supports the submission of counsel for the Respondent. The decision of the Adjudicating Authority declaring the Greater Noida Industrial Development Authority as Secured Operational Creditor does not warrant any interference in this appeal - appeal dismissed.

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• 2024 (4) TMI 438
  CIRP - Admissibility of two additional documents - Section 11 of Arbitration and Conciliation Act - rejection of Application of the Appellant seeking permission to bring additional documents - the arbitration petition and the order were both initiated after the filing of the Section 9 Application - HELD THAT:- Notice under Section 8 was issued by the Operational Creditor on 05.05.2022, which was also replied by the Corporate Debtor. Section 9 Application was filed being CP(IB)No.36/CB/2022 by the Operational Creditor in the year 2022, to which reply was also filed by the Corporate Debtor. Arbitration proceedings before the Hon ble Calcutta High Court in BALASORE ALLOYS LIMITED VERSUS MSTC LIMITED [ 2023 (9) TMI 1457 - CALCUTTA HIGH COURT] under Section 11, sub-section (6) of the Arbitration and Conciliation Act, 1996 was initiated on 31.08.2023, on which an order was passed by the Hon ble Calcutta High Court on 13.09.2023. Both the Arbitration Application and order of the Hon ble Calcutta High Court, which were sought to be brought on record by the Corporate Debtor, were much subsequent to filing of Section 9 Application. The observation of the Hon ble Supreme Court in MSTC LIMITED VERSUS BALASORE ALLOYS LIMITED [ 2023 (11) TMI 1245 - SC ORDER] , clearly indicate that arbitration order passed in the arbitration proceedings shall not affect proceedings in Section 9 Application under the Code, which was filed by the Operational Creditor. There are no error in order of the Adjudicating Authority rejecting application filed by the Appellant to bring on record two documents - Appeal is dismissed.

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• 2024 (4) TMI 437
  Approval of Resolution Plan - Validity of the order of Adjudicating Authority (NCLT) wherein it held that Rishima cannot be called as a Financial Creditor and Rishima being a Decree Holder of a foreign award can be treated as other creditor. The application of the respondent was partly allowed by the Adjudicating Authority - HELD THAT:- It is clear that in the Resolution Plan which stood approved by the Adjudicating Authority and also upheld by this Tribunal by its order of the date in Company Appeal (AT) (Ins.) No.143 of 2024 [ 2024 (4) TMI 305 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ], the total claim of the Appellant has been admitted as Rs.132,89,75,268/- and has been allocated Rs.1 Lakh. In this appeal it is not necessary for us to enter into the issue whether the Adjudicating Authority s order dated 30.11.2023 partly allowing the application of Rishima needs to be upheld or not. The order dated 30.11.2023 passed by the Adjudicating Authority has been given effect to as reflected in the Resolution Plan which stands approved on 04.01.2024. There are no reason to enter into various submissions raised by the Appellant questioning order dated 30.11.2023. In view of approval of Resolution Plan on 04.01.2024, in which Resolution Plan order dated 30.11.2023 passed by the Adjudicating Authority has been given effect to, there is no occasion to consider challenge to the said order in this appeal - Appeal dismissed.

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• 2024 (4) TMI 436
  Prayer for interim distribution of funds lying in the Escrow Account of the Company - date on which Liquidation Value has to be taken for distribution of amount to the creditors - IL FS had not been servicing the debt since October 2018 - HELD THAT:- The Liquidation Value as on 30.09.2018 is as per order dated 12.03.2020 where this Tribunal has accepted 15.10.2018 as the cut-off, there are no error in fixing the Liquidation Value as on 30.09.2018. Furthermore, the Lenders with the requisite majority has already taken a decision to approve Restructuring Plan, the SBI, who is also one of the Lender, cannot be permitted to wriggle out of the terms of the ITPCL Restructuring Plan and as per decision taken by the majority, prescribed in Clause 10 of the RBI Circular, the Restructuring Plan and the Liquidation Value taken therein is binding on the Applicant. In the present case, cut-off date has already been laid down by this Tribunal in the order dated 12.03.2020 [ 2020 (3) TMI 1398 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] and the Liquidation Value as fixed by the Lead Bank cannot be said to be erroneous. The relevant fact which is brought to the notice here is that the Valuers report was received by the Lead Bank and thereafter third Valuer was engaged due to difference in the valuation by the Valuers and all the process was noticed and discussed in the Joint Lenders Meeting. There is no dispute that Liquidation Value as per the Valuers Report submitted by Lead bank has been communicated to the Applicant. There are no error in the Master Restructuring Plan having based on Liquidation Value as on 30.09.2018. Application dismissed.

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• Service Tax

• 2024 (4) TMI 435
  Levy of service tax - various public amenities provided by the Municipal Corporation such as market space, bus stands, vehicle stands, slaughter houses etc. - Taxability of services provided by the appellant to various telecom companies by way of permitting them to lay terrestrial and overhead communication cables in corporation property - Taxable value of arrears recovery pertaining to service provided prior to 1.4.2011 - Methodology adopted by the Revenue to arrive at the taxable value - Extended period of Limitation - suppression of facts or not. Levy of service tax - various public amenities provided by the appellant such as market space, bus stands, vehicle stands, slaughter houses etc. - claim of the appellant is that these are the sovereign functions entrusted to them by the Kerala Municipality Act ,1994 - HELD THAT:- In the case of KARAD NAGAR PARISHAD VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, KOLHAPUR [ 2018 (2) TMI 733 - CESTAT MUMBAI] , the Tribunal held that Regulation of slaughter houses is the sovereign function of the Municipal Corporation therefore the fees collected towards the regulation of slaughter houses, the demand of Service Tax does not arise. In view of the above, the demands against the Appellant with regard to the rent markets, bus stands, vehicle stand, slaughter house and comfort station are set aside as they are the sovereign functions of the appellant and it is immaterial whether they are delivered directly or through the intermediaries. However, the Commissioner also observes that in certain cases, the appellant has collected the Service Tax and therefore, even though they are not liable to service tax, the tax collected needs to be deposited with the tax authorities. Taxability of services provided by the appellant to various telecom companies by way of permitting them to lay terrestrial and overhead communication cables in corporation property - appellant s grievance is that these amounts do not figure in their Income and Expenditure Statement along with the advanced accounts which has been the basis for arriving at the taxable value - HELD THAT:- Since the agreements are on record and clearly establish that part of the amounts have been retained by the appellant for certain services rendered by them to M/s. Reliance Jio Infocomm Limited, the demand of Service Tax is justified and to that extent, the order is upheld. These agreements were not on record and admittedly, the payments were also not shown in the income and expenditure statement thus, non-disclosure of the amounts collected and retained amounts to suppression of facts with intent to evade payment of duty. Therefore, the Service Tax on Telecom charges is upheld, for these agreements beyond the normal period. Taxable value of arrears recovery pertaining to service provided prior to 1.4.2011 - appellant claims that this amount of Rs.3,68,00,915/- includes the arrears for the year 2011-12 which is already included in the year 2012 - HELD THAT:- According to the appellant, the actual taxable amount is the amount received during October 2011 to March 2012 which is Rs.37,13,989/- as against Rs.3,68,00,915/-. The submission of the learned Consultant agreed upon that the any arrears beyond 5 years is not sustainable but since these are factual data errors as has been explained by the Consultant, the same needs to be verified before finalisation of demand. Methodology adopted by the Revenue to arrive at the taxable value - Commissioner observed that all incomes are recognised on accrual basis - HELD THAT:- Considering the provisions of the Point of Taxation Rules 2011, it is found that the income and expenditure statement of the SSC along with advanced accounts will only render true reflection of the taxable value of the SSC, accordingly the taxable value reworked on the basis of the figures reflected in the income and expenditure statement and the advanced accounts . The only objection on this observation by the appellant is that he has traversed beyond the show-cause notice as the notice demanded duty based on the credit transactions reflected in the Trial Balance, wherein the Commissioner found that it was not the right method for arriving at the taxable value; since, they are not the final income receipts, thus traversed beyond the show-cause notice - there are no reason to interfere with this observation of the Commissioner in as much as he has in fact accepted the objections raised by the appellant with regard to the methodology of arriving at the taxable value by the Revenue at the time of issuance of the notice and considering the accounting methods has rightly arrived at the taxable value based on income and expenditure statement and the advanced accounts . There are nothing wrong in the methodology adopted by the Commissioner, which is also not disputed by the appellant except for stating that he has traversed beyond the notice. Extended period of Limitation - suppression of facts or not - HELD THAT:- Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. On the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of facts. An incorrect statement cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. - there is nothing on record in the impugned order to establish that the appellant s intention to evade payment of duty - the demand for the extended period is set aside and demand restricted to the normal period of limitation except in the case of a telecom transactions, as they were not part of the income expenditure statement of the appellant. Since the demand except for telecom services are barred by limitation, the matter is being remanded for redetermination of the taxes based on our observations under each category. While redetermining the same, the written submissions dated 19.10.2023 filed by the appellant with regard to the factual errors and duplication of taxes need to be considered. An opportunity of being heard is to be provided before redetermination of the demands to the appellants - All penalties are set aside. Appeals allowed by way of remand.

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• 2024 (4) TMI 434
  Recovery of Service Tax alongwith interest and appropriation of amount already deposited alongwith penalty under Section 77(1)(a),77(1)(c) 78 of Finance Act, 1994 and Late fees for non filing /late filing of each of half yearly/quarterly returns during the period Oct, 2010 to Sept. 2015 in terms of Rule 7C of the Service tax Rules, 1994 read with section 70 of Finance Act, 1994 - entitlement to benefit of exemption being the services provided by them as a sub-contractor to the main contractor. W hether the adjudicating authority was correct in dropping the demand of Rs 87,14,512/-? - HELD THAT:-T he notification 17/2005 -ST dated 07.06.2005 provided exemption to site formation and clearance, excavation and earthmoving and demolition and such other similar activities in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, ports and other ports with effect from 16.06.2005 - The aforesaid notification exempts all the activities related to construction of public utilities as described above. In the instant case, we note that only the respondent s contracts are merely for excavation and not construction. The Notification is very clear that such services are exempt only if it is in the course of construction, which is not the case here. There are catena of judgements which hold that the wordings of a Notification have to be interpreted strictly and cannot be expanded to conclude any extraneous interpretation. The issue of the liability of service tax on subcontractors stands settled by the decision of the Larger Bench in the case of COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. [ 2019 (6) TMI 518 - CESTAT NEW DELHI-LB] where it was held that it is not possible to accept the contention of the learned Counsel for the Respondent that a sub contractor is not required to discharge Service Tax liability if the main contractor has discharged liability on the work assigned to the subcontractor.All decisions, including those referred to in this order, taking a contrary view stand overruled. T he respondent was liable to pay service tax on the taxable services provided by him for the period prior to 01.07.2012. However, it is observed that adjudicating authority has ordered appropriation of an amount of Rs. 53,31,429/- which was collected as service tax from the service receiver on exempted services and deposited to the Government account in terms of provisions of section 73A (2) of the Finance Act. It would be appropriate to remand the matter to the adjudicating authority for recalculation of the demand, if any, taking into account the amount already so paid. Whether the Commissioner had erred in imposing penalty @50% under section 78 of the Act? - HELD THAT:- It is by virtue of a proviso that the benefit of reduced penalty at 50% has been made available only with effect from 08.04.2011. Consequently, the benefit of this proviso could only have been exercised by the Commissioner for the period post 08.04.2011. In view of the above, it is agreed that the Commissioner has erred in imposing penalty at 50% for the period prior to 08.04.2011. Appeal allowed by way of remand to calculate service tax liability of the respondent for the period prior to 01.07.2012, as well as for recalculation of the penalty under section 78 leviable thereon.

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• 2024 (4) TMI 433
  Benefit of service tax exemption - Works contract service - Composite contract - denial of benefit on the ground that the road so constructed was a part and parcel of composite contract and no separate price bifurcation was available on record and hence the Appellant was not entitled for availing benefit of road construction under works contract service - whether the present contract is a composite contract or a contract segregating various items of work while indicating the amounts charged for each activity? - HELD THAT:- In the case of M/S LEOTRONICS SCALES PVT. LTD. VERSUS CCE, JALANDHAR (HQ. AT CHANDIGARH) [ 2020 (4) TMI 146 - CESTAT, CHANDIGARH ] Chandigarh bench has observed that The present roads have been constructed to facilitate the movement of the transport vehicles to weigh bridges and is not a part of the residential complexes, therefore, its value cannot be subjected to service tax and the appellant has rightly excluded the same from the total value of construction of weigh bridges in claiming the abatement under the respective notifications. Undisputedly the appellant entered into a sub-contract with M/s Subhash Infra Engineers Pvt. Ltd. for this item of the work. They have produced the invoices raised by the sub contractor upon them for the work sub contracted. The fact about allocation of this work to sub contractor by the appellant is not disputed by the revenue in the present case. That being so, the finding recorded by the authorities below that the contract was composite contract for entire project could not be upheld. Further from the fact that value of contract between the appellant and their service recipient is required to be determined in two manners as per the clause 5.1, and the lower of two values has to be adopted, clearly show that the both the parties to contract, i.e. appellant and Lalitpur Power Generation Company Ltd. viewed that contract could be vivisected into sub contracts, to be executed by the sub contractors. It is settled position in law that the contract should be viewed in the context they are entered and as per the understanding of the parties to the contract. It is also not the case of revenue that value of contract was determined in terms of the (ii) of Clause 5 as per which the total value of contract was to be restricted to Rs 675 crores. No finding in this respect has been recorded in the impugned order. In absence of any such findings, there are no merits in the conclusion arrived by the lower authorities that it was a composite contract. The impugned order is set aside - appeal allowed.

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• 2024 (4) TMI 432
  Levy of Service tax - Business Auxiliary Service - incentives being received by the appellant amounts to receipt of payment for providing the taxable service in relation to promotion or marketing or sale of goods, produced or provided by MUL - Charges received by the appellant for extended warranty - Extended period of Limitation - penalty - HELD THAT:- The appellant in no way, is promoting or marketing the services provided by the client i.e. MUL. It is also found that the appellant has received the commission from MUL and not from the bank, as alleged by the Department. It is also found that MUL vide its mail dated 17.05.2004 has already clarified that the dealers are not required to pay service tax on the commission received by them from MUL because MUL has deposited the applicable service tax - the demand of service tax under the category of Business Auxiliary Service is not sustainable in law and therefore, the same is set aside. Charges received by the appellant for extended warranty - HELD THAT:- It is a settled law that the service tax is not liable to be paid under Business Auxiliary Service for warranty commission. Extended period of Limitation - HELD THAT:- No case has been made by the Department to show any positive act with intent to evade payment of duty. It has been held in the case of Sunshine Steel Industries [ 2023 (1) TMI 638 - CESTAT NEW DELHI] which is upheld by the Hon ble Supreme Court in [ 2023 (7) TMI 479 - SC ORDER] holding that the extended period cannot be invoked for a demand raised on the basis of audit. Therefore, we find that extended period cannot be invoked and in the present case, the substantial demand is beyond the period of limitation. Penalty - HELD THAT:- The issue does not arise when the demand itself is not sustainable. The impugned orders are not sustainable in law and therefore, set aside - appeal allowed.

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• 2024 (4) TMI 431
  Point of taxation - Continuous supply - Principles of natural justice - cryptic and non-speaking order - Mining of Mineral, Oil or Gas service - Business Support service (by foreign entity) - Supply of Tangible Goods service - Works Contract service - Security/Detective Agency service - Manpower Recruitment and Supply Agency service - Reverse Charge Mechanism - HELD THAT:- Admittedly appellant have not reached the stipulated event where it can raise invoice pursuant to supply of crude oil/gas to ONGC, during both the periods under dispute. It is found that the value of taxable turnover determined by the Commissioner in the impugned order is hit by proviso to Rule 3 of Point of Taxation Rules, as admittedly, the stipulated event for completion of service i.e., supply of crude oil/gas by the appellant to ONGC was not achieved. It is further found that admittedly appellant have neither received any consideration nor was entitled to receive any consideration during the period under dispute in absence of achieving the stipulated milestone. It is also held that the determination of taxable turnover under the provisions of section 67 read with the Service Tax (Determination of Value) Rules is erroneous and against the provisions, particularly, proviso to rule 3 of Point of Taxation Rules. Further, addition of notional value towards profit @ 10% is also bad and against the provisions of law - the impugned orders, being in the nature of best judgment assessment are bad under the admitted facts that the appellants have maintained proper records of the transactions and were registered with the department and have regularly filed the returns - the impugned orders are cryptic and nonspeaking. Extended period of limitation - HELD THAT:- The extended period of limitation is not available to Revenue, in absence of conditions stipulated/precedent for invocation. The impugned order set aside - appeal allowed.

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• 2024 (4) TMI 430
  Levy of service tax - Manpower Recruitment or Supply - Rent a cab Service - Renting of Immovable Property Service - amount towards Tower verification charges under the head Business Support Service - reverse charge mechanism - penalty u/s 77 and 78 of FA - Extended period of limitation. Manpower Recruitment or Supply service - HELD THAT:- The Greater Hyderabad Municipal Corporation is neither a business entity, ordinarily, in terms of Section 65B (17) of the Finance Act 1994 nor a body corporate in terms of Section 65 (14) of the Finance Act 1994 read with Clause (7) of Section 2 of the Companies Act, 1956 nor registered as body corporate under the Companies Act, 1956, or any other Act - The appellant is basically a Local Authority performing statutory functions in terms of GHMC Act, 1955, passed by AP State Legislature and constitutional functions in terms of Article 243W of the Constitution of India, read with Twelfth Schedule of the Constitution and undertakes public services. Local Authority cannot be considered as a commercial organisation, as held by the Tribunal in the case of COMMISSIONER OF CEX ST BHOPAL versus SUNIL SHRIVASTAVA [ 2018 (7) TMI 1212 - CESTAT NEW DELHI ]. GHMC is not so registered either under the Andhra Pradesh Societies Registration Act or Companies Act 1956. On the other hand, it was brought in to existence by a special enactment i.e. GHMC Act 1955, passed by the Andhra Pradesh State Legislature. GHMC is not a body corporate within the meaning of Section 65(14) of the Finance Act, 1994, read with clause (7) of Section 2 of the Companies Act, 1956 - the appellant is neither a business entity nor a body corporate. Consequently, the appellant is not liable to pay service tax on Manpower Supply services and Rent a Cab service, under Reverse Charge in terms of Notification No. 30/2012-ST dated 20.06.2012. Accordingly, this ground is allowed in favour of the appellant and set aside the demand of Rs Rs.30,71,27,798/- on Manpower Supply services and Rs.1,49,02,365/- on Rent a Cab service under Reverse Charge, in terms of Notification No. 30/2012-ST dated 20.06.2012. Demand of service tax on Cell Tower Verification fee under Business Support Services - HELD THAT:- It is admitted fact that the said activity is a statutory and regulatory function performed by the appellant in terms of Government Orders issued by the State Government. In terms of the said Government Orders, no person shall erect or re-erect any non-Governmental telecommunication tower or telecommunication pole structures or accessory or make alteration or cause the same to be done without first obtaining a separate permission for each such tower or telecommunication pole structures from the Sanctioning Authority. The regulatory nature of the activity of the appellant is discernible from the fact that it requires a certificate of structural safety/stability of the tower and the building, if the tower or pole is constructed over a building and the permission is issued keeping various aspects like water bodies, railways, Airports etc in view - There is neither rendition of any service nor realisation of service consideration, as the amount collected is only a statutory fee. Therefore, we hold that the activity of Cell Tower Verification and certification undertaken by the appellant is a mandatory statutory and regulatory function in the public interest, which is not leviable to service tax as clarified in the Circular No. 89/7/2006-ST dated 18.12.2006 and held in a catena of decisions relied on by the appellant. In respect of the services provided or agreed to be provided by Government or local authority by way of support services excluding,- (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act,1994,the recipient is liable to pay Service Tax in terms of S.No.6 of Notification No.30/2012-ST dated 20.06.2012 - this ground is allowed in favour of the appellant and the demand of Rs. 1,70,83,907/- set aside. Demand of service tax Rs.15,18,18,931/- on Road Cutting and Refilling Services (Right of Way of Laying Cables), under Renting of Immovable Property Service - HELD THAT:- In terms of Notification No. 1/2018- dated 30.11.2018, issued under section 11C of the Central Excise Act, 1944 read with section 83 of the Finance Act, 1994, and clause (e) of sub-section (2) of section 174 of the Central Goods and Services Tax Act 2017, it is notified that the service tax payable under section 66B of the Finance Act, 1994,during the period commencing on and from the 1st day of July, 2012 and ending with the 30th day of June, 2017, on the services by way of granting of right of way by local authorities , as defined in Sub Section (7) of Section 3 of the Indian Telegraph Act, 1885, in the said period, but for the said practice, shall not be required to be paid - In terms of Sub Section (7) of Section 3 of the Indian Telegraph Act, 1885, local authority means any municipal committee, district board, body of port commissioner or other authority legally entitled to, or entrusted by the Central or any State Government with the control, management of any municipal or local fund. It is an admitted fact that the appellant is a Local Authority, as defined in Sub Section (7) of Section 3 of the Indian Telegraph Act, 1885, entrusted with the control, management of municipal fund, in terms of Section 169 of the GHMC Act 1955. The service tax demand on the services by way of granting of right of way by the appellant are not leviable to service tax during the period commencing on and from the 1st day of July, 2012 and ending with the 30th day of June, 2017 in terms of Notification No. 1/2018- dated 30.11.2018 - the demand is set aside - allowed in favour of appellant. The appropriation of Rs.7,98,52,484/- paid by the appellant during investigation is not legally sustainable and accordingly set aside the same. Penalty imposed under Section 77 78 of the Finance Act, 1994 - HELD THAT:- As the appeal allowed on merits, in favour of the appellant, the penalty imposed under Section 77 78 of the Finance Act, 1994 is set aside. The impugned order set aside - appeal allowed.

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• 2024 (4) TMI 429
  Exemption under N/N. 9/2009-ST dated 03.03.2009 as amended - service provided by a subcontractor to a unit located in SEZ - HELD THAT:- It can be seen that there is no denying of the fact that services were provided by the appellant in the capacity of a subcontractor to a unit located in SEZ area and only argument on the basis of which the learned Adjudicating Authority has confirmed the demand of service tax only on the ground that when the service has been provided by a subcontractor to the contractor of the SEZ Unit, the subcontractor will not be entitled to benefit of notification even though services have been provided to a SEZ unit. Since the services rendered to a SEZ unit on behalf of a Contractor who has formally been authorised by SEZ Unit for providing certain goods and services to them, irrespective whether the services directly provided by the main contractor or the main contractor has appointed a subcontractor makes no difference since the service has been rendered to SEZ Unit, the benefit of exemption notification is available to the appellant. Reliance placed in Tribunal s decision in the case of SHYAM ENGINEERS VERSUS COMMISSIONER OF CENTRAL EXCISE ST, VADODARA [ 2023 (10) TMI 1379 - CESTAT AHMEDABAD] where it was held that there is no doubt in our mind that service provided by the appellant in the capacity of sub-contractor but in relation to the authorised operations in SEZ are clearly eligible for exemption Notification No. 9/2009-ST dated 03.03.2009 as amended. The substantial benefits of exemption notification cannot be denied merely on small infringement of procedural requirement - the impugned order set aside - appeal allowed.

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• Central Excise

• 2024 (4) TMI 428
  Quantum of computation/the cum-duty price - Interpretation of Notification No.02/2006 dated 01.03.2006, as amended by the Notification No.16/2006 dated 11.07.2006, thereby superseding notification no. 13/2002 dated 01.03.2002 - HELD THAT:- Parties are directed to appear before the CESTAT, Ahmedabad on 02.05.2024, when a date of hearing will be fixed. The review petitions are allowed and disposed of.

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• 2024 (4) TMI 427
  Clandestine Removal - requirement of cross-examination of witnesses - entire case was made out on the basis of the printout taken from the computer lying in the factory premises and the statements of the various persons - Section 36B of the Central Excise Act - HELD THAT:- From the plain reading of the Section 9D, it can be seen that it is not the whims of the Adjudicating authority to allow or reject the request of cross-examination. As per the above statutory provision, if the appellant dispute the statements which are relied upon for adjudication it is incumbent on the adjudicating authority to allow the cross-examination of the witnesses and thereafter if the outcome of cross-examination is in consistence with the statement given by the witnesses, the same can be admitted as evidence. Therefore, the cross-examination is necessary for arriving at a fair trial of the case. The impugned order set aside - appeals are allowed by way of remand to the adjudicating authority, for passing a fresh order, after allowing the cross-examination of the witnesses and considering the further submission to be made by the appellant.

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• CST, VAT & Sales Tax

• 2024 (4) TMI 426
  Validity of reassessment proceedings - Extension of period of limitation and the consequential notice dated 29.11.2022 issued by respondent no.3 to reassess the petitioner for assessment year 2012-13 (UP) - HELD THAT:- The Supreme Court in M/s Modi Naturals Ltd. Vs. The Commissioner of Commercial Tax, UP [ 2023 (11) TMI 298 - SUPREME COURT] has opined that notwithstanding the non-vatable/exempt nature of DORB, its sale value would have to be considered/included for the purpose of carving out exclusion under Section 13(1)(f) of the UP VAT Act. On that reasoning, the judgment of the learned Single Judge has been reversed. In view of the above law declared by the Supreme Court, the material on the strength of which reassessment proceedings were drawn against the petitioner for A.Y. 2012-13 (UP) does not exist. In face of the law declared by the Supreme Court, it can never be said by the revenue, turn over had escaped assessment at the hands of the petitioner for the said assessment year. The reassessment proceedings for the reassessment year 2012-13 (UP) are quashed - the writ petition is allowed.

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• Indian Laws

• 2024 (4) TMI 425
  Interpretation of a contract condition, which required the measurement of quantities used for payment for embankment construction with soil or with pond ash - Section 34 of the Arbitration and Conciliation Act, 1996 - HELD THAT:- This Court, in VOESTALPINE SCHIENEN GMBH VERSUS DELHI METRO RAIL CORPORATION LTD. [ 2017 (2) TMI 1239 - SUPREME COURT] commenting on the value of having expert personnel as arbitrators, emphasized that technical aspects of the dispute are suitably resolved by utilising their expertise when they act as arbitrators. The prevailing view about the standard of scrutiny- not judicial review, of an award, by persons of the disputants choice being that of their decisions to stand- and not interfered with, [save a small area where it is established that such a view is premised on patent illegality or their interpretation of the facts or terms, perverse, as to qualify for interference, courts have to necessarily chose the path of least interference, except when absolutely necessary]. By training, inclination and experience, judges tend to adopt a corrective lens; usually, commended for appellate review. However, that lens is unavailable when exercising jurisdiction Under Section 34 of the Act. Courts cannot, through process of primary contract interpretation, thus, create pathways to the kind of review which is forbidden Under Section 34 - As long as the view adopted by the majority was plausible- and this Court finds no reason to hold otherwise (because concededly the work was completed and the finished embankment was made of composite, compacted matter, comprising both soil and fly ash), such a substitution was impermissible. It is evident that a dissenting opinion cannot be treated as an award if the majority award is set aside. It might provide useful clues in case there is a procedural issue which becomes critical during the challenge hearings. This Court is of the opinion that there is another dimension to the matter. When a majority award is challenged by the aggrieved party, the focus of the court and the aggrieved party is to point out the errors or illegalities in the majority award. The minority award (or dissenting opinion, as the learned authors point out) only embodies the views of the arbitrator disagreeing with the majority. There is no occasion for anyone- such as the party aggrieved by the majority award, or, more crucially, the party who succeeds in the majority award, to challenge the soundness, plausibility, illegality or perversity in the approach or conclusions in the dissenting opinion - the so-called conversion of the dissenting opinion, into a tribunal s findings, [in the event a majority award is set aside] and elevation of that opinion as an award, would, with respect, be inappropriate and improper. The awards, which were the subject matter of challenge, and to the extent they were set aside, are hereby upheld and restored. The direction in the awards, to the extent they required compounded monthly interest payments, are modified. Instead, the NHAI shall pay uniform interest on the amounts due, on the head concerned, i.e., construction of embankment, to the extent of 12% from the date of award to the date of payment, within eight weeks from today. Appeal allowed.

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