Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 24, 2023
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
GST
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Requirement for registration levy of service tax - renting of commercial building - Location of GPA holder - Place of supply - the GPA holder is the supplier of service of leasing of the building for commercial purposes - Since the place of supply and location of supplier are both in Karnataka the said supply amounts to intra-state supply in terms of section 8(2) of IGST Act, 2017 and the taxable person, i.e GPA holder is liable to pay CGST and KG ST of 9% each on the taxable value - AAR
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Classification of goods - rate of GST - HSN Code - Phosphate solubilizing Fungal Bio fertilizers - the product “Bio-Phosphate” merits classification under HSN code 3103 90 00 and thus are exigible to GST @ 5% - AAR
Income Tax
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Offence u/s 276 B r/w 278 B - failure to deposit TDS amount with the Government - Proceedings against the company and Persons aged above 70 years - Scope of the CBDT circular - Since the petitioners 2 and 3 are admittedly aged above 70 years, their appearance before the trial Court is dispensed with unless, the learned Magistrate considers their appearance necessary for the progress of the Trial - HC
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Evasion of tax in the guise of Amalgamation - Admittedly the amalgamation though reality was devised to create a smoke screen in the eyes of the Income Tax Department to evade tax on the amounts transferred in cash without proper accounting. But, for the search conduced under Section 132 at the premises of the respective respondents and their Groups namely, Dadha Group and at the premises of M/s.Sun Pharma Industries Limited (SPIL) Group, the truth would have not came to the light. - substantial questions of law answered in favour of the appellant revenue - HC
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Revision u/s 263 - Transfer of land by wife to her husband - Nature of transaction - Sale or Gift - It is the case of the assessee that sale deed is nothing but gift deed intended to transfer the land as vouched by lack of consideration and in view of the intented circumstances. This fact was brought on record by way of oral evidence as well as circumstantial evidence. - AO also invoked Section 64 for clubbing of income and simultaneously exonerated the assessee from the liability of LTCG on notional consideration - Revision order quashed - AT
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Denial of exemption u/s 10(26BBB) - both the provisions i.e. sec. 12AA and sec. 10(26BBB) of the Act are independent and separate provisions having been incorporated in the Act for specific purposes. There is no bar cast on one provision by the other. Meaning thereby, the corporation may be registered u/s 12AA and at the same time it can apply for exemption u/s 10(26BBB) of the Act but both the issues have to be examined independently on the basis of specific requirement and eligibility of the said provisions - AT
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Revision u/s 263 - nature of land sold - Even if the alternate contention of the assessee were to be accepted, then also, we observe that in the instant facts the AO has not examined the claim of the assessee for exemption u/s 54B of the Act from correct perspective. - Order of revision sustained - AT
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TP Adjustment - secondment of employees by Assessee to its AE - the benchmarking done by the TPO by applying the same rate of thirty party placement agency is not correct, since there are additional services/benefits provided by third-party agencies while providing Recruitment Services whereas in Assessee’s case, it is a pure deployment of personnel with regard to software services. Accordingly since there is need for an adjustment for the benefit derived we hold that the TP adjustment is to be revised to Rs.4,00,000/-. This ground of the Revenue is partly allowed. - AT
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Disallowance u/s.40(b) - remuneration paid to partners - requirement of discloser in Clause 21(c) of Form 3CD - Although the details referred to in Clause 21(c) does make a reference of both the amounts admissible and inadmissible, but a careful perusal of the same reveals that the said details are sought only as regards the expenses therein set out which are inadmissible u/ss.40(b)/40(ba) of the Act. On the basis above no infirmity emerges from the non-mentioning of the amount of remuneration paid by the assessee firm to its partners in Clause 21(c). - AT
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Penalty u/s 271(1)(c) OR u/s 271AAA - addition made on account of unexplained profit for Land trading pursuant to search proceedings - Penalty has been levied under the wrong provisions of the Act i.e. section 271(1)(c) of the Act and therefore the same is not maintainable. - AT
Customs
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Levy of penalty - Valuation - guar gum was of food grade or not - The impugned order is correct in rejecting the transaction value and re-determining the value based on the contemporaneous values of imports available in NIDB - Undisputedly, 2 Persons were involved in the mis-declarations and therefore, the impugned order is correct in imposing penalties on them. - AT
Direct Taxes
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Benami Transactions - family arrangement - exception in Section 4(3)(a) of the Benami Act - The bar of Benami under Benami Act requires examination of factual aspects including the exceptions to Section 2(9) and 4(3). The question whether a transaction is Benami or not is therefore one of fact requiring evidence. - That being the position, such questions in view of paragraphs 50, 54, 56 of Nusli Neville Wadia vs. Ivory Properties [2019 (10) TMI 1314 - SUPREME COURT] cannot be decided under Section 9A. - HC
Indian Laws
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Violation of principles of natural justice - penalty - debarring from further tenders - The authority concerned has proceeded to impose the maximum of penalty to the tune of 10% of the deficit supply without specifying as to why the maximum of penalty was sought to be imposed. In this regard, the relevant factors as indicated by the appellant could not have been ignored altogether. Unfortunately, the High Court has totally omitted to consider this aspect of the grievance of the appellant. - SC
IBC
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Writ petition - Seeking Pre-Packaged Insolvency Resolution Process under the IBC instead of proceeding under the SARFAESI Act - It appears that this writ petition is directed solely as a ploy to delay the further proceedings initiated under the SARFAESI Act which has already been initiated against the petitioner. The SARFAESI Act is a complete code in itself and it has statutory Authorities prescribed for redressal of grievances raised by the petitioner in the writ petition. - HC
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Condonation of delay - Time Limitations for filing appeal - proviso to Section 61(2) allows the filing of the appeal even after expiry of 30 days if the Applicant/Appellant satisfies the Appellate Authority about the presence of a sufficient cause for not filing the appeal within that time but in no case the period of 15 days can be extended. - This is not a fit case for condonation of delay for filing of the appeal - AT
Service Tax
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Adjudication of Show Cause Notice - time limitation - expiry of reasonable period of five years from the date of show cause notices - the order set aside - petition allowed - HC
Central Excise
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Scope of the order pursuant to remand back of the matter - Refund of Excess Duty paid - The Ld. Commissioner (Appeals) has travelled beyond the remand order passed by the Tribunal. In remand order, the Ld. Commissioner was only to consider the issue of unjust enrichment whereas the Ld. Commissioner has gone beyond the remand order to hold that Rule 7 of the Central Excise Valuation Rules, 2000 has not been followed. - Refund allowed - AT
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Protective demand - Remission of duty under Rule 21 of the Central Excise Rules - Any decision on the protective demand Show Cause Notice dated 06.11.2012 issued to the appellants can only be an outcome of the decision in the remission application, outcome of which under the present circumstances is yet pending decision. - AT
VAT
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Deemed Sale - crane services given by the assessee to the Govt./Private institution - Transfer of right to use goods - The control and possession of the crane, as evidenced by the requirements imposed under Condition Nos. 17 and 28, lay with the respondent-assessee only. Hence, there were no mitigating circumstances warranting the contract to encapsulate a sale as provided u/s 2(35)(iv) of the Act of 2003 read with Article 366(29A) of the Constitution of India. - HC
Case Laws:
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GST
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2023 (4) TMI 907
Detention of goods alongwith vehicle - fraudulent business activities - claiming fake ITC - section 129 of GST Act - HELD THAT:- In view of the instruction received, it appears that the petitioner has not approached the authority, even though the authorities have expressed their view that the conveyance can be released on payment of penalty as per the demand order or after furnishing the bank guarantee of equal amount. Mr. Behura, learned counsel for the petitioner undertakes that the petitioner shall furnish the bank guarantee of equal amount within a period of two days, so that the authority can release the vehicle. It is made clear that if the petitioner fails to furnish the bank guarantee, it will be open to the opposite parties to confiscate the vehicle of the petitioner. So far the order impugned is concerned, since the same is appealable one, the petitioner is permitted to prefer appeal before the appellate authority in accordance with law - Petition disposed off.
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2023 (4) TMI 906
Jurisdiction of the Sales Tax Officer(1), Surat - power to invoke the confiscation proceedings under Section 130 of the CGST Act read with Section 20 of the IGST Act - HELD THAT:- In view of the fact that the goods been auctioned by authority, learned advocate for the petitioner has submitted that in such circumstances of the case, conveyance may be released and the petitioner is ready and willing to give sufficient amount of bond for the remaining amount of fine in lieu of conveyance. In the totality or the facts and circumstances of the case, of the submissions made by the learned advocate for the petitioner, it would be in the interest of justice if the conveyance in question i.e. truck bearing registration No.RJ-09-GB-0240 is ordered to be released provided the following conditions are complied with, (i) The petitioner shall deposit Rs.1,00,000/- with the respondent authority (ii) The petitioner shall also furnish a bond of Rs.25,86,456/- towards demand of conveyance with the respondent authority. Once the bond is furnished and the amount of Rs.1,00,000/- is deposited with the respondent authority, the respondent concern may release the conveyance immediately.
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2023 (4) TMI 905
Maintainability of appeal - time limitation - appeal not entertained on the ground that the appeal was filed beyond the time limit provided under section 107(4) of the Gujarat Goods and Services Tax Act, 2017 - Cancellation of GST registration of petitioner - notification dated 31.3.2023 - HELD THAT:- While learned advocate for the petitioner expressed apprehension that the notification may not apply to the case of the petitioner inasmuch as the registration was cancelled retrospectively, this apprehension stands misplaced in view of the provisions of section 29(2) of the Act, more particularly clause (b) and clause (c) thereof. These provisions are referred to in the above notification itself. Not only that sub-paragraph (b) of the notification mentions that the application for revocation of the cancellation of the registration could be filed only on furnishing returns due upto the effective date of cancellation of registration and that it could be done after payment of any amount of tax due in terms of the returns. In other words, the notification dated 31.3.2023 has opened a window for the defaulting dealers who could now file return and pay the tax. In this view, it will be possible for the petitioner to seek prayer for revocation of the registration by taking advantage of the provisions of the notification. The petition is disposed off.
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2023 (4) TMI 904
Maintainability of appeal - time limitation - time period for completion of proceedings is three years from the due date for furnishing the annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised, relates - HELD THAT:- As the appellant had sought for availing the alternate remedy and has, in fact, availed it, we are not inclined to admit this writ appeal and hear the contentions of the appellant on merits. Learned Counsel for the appellant raises an apprehension that since the writ petition was dismissed, he would be prejudiced in the appeal before the statutory authority as it will be taken that his contentions were rejected by this Court - the said apprehension to be without any basis as the learned single Judge has only considered the contentions and had entered findings only for the purpose of declining jurisdiction under Article 226 of the Constitution of India for entertaining the writ petition and nothing more. Petition dismissed.
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2023 (4) TMI 903
Requirement for registration levy of service tax - renting of commercial building - Location of GPA holder - Place of supply - location of supplier - in Karnataka under KGST/CGST Act 2017 - HELD THAT:- On examination of the facts that the applicant has given General Power of Attorney (GPA) to his mother Smt. Prabhavathi, Nagarabhavi, Bengaluru quoting the reason that he is working outside India and thus unable to take care of the said commercial property owned by him. It is observed from para 1 of the said GPA that the applicant has nominated / appointed the attorney to induct tenant, to create tenancy and to execute necessary deeds or documents either registering before the Jurisdictional sub-registrar and to receive all profits, rents, lease advance money, advance security deposit amount from the existing tenant and also from the prospective tenant and to take care all necessary action regarding tenancy of the said scheduled property. A General Power of Attorney is governed by provisions of Powers of Attorney Act, 1882. It is an instrument empowering the specified person to act for and in the name of the person executing it. It is a legal document whereby one person authorises another to act on his/her behalf. The person authorising is referred to as the 'principal' and the person being authorised under the power of attorney is called an 'agent' - It is evident that though Shri Nagabhushana Narayana, is the absolute owner of property, the act of leasing of immoveable property was taken up by Smt Prabhavathi as a GPA holder of the said property. Also the incomes from the property, including the rent are received and retained by the GPA holder. The activity of leasing or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services in terms of entry 2(b) of Schedule II to Section 7 of CGST Act, 2017 - Smt.Prabhavathi, the GPA holder is the supplier of service of leasing of the building for commercial purposes. In the instant case, since the supply of service is directly in relation to immoveable property, in terms of Section 12(3) of IGST Act, 2017, the place of supply of service shall be the location of the said immoveable property i.e., in Bangalore, Karnataka. Since the place of supply and location of supplier are both in Karnataka the said supply amounts to intra-state supply in terms of section 8(2) of IGST Act, 2017 and the taxable person, i.e Smt. Prabhavathi is liable to pay CGST and KG ST of 9% each on the taxable value in terms of entry no 16(iii) (SAC heading 9972) of Notification No. 11/2017 dated 28.06.2017, as amended.
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2023 (4) TMI 902
Classification of goods - rate of GST - HSN Code - Phosphate solubilizing Fungal Bio fertilizers - to be classified under HSN code 3101 0099 or not - HELD THAT:- Heading 3103 covers Minerals or chemical fertilisers of phosphatic in nature. Further heading 3103 10 00 covers superphosphates and heading 3103 90 00 covers other phosphatic fertilisers. In the instant case the impugned product contains Rock Phosphate and thus it is a phosphatic in nature. Further it is not a superphosphate and thus it merits classification under heading 3103 90 00. Rate of GST - HELD THAT:- Notification No. 1/2017-Central Tax(Rate) dated 28.06.2017, as amended, specifies GST rate of 5% on the impugned product in terms of Sl.No.182B of Schedule I to the said Notification, which covers Mineral or chemical fertilizers, phosphatic, other than those which are clearly not to be used as fertilizers - the product Bio-Phosphate merits classification under HSN code 3103 90 00 and thus are exigible to GST @ 5%, in terms of Sl.No. 182B of Schedule I to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended.
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Income Tax
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2023 (4) TMI 901
Computation of deduction u/s 80-HHC - Deduction in respect of profits retained for export business - amendments made to Section 80-HHC(3) vide Finance (No. 2) Act, 1991, substituting sub-section (3) to Section 80-HHC of the 1961 Act and prescribing a different formula - HELD THAT:- Computation of deduction u/s 80-HHC would be made as per clause (b) to sub-section (3) to Section 80-HHC of the 1961 Act, as it existed before substitution and amendment by Finance (No. 2) Act, 1991; Treatment/head of income from sale of shares - As for assessment year 1989-1990 for the purpose of Section 80-HHC(3) of the 1961 Act, income/profit earned from sale of shares would be included in the amount which bears to the profits of the business as computed under the head profits and gains of business or profession . The receipt/gross amount from sale of shares would be included in the total turnover; and Income by way of interest in the assessment years 1989- 1990, 1990-1991 and 1991-1992, being income taxable under the head income from other sources , would be compulsorily excluded for the purpose of computation of deduction under Section 80-HHC(3) of the 1961 Act.
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2023 (4) TMI 900
Offence u/s 276 B r/w 278 B - after deducting the tax at source, the petitioners failed to deposit the tax to the credit of the Central Government within the prescribed time - Proceedings against the company and Persons aged above 70 years - Department had issued a circular stating that the instruction that a person above 70 years shall not ordinarily be prosecuted is subject to Clause 4 in the said circular which states that notwithstanding the other provisions, the Commissioner of Income Tax (CIT) can sanction the prosecution keeping in view the nature and magnitude of the offence. HELD THAT:- The general rule that persons above 70 years cannot be prosecuted is subject to exceptions and in this case, the Commissioner of Income Tax (CIT) considered that this is a fit case for launching prosecution. The other submission of the learned counsel for the petitioners is that there is no averment to show as to how petitioners are either principal officer or persons in charge of and responsible for the conduct of the business of the company. This Court finds that this issue was decided by the Honourable Apex Court in Madhumilan Syntex Ltd., and others vs. Union of India and another [ 2007 (3) TMI 670 - SUPREME COURT] . Hence, this Court is of the view that the points raised by the petitioners have to be adjudicated only before the trial Court. The petitioners 2 and 3 are at liberty to submit before the trial Court that their case would not fall within the exceptions and that they are entitled to the benefit of the circular which restricts initiation of prosecution against persons above 70 years of age. It is needless to say that they would also be entitled to show that they were not in charge and responsible to the company for the conduct of its business, before the trial Court. Therefore, this Court is not inclined to entertain these petitions. Since the petitioners 2 and 3 are admittedly aged above 70 years, their appearance before the trial Court is dispensed with unless, the learned Magistrate considers their appearance necessary for the progress of the Trial. Criminal Original Petitions are dismissed
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2023 (4) TMI 899
Transfer arising out of amalgamation - Evasion of tax in the guise of Amalgamation - Exemption from capital gains - transfer of shares arising out of amalgamation - Revenue submitted that though the Scheme of Amalgamation was approved by the Gujarat High Court and this Court in November, 1997, payments have been made continuously by the Sun Group to Dadha Group till the date of search in December 1998 and interest were charged on the defaulted installments. - It is submitted that there was absolutely no need of any payment as per the Amalgamation Scheme. HELD THAT:- As per the sanctioned Scheme of Amalgamation, for every 4 shares held by shareholders in Transferor Company, viz. M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL), the shareholders were entitled to one share in the Transferee Company, viz. M/s.Sun Pharma Industries Limited (SPIL). Thus, members and entities under of SMD Group of Dadha Group (DG) who held shares in M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) came to hold a consolidated 1,05,353 numbers of shares in the Transferee Company. It is the case of the Income Tax Department that there was a capital gain arising out of transfer of shares held by the respective respondents in M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL). On account of amalgamation of M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) with M/s.Sun Pharma Industries Limited (SPIL), the above capital gain was not offered to tax. This transfer arising out of amalgamation was treated as capital gains in the hands of the shareholders (the respondents herein) and other members of the Dadha Group (DG) and therefore, proceedings came to be initiated under Section 158BC of the Income Tax Act, 1961 by issuing notice to both the members of the Dadha Group and M/s.Sun Pharma Industries Limited (SPIL) for the block period between 01.04.1988 and 15.12.1998. Merely because some of the cases filed by the Income Tax Department were disposed in the light of the Litigation Policy of the Income Tax Department will not impel to dismiss these T.C.As. as admittedly the amalgamation though reality was devised to create a smoke screen in the eyes of the Income Tax Department to evade tax on the amounts transferred in cash without proper accounting. But, for the search conduced under Section 132 at the premises of the respective respondents and their Groups namely, Dadha Group and at the premises of M/s.Sun Pharma Industries Limited (SPIL) Group, the truth would have not came to the light. There are only notional allocations based on the number of shares before and after acquisition that were held and allegedly transferred prior to the amalgamation. None of the documents relating to the allocation of shares prior to the amalgamation has been filed. Share Registers of M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) were also not produced before AO. Whether the amounts were individually received by the respondent or consolidated amounts were received by the members of the SMD Group out of Rs.16,85,62,000/- is also not available. Therefore, the arguments that the undisclosed income for the block period 01.04.1998 to 15.12.1998 is below the litigation policy cannot be accepted. To meet the end of justice, that a fresh assessment is required to be made by the assessing officer based on the records instead of notional allocation of amounts received by the S.Mohandchand Dadha Group (SMD Group) without any proof of direct transfer of the amounts to the individual members of the S.Mohandchand Dadha Group (SMD Group). Therefore, while answering the substantial questions of law in favour of the appellant revenue, matter restored back for de-novo adjudication.
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2023 (4) TMI 898
Delay in filing return of income - Petitioner is admittedly a foreign citizen and having OCI status since 2009 and he cannot be reasonably expected to keep himself aware and updated about the due date for filing return in India especially when he did not have any income taxable in India since the financial year 2010-11 - Petitioner submits that that the claim of the Petitioner that he was not aware of the due date or the process for filing the return of income has been negated on the sole ground that the Petitioner had filed his return for the assessment year 2011-12 within the time limit - HELD THAT:- This Court is of the view that ignorance of law is not an excuse. Assessee had filed his ITR for the assessment year 2011-12 within the time limit proves that the Assessee was aware of the process of filing the ITR. Consequently, this Court is in agreement with the finding of the Respondent No.2 that in the present case there was no genuine hardship or reasonable cause for late filing of the return. This Court is also of the opinion that the impugned order is clear and cogent and has been passed with the approval and sanction of Principal Chief Commissioner (IT). Further, there has been no violation of principles of natural justice, as the petitioner s contentions have been duly considered.
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2023 (4) TMI 897
Deduction from the income in view of Rule 7A(2) of the Income Tax Rules - cost of maintenance of rubber trees already planted - Whether Plantation Companies under Rule 7A(2) of the Rules are entitled to an allowance towards replanting expenses and a further deduction towards upkeep and maintenance expenses incurred by the assessee for the immature plants till the age of maturity in the computation of income under the Act and Rules? - HELD THAT:- Questions of law framed in instant appeals are covered by the Full Bench order [ 2022 (10) TMI 851 - KERALA HIGH COURT ] wherein held in the computation of business Income under Rule 7A of the Rule 1962, the assessee under Rule 7A(2) is entitled to an allowance in respect of the cost of replacement of dead and useless rubber trees in the rubber plantation in an area not abandoned, subject to Section 10(31) of Act 1961. The upkeep and maintenance expenses incurred by the assessee till the maturity of rubber trees are revenue expenditures eligible for deduction u/s 37.
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2023 (4) TMI 896
Revision u/s 263 - Transfer of land by wife to her husband - Nature of transaction - Sale or Gift - Clubbing of income - CIT-A assailed the assessment order on the ground that LTCG arising on transfer of agriculture land by assessee to her husband is liable to taxation which has been erroneously not done by the AO resulting in prejudice to the interest of revenue - HELD THAT:- Whether the re-assessment order can be regarded as erroneous insofar as prejudicial to the interest of the Revenue has to be tested on the touchstone of the plausibility of explanation given by the assessee before the Assessing Officer. Where the opinion formed by the Assessing Officer towards non taxability of any LTCG on purported sale is found plausible then the act of the Assessing Officer cannot be regarded as erroneous per se and consequently the jurisdiction of ld. Pr.CIT would be automatically ousted. In the reverse, if the opinion formed by the Assessing Officer is wholly incongruent with the scheme of the Act, the Pr.CIT shall be within its right to usurp jurisdiction under Section 263. As undisputed although the property was purchased in the name of the assessee-wife, the purchase consideration were paid by the husband of the assessee at the time of purchase of land in December, 1999. The sale deed was executed to handover the agricultural land back to husband for which no consideration whatsoever was received by the assessee. The only mistake committed was that instead of execution gift deed a sale deed was executed to restore the legal rights of husband. It is the case of the assessee that sale deed is nothing but gift deed intended to transfer the land as vouched by lack of consideration and in view of the intented circumstances. This fact was brought on record by way of oral evidence as well as circumstantial evidence. No negative fact is available on record to dispute the assertions made on behalf of the assessee as well as her husband jointly - AO also invoked Section 64 of the Act for clubbing of income and simultaneously exonerated the assessee from the liability of Long Term Capital Gain on notional consideration in the absence of any real income accrued to the assessee. AO thus accepted the version of the assessee with application of mind. Merely because the Pr.CIT thinks differently on the point on the issue would not entitle him in law to substitute his opinion by the view adopted by the AO in discharge of his quasi judicial functions - Appeal of the assessee is allowed.
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2023 (4) TMI 895
Carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger - absence of undertaking in the scheme - HELD THAT:- Since before the NCLT no undertaking in the scheme was given by the appellant in compliance with provision of Section 72A of the Income Tax Act, 1961, the Learned Tribunal has committed no error in dismissing the application. Before this Appellate Tribunal the said undertaking has been brought on record through its rejoinder. In such view of the matter we feel appropriate to dispose off this appeal with an observation that if fresh undertaking to amalgamation scheme in terms of Section 72A of the Income Tax Act, 1961 is filed before the NCLT, the learned NCLT may consider the same and pass appropriate orders expeditiously in accordance with law.
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2023 (4) TMI 894
Disallowance of deduction claimed u/s 80P in respect of bank interest - interest income earned by the assessee is chargeable under the head income from other sources and not the business income of the assessee - HELD THAT:- Assessee accepts deposits from its members and provides credit facility to them at the time of their requirement - surplus funds not immediately required for deployment is kept in fixed deposits, which in turn, are pledged to the over draft facility taken by the assessee for transfer of funds to members either as loan or as repayment. Thus, it can be seen that the investment in fixed deposits is to augment the business activity of the assessee. In any case of the matter, as explained the interest income is also utilized for providing credit facility or repayment to members. Thus, interest income being inextricably linked to assessee s business activities as a credit society, would be eligible for deduction under Section 80P(2) - Decided in favour of assessee.
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2023 (4) TMI 893
Reopening of assessment u/s 147 - Addition u/s 80IC - assessee has not maintained separate accounts for the purpose of calculating the profits of the units for which deduction under section 80IC of the Act was claimed and the assessee had not furnished Form 10CCB at the time of original assessment - assessee s case is that he has been allowed deduction under section 80IC in all the previous and subsequent years and the facts of the year under consideration are identical to all these years. The predecessor AO had allowed the impugned deduction only after verifying the facts from Form 10CCB - HELD THAT:- From the direction u/s 144A issued by the Ld. Addl. CIT Range-7 New Delhi, it is observed that he perused the assessment record and recorded the finding after seeing the material in the Schedule filed that heads are bifurcated in three units i.e. unit 1, 2 and 3 which shows that the assessee has maintained/furnished three separate accounts for the purpose of calculating the profits and deduction thereon. ACIT further noted that even during re-assessment proceedings the assessee submitted Form 10CCB alongwith letter dated 15.10.2018 and audited unit-wise final accounts. If that be so, the assessee s case is fully covered in favour of the assessee by the decision of the Hon ble Supreme Court in CIT vs. G.M. Knitting Industries (P) Ltd [ 2015 (11) TMI 397 - SC ORDER] as also by the decision of the Hon ble Delhi High Court in CIT vs. Centimeters Electricals Pvt. Ltd. [ 2008 (12) TMI 4 - HIGH COURT DELHI] Decided against revenue.
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2023 (4) TMI 892
Levy of penalty u/s 271D - assessee has violated the provisions of section 269SS - assessee has received cash on different dates from two people regarding sale of immovable property - case was selected for limited scrutiny under CASS for examination of cash deposited during the demonetization period - HELD THAT:- As during the year, there is no sale of property as is discernible from the assessment order and the assessment order refers to the deposit of cash during demonetization period which was accepted by the Assessing Officer himself being out of sale of immovable property on 20.01.2016 in cash. Therefore, provisions of section 269SS, if any, has been violated in the assessment year 2016-17 and not in A.Y 2017-8. Therefore, the very initiation of penalty proceedings u/s 271D for the A.Y 2017-18 is void abinitio and therefore, the order of the CIT (A) NFAC confirming the penalty u/s 271D of the Act has no legs to stand. We, therefore, set aside the order of the CIT (A) NFAC and direct the Assessing Officer to cancel the penalty. The grounds raised by the assessee are accordingly allowed.
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2023 (4) TMI 891
Denial of exemption u/s 10(26BBB) - assessee is not formed under Central, State or Provincial Act but formed under a resolution passed by the Government of Maharashtra and thereby not eligible for exemption u/s 10(26BBB) - HELD THAT:- NFAC correctly held that as evident from the said provision i.e. sec. 10(26BBB) of the Act that any income of corporation which is established either by Central, State or Provincial Act only is exempted u/s 10(26BBB) of the Act. In this case, the assessee-corporation has come into existence by a Resolution of Government of Maharashtra and not by any Act of Central, State or Province. We are of the considered view that whenever a financial legislation is interpreted, it has to be interpreted literally or in other words there has to be literal interpretation of the said provision. Meaning thereby what exactly is the intention of the legislature in respect of that particular provision, that exactly has to be read into it and one cannot improvise through judicial activism or otherwise extending or reducing the scope of such financial legislation In order to claim exemption, the corporation has to be established only through the Act and not by any other means. Therefore, the NFAC has given a correct interpretation of the said section. Denying grant of registration/s 12AA of the Act to the assessee - assessee has taken a ground that the issue of grant of registration u/s 12AA is pending before the ld. CIT Exemption as per the basis of directions of Pune Tribunal vide [ 2021 (6) TMI 811 - ITAT PUNE] in assessee s own case. Having considered this development and the chain of events in assessee s own case, we find it deem and appropriate in the interest of justice to remand this matter also to the file of the ld. A.O to re-adjudicate as per law based on the outcome of the decision in the earlier matters of the assessee as has been examined in the preceding paras. Also both the provisions i.e. sec. 12AA and sec. 10(26BBB) of the Act are independent and separate provisions having been incorporated in the Act for specific purposes. There is no bar cast on one provision by the other. Meaning thereby, the corporation may be registered u/s 12AA and at the same time it can apply for exemption u/s 10(26BBB) of the Act but both the issues have to be examined independently on the basis of specific requirement and eligibility of the said provisions
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2023 (4) TMI 890
Revision u/s 263 - nature of land sold - transfer of capital assets was due to conversion of land to stock in trade and land converted into stock-in-trade could not have been agricultural land - As per CIT deduction u/s 54B cannot be allowed on the gain arising from transfer of such asset, which does not qualify as an agricultural land - HELD THAT:- Properties were purchased by the assessee prior to the date of sale of land on 02-08-2010, and section 54B of the Act requires that the assessee should have purchased the new land after the date of transfer of such agricultural property. Therefore, even in this case as well, the complete benefit of section 54B of the Act was not available to the assessee, even if the alternate contention of the assessee that the land was sold on 02-08-2010, were to be accepted. The order of the Principal CIT, we are of the considered view that there is no infirmity in the order passed by the Principal CIT in the instant facts. Even if the alternate contention of the assessee were to be accepted, then also, we observe that in the instant facts the AO has not examined the claim of the assessee for exemption u/s 54B of the Act from correct perspective. No infirmity in the order of the Principal CIT in holding that the assessing officer has not carried out proper examination of the facts of the case and has not carried out the necessary verification at the time of passing of the assessment order in respect of the assessee s claim of deduction u/s 54B - Decided against assessee.
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2023 (4) TMI 889
Amortisation of Non-compete Fee - payments made to one Asia Logistics for non-competing for one year for procuring business in China - AO held that the non compete fee cannot be fully allowed as a deduction and needs to be amortised over the period of non competing - HELD THAT:- In assessee s case, the agreement of non-competence is entered into for a period of one year and two years and the Assessee has incurred the liability towards the same in the year under consideration. Hence, respectfully following the decision of Taparia Tools ( 2015 (3) TMI 853 - SUPREME COURT] ), we uphold the decision of the Ld.CIT(A) in deleting the disallowance of non-competence fees. This ground of the revenue is dismissed accordingly. Disallowance of Employee Stock Option Expenses (ESOP) - AO made addition reason that the no option has been exercised during the year and that the Assessee did not provide any plausible reason for claiming the expenses as a deduction - HELD THAT:- As relying on New Delhi Television Ltd case [ 2016 (7) TMI 1486 - DELHI HIGH COURT] we hold that the ESOP expenses be allowed as a deduction and therefore see no reason to interfere with the decision of the Ld.CIT(A). This ground is dismissed accordingly. Deduction u/s 80HHE after setting off earlier years brought forward business losses - assessee's contention for allowing deduction u/s 80HHE against income from Other Sources is not found tenable in view of the overriding effect of the provisions of section 80AB - HELD THAT:- We notice that sub-section (3) of section 80HHE which deals with the manner of computation of eligible deduction states that for the purpose of deduction Profits derived from the business shall be considered and that sub-section (1) of section 80A clearly states that in computing the total income of an assessee, there shall be allowed from his gross total income , the deductions specified in sections 80C to 80U. We are, therefore, of the considered view that the ratio laid down by the Hon ble Supreme Court in Reliance Energy [ 2021 (4) TMI 1237 - SUPREME COURT] is clearly applicable to Assessee s case also and accordingly the assessee has correctly claimed the deduction under section 80HHE from gross total income. Further, we notice that the co-ordinate bench in Assessee s own case has allowed the issue in favour of the Assessee considering the decision of the Apex Court. Uphold the decision of the CIT(A) to allow the deduction under section 80HHE and this ground of the Revenue is dismissed. Depreciation on Software Expenses - Depreciation allocated on the basis of respective turnover of STPI and Non-STPI units - DR submitted that the depreciation claim for STPI non-STPI should be segregated since the depreciation claimed in respect of STPI units was adjustable against the income exempt under section 10A and not against the profits of other units - HELD THAT:- We accordingly, remand the issue back to Assessing Officer with a direction to consider the above working and re-compute the exemption under section 10A considering the depreciation pertaining to STPI unit and allow the balance amount of Rs.2,57,910/- as a deduction while computing taxable income of the Assessee. This ground of the Revenue is allowed for statistical purposes. Depreciation claim for the purpose of Section 10A exemption - HELD THAT:- From the perusal of the above workings as submitted by the Assessee before the lower authorities, it is clear that the adjustment of difference in depreciation to the profits eligible for exemption under section 10A will not result in any addition to total income. This is so because any increase or decrease to the profit due to the depreciation adjustment, i.e. adding back book depreciation deduction of depreciation as per section 32 will be exempt under section 10A since there is no dispute that the Assessee is entitled to claim exemption under section 10A. Accordingly when the adjusted profit is also eligible for exemption under section 10A there is no question of making any addition towards the adjustment made to depreciation. We accordingly uphold the view taken by the CIT(A) in deleting the addition made in this regard. This ground of the Revenue is dismissed. TP Adjustment - secondment of employees by Assessee to its AE - HELD THAT:- CIT(A) has recomputed the TP adjustment taking into account the Indian salary and after excluding 5 employees, who have left within 6 months or who have rejoined Assessee. Whether an adjustment is required, we are of the considered view that an adjustment is warranted for the benefit derived by the AE due to deployment of personnel for which the Assessee is required to be compensated. However, the benchmarking done by the TPO by applying the same rate of thirty party placement agency is not correct, since there are additional services/benefits provided by third-party agencies while providing Recruitment Services whereas in Assessee s case, it is a pure deployment of personnel with regard to software services. Accordingly since there is need for an adjustment for the benefit derived we hold that the TP adjustment is to be revised to Rs.4,00,000/-. This ground of the Revenue is partly allowed.
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2023 (4) TMI 888
Excessive interest expenses - interest paid @ 21% to one person is excessive - commercial expediency which necessitated taking of loan by the assessee @ 21% - interest income at the prevailing rate of 6 to 12% (maximum at rate of 15%) - AO restricting the amount of interest expenses to 15% as against 21% interest paid by the assessee - assessee submitted that the AO cannot sit in judgement as to the amount of interest which is required to be paid by the assessee, since given the commercial expediency of the facts of the instant case, it is assessee who is in the best position to decide at what rate of interest the loan may be required to be taken - HELD THAT:- Since if the assessee is unable to establish the nexus between interest bearing loans and earning of interest income itself, the entire interest expense is liable to be disallowed and not part thereof as upheld by CIT(Appeals). Even in the assessment order, AO has not challenged the fact that assessee has not been able to establish the nexus between interest taken @ 21% and the earning of interest income by the assessee. Both the AO and CIT(Appeals) have not been able to controvert the commercial expediency demonstrated by the assessee for incurring a higher rate of 21% interest on loan taken from Shri Dharmesh Kumar Patel, given the facts of the instant case. Therefore, assessee has been able to establish both the commercial expediency for taking the interest at higher rate of 21% (since the same was required by the assessee on urgent basis to be given to the firm in which the assessee was a Director) and has also been able to establish the nexus as required under section 57 of the Act. As decided in CIT v. Darashaw Co. (P.) Ltd. [ 2014 (5) TMI 940 - BOMBAY HIGH COURT ] held that It cannot be said that interest expenditure on borrowed capital shall be debited, only if any income is made or earned. In the case of CIT v. Rajendra Prasad Moody [ 1978 (10) TMI 133 - SUPREME COURT ] held that to bring a case within section 57(iii), it is not necessary that any income should in fact have been earned as a result of expenditure. Therefore, interest paid on money borrowed for investment in shares, which had not yielded any dividend, was admissible under section 57(iii) of the Act. Appeal of the assessee is allowed.
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2023 (4) TMI 887
Disallowance u/s.40(b) - remuneration paid to partners - requirement of discloser in Clause 21(c) of Form 3CD - claim for deduction was disallowed for the reason that the assessee firm had failed to mention Clause 21(c) of Form 3CD of his audit report the amount of remuneration that was admissible u/s. 40(b)/40(ba) - HELD THAT:- Now when Clause 21(c), inter alia, envisages mentioning of the amount of remuneration that is inadmissible u/s.40(b) of the Act, therefore, no adverse inferences could have been drawn for the reason that the assessee firm had failed to make mention of the amount admissible under the said statutory provision. Although the details referred to in Clause 21(c) does make a reference of both the amounts admissible and inadmissible, but a careful perusal of the same reveals that the said details are sought only as regards the expenses therein set out which are inadmissible u/ss.40(b)/40(ba) of the Act. On the basis above no infirmity emerges from the non-mentioning of the amount of remuneration paid by the assessee firm to its partners in Clause 21(c). Unable to persuade to subscribe to the view taken by the lower authorities who had disallowed the assessee s claim for deduction of remuneration under sec. 40(b) - Decided in favour of assessee.
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2023 (4) TMI 886
Validity of Reassessment u/s 147/144 - non assuming jurisdiction as per law and without complying with the mandatory conditions u/s 147 to 151 - tangible material to initiate reopening - Borrowed satisfaction - non applIcation of mind by AO - HELD THAT:- There was AIR information available with the AO in the form tangible material and thereafter the AO proceeded to initiate reassessment proceedings and to issue notice u/s. 148 of the Act to the assessee. Analysis of reasons recorded by the AO clearly shows that except AIR information there was nothing else in the hands of AO at the time of initiating reassessment proceedings and the AO without applying mind to the information and without any further verification from the bank prosecute to record he had reason to believe that income has escaped assessment for A.Y. 2010-11. As decided in Bir Bahdur Singh Sijwali [ 2015 (2) TMI 60 - ITAT DELHI] we are inclined to hold that mere AIR information of cash deposit without any other information and verification or examination by the AO the AO is not entitle to assume valid jurisdiction to initiate reassessment proceedings u/s. 147 of the Act and issue notice u/s. 148 of the Act. Decided in favour of assessee.
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2023 (4) TMI 885
Penalty u/s 271(1)(c) OR u/s 271AAA - addition made on account of unexplained profit for Land trading pursuant to search proceedings - HELD THAT:- Admittedly, the year before us is the year in which the search was conducted and therefore it fulfils the conditions of the specified previous year as provided under explanation (b) of section 271AAA - if any penalty is to be levied, then the same has to be charged under the provisions of section 271AAA - provisions of subsection (3) of section 271AAA(1) of the Act specifically debars the revenue to levy the penalty under the provisions of section 271(1)(c) of the Act. Penalty has been levied under the wrong provisions of the Act i.e. section 271(1)(c) of the Act and therefore the same is not maintainable. Hence the ground of appeal of the assessee is allowed.
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2023 (4) TMI 884
TP adjustment - interest charged by the assessee on loans given to its associate enterprise/subsidiary - AO benchmarked the transaction taking the interest rate at which the assessee would get the loan in India and thereby made the transfer pricing adjustment by taking the interest rate @ 14.47% - HELD THAT:- The loan was advanced by the assessee to its wholly owned subsidiary for strategic acquisition abroad with a view to further the assessee s business profile. DR could not rebut the above plea of the ld. AR that the loans were benchmarked as per relevant market rate of the relevant currency in which loans were advanced and as per the prevailing rate in that foreign country. As relying on case of Russell Credit Ltd. [ 2020 (1) TMI 781 - ITAT KOLKATA ] and M/s Britannia Industries Ltd. [ 2018 (11) TMI 1744 - ITAT KOLKATA ] we hold that the ld. CIT(A) rightly applied the case laws and deleted the impugned loan interest arm s length price adjustment made by the Assessing Officer. Ground Nos.1 to 4 are accordingly dismissed. Disallowance u/s 40(a)(ia) - non-deduction of TDS on payment paid on account of advertisement to St. Xavier s Alumni Association - HELD THAT:- As in the appellant s own case for assessment year 2008-09 to 2010-11 his predecessor [CIT(A)] has deleted the impugned disallowance observing that the payee i.e. St. Xavier s Alumni Association was recognised by the department as a charitable institution and its income was exempt and therefore, there was no escapement of income and the assessee was not obliged to deduct TDS, since the income of the said institution/payee was not taxable. Decided against revenue. Disallowance u/s 40A(9) for payments made to the employees recreation club - AO disallowed the said expenditure observing that the said club was a distinct entity and contribution made by the assessee to the said club was not allowable as business expenditure - CIT-A deleted the addition as relying on own case as held that recreation club was integral part of the assessee itself, where, the contribution was collected from employees and this was matched by the assessee for providing recreational facilities as a measure of employee welfare and since the payments were not made to any third party association or trust, rather, the payments represented expenditure on in-house employee welfare activities, the expenditure was allowable - HELD THAT:- The facts and issues involved in Revenue s appeal for assessment year 2012-13 2013-14 are exactly identical except the amounts involved and our findings, given above, will mutatis mutandis apply to all the captioned appeals. In view of this all the appeal filed by the Revenue are hereby dismissed.
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2023 (4) TMI 883
Revision u/s 263 by CIT - complete cash deposits in bank account has not been verified during the assessment proceedings - HELD THAT:- Admittedly, the case was selected under scrutiny on account of large cash deposits of Rs. 1.91 crores but the AO has not verified the entire cash deposits during the proceedings except the cash deposits in old demonetized currency. Accordingly, we hold that the verification has not been done by the AO during the assessment proceedings with respect to the verification of cash deposits. It is a settled position of law that non-verification of the AO renders the assessment order as erroneous in so far prejudicial to the interest of revenue. In holding so, we draw support and guidance from case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT ] - Thus no infirmity in the order framed u/s 263 - Appeal of the assessee is dismissed.
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Benami Property
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2023 (4) TMI 882
Benami Transactions - family arrangement - exception in Section 4(3)(a) of the Benami Act - Jurisdiction of the Court to entertain under Section 9A of the CPC - Suit filed as barred under the provisions of the Benami Transactions (Prohibition) Act, 1988) - Whether the suit is barred by limitation ? - Scope of preliminary issue under Section 9A - requirement of evidence to decide the preliminary issues - The learned Single Judge observed that the issues of limitation and benami were mixed questions of fact and law requiring evidence - whether plaint was ex-facie barred by limitation on the basis of the admissions in the plaint itself? - HELD THAT:- The bar of Benami under Benami Act requires examination of factual aspects including the exceptions to Section 2(9) and 4(3). The question whether a transaction is Benami or not is therefore one of fact requiring evidence. There is, therefore, no dispute that limitation and benami transactions being mixed questions of fact and law, require evidence. That being the position, such questions in view of paragraphs 50, 54, 56 of Nusli Neville Wadia vs. Ivory Properties [ 2019 (10) TMI 1314 - SUPREME COURT ] cannot be decided under Section 9A. In view of the law settled in the case of Nusli Neville Wadia vs. Ivory Properties (supra), we have no doubt in holding that, in the facts of this case, limitation and benami transactions are not covered within the ambit of jurisdiction of the Court to entertain under Section 9A of the CPC and cannot be decided as preliminary issues under Section 9A of the CPC. Section 9A only deals with issues of whether the Court does or does not have jurisdiction to entertain a suit. Respondent s interpretation is misplaced. A plain reading of the order clearly indicate that although the learned Single Judge kept importuning the Appellant to lead evidence as the same was necessary to decide the issues but the appellant refused to do so. There is a difference between refusing to lead evidence and evidence not being required to be led. In the facts of the case as borne out from the orders, the evidence was necessary to be led to decide the preliminary issues. Just because now that the Appellant can raise a point in the light of the Apex Court decision in the case of Nusli Neville Wadia vs. Ivory Properties (supra), objection cannot be raised to state that decision on preliminary issues on the basis of admission and pleadings ought to be considered without having to lead evidence. It is also evident from the above order that the Plaintiff, the Appellant herein, did not wish to lead evidence on either of the two preliminary issues. Therefore, whether or not the appellant gave consent or elected to have the preliminary issues decided, that cannot come in the way of the law settled in the case of Nusli Neville Wadia vs. Ivory Properties (supra) being applied. The law laid down in Nusli Neville Wadia vs. Ivory Properties (supra) was always the law and the Appeal/ impugned order will have to be tested on that basis. The present Appeal being tested on the touchstone of Section 9A in the light of the decision in the case of Nusli Neville Wadia vs. Ivory Properties (supra), and [ 2015 (9) TMI 1606 - BOMBAY HIGH COURT ] clearly holding the requirement of evidence to decide the preliminary issues will have to be set aside and is hereby set aside.
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Customs
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2023 (4) TMI 881
Condonation of delay in filing appeal - Sufficient cause for delay exists or not - Punitive measures imposed on the respondent s Customs Broker License under the Customs Broker Licensing Regulations, 2013 reduced to forfeiture of the security deposit - failure to verify the antecedents and correctness of the Import-Export Code No., identity of his client and functioning of his client at the declared address - over-valuation of consignment imported for making fraudulent drawback claims. Whether the delay in filing the same is required to be condoned? - HELD THAT:- The application seeking condonation of delay is bereft of any particulars. Apart from making a bald statement that the impugned order was misplaced because the office of the counsel of the appellant was under renovation and was found subsequently, no further details are provided - This Court finds it difficult to accept the aforesaid explanation. It is also not possible for this Court to countenance the procedure, where the Department is clueless whether an appeal has been filed or not; and apparently, remains sanguine once instructions to file have been given to the counsel. It is also relevant to note that there is a substantial delay of 109 days in re-filing the appeal as well. It is stated that after the appeal was filed, the appeal memo was returned by the Registry with certain objections. The delay in re-filing was due to the fact that some of the appeal papers got misplaced which included the affidavit accompanying the appeal . In the process of locating the appeal papers, there occurred some delay in re-filing the appeal with the Registry of this Court - it is also seen that there has been an inordinate delay in the prosecuting the present appeal as well. The notice in the present appeal was issued on 18.12.2019, however, the respondent could not be served. The hearings were adjourned thereafter on account of truncated functioning of the Court due to the outbreak of Covid-19. The present appeal was listed on 25.04.2022, however, none appeared for the appellant on that date. This Court finds no reason to condone the delay in filing the appeal or re-filing the same - Appeal dismissed.
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2023 (4) TMI 880
Levy of penalty - guar gum was of food grade or not - Revenue s contention that it is of food grade is based on the test reports of AES to whom the samples were sent by CRCL - valuation should be based on transaction value or not - Rejection of transaction value - determination of value based on the contemporaneous values available in the NIDB - HELD THAT:- The appellant did not dispute the samples being sent to this laboratory and in fact, had paid the fee for the testing also. Learned authorised representative for the Revenue has produced before the covering letter under which the samples were sent to the CRCL for testing which were further forwarded to AES. All samples which are drawn are entered in a register by the Customs and the entry number in the registered gives the correlation with the sample and these numbers were further correlated with the test reports. For these reasons, the test reports of AES credible and they state that the imported guar gum was of food grade. The test report of Balaji and the declaration of the Director of Balaji submitted during the hearing were examined. Neither the test report nor the declaration state any marks and numbers of the samples which were tested. Therefore, it is not satisfied that the test report of Balaji pertains to the imported goods and the samples which were tested were those samples which were drawn in the presence of both sides. Needless to say that any test report is as good as the sample which was tested. Unless the report can be correlated with the sample, the test report cannot be relied upon. Also the test report of Balaji mentions at the top See note 150 E(f) Under the Drugs and Cosmetics Act, 1940 and the Rules made thereunder and indicates against different parameters I.P. which apparently refers to the standards of Indian Pharmacopeia. The test conducted by Balaji is to check the imported guar gum against pharmacopeial standards and in so testing, it found that the total microbial content was higher than what was permissible as per IP. All other parameters were within the pharmacopeial standards. This report nowhere states that it tested the samples to check if the guar gum is of food grade or that it is not of food grade and it does not advance the case of the appellant that the imported guar gum is not of food grade. The appellants contention that valuation should be based on the transaction value is not correct for four reasons. Firstly, the quantity of the goods is much larger than what was declared. Secondly, the buyer and seller are related parties. Thirdly, the grade of the guar gum has been mis-declared by the appellant as not of food grade but on testing, it is found to be of food grade. Fourthly, the declared value is Rs 19.264 per kg as opposed to the contemporaneous import prices of Rs. 424.95 per kg. For all the reasons, the impugned order is correct in rejecting the transaction value and determining the value based on the contemporaneous values available in the NIDB. The impugned order is correct in rejecting the transaction value and re-determining the value based on the contemporaneous values of imports available in NIDB - Undisputedly, Shri Puri and Shri Malhotra were involved in the mis-declarations and therefore, the impugned order is correct in imposing penalties on them. All three appeals are rejected.
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Corporate Laws
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2023 (4) TMI 879
Rejection of defendant/Petitioner s application under order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC) - whether the court below had jurisdiction to entertain the suit since the said suit is barred under section 430 of the Companies Act, 2013? - HELD THAT:- It is quite clear, if the statements made in the plaint are treated to be true then the defendant no. 2 Manoj Sett is not the director of the plaintiff no. 1 company. If that be so prima facie it appears that the dispute is in-between director and a person who is not a director. Learned counsel on behalf of the petitioner in this context argued that the golden rule of statuary construction is that the phrases or sentences should be interpreted according to the intention of the legislature and section 241 and 242 should be read together and as such under the Act of 2013 the intention of the legislature is to vest the power of adjudication of the matter referred in section 242, to the Tribunal. As averment made in the plaint which is considered to be true for the present purpose, discloses conflict of two individual alleging that the plaintiffs personal right got affected by a person whose membership in the company is not beyond doubt, suit under section 34 of the specific relief act is not barred in the present context specially when plaintiff averred in the plaint that they are not allowed to enter into the premises of the company and thereby they prayed for enforcement of their civil right rather than right as director. In view of settled proposition of law that ouster of civil court jurisdiction cannot be readily inferred and consolidating all previous judgment, apex court in CHURCH OF NORTH OF INDIA VERSUS LAVAJIBHAI RATANJIBHAI ORS [ 2005 (5) TMI 636 - SUPREME COURT ] has laid down the principles relating to the exclusion of jurisdiction of civil court stating that The Civil Court will have no jurisdiction in relation to a matter whereover the statutory authorities have the requisite jurisdiction. On the other hand, if a question arises, which is outside the purview of the Act or in relation to a matter, unconnected with the administration or possession of the trust property, the Civil Court may have jurisdiction. In this case, having regard to the nature of the lis, the jurisdiction of the Civil Court was clearly barred. As the question about ouster of jurisdiction of a civil court must be constructed having regard to the schemes of the act, it can be said that the preamble of the act of 2013 have not taken away the jurisdiction of a civil court in each and every matter connected with company affairs. The preamble speaks that this is an act to consolidate and amend the law relating to companies. The normal civil remedies associated with action lies in civil courts. If not prescribed in the act, plea of bar to jurisdiction of a civil court may not be considered having regards to the contentions raised in the plaint and for this purpose reliefs sought in the plaint must be considered in their entirety on the basis of factual averment made in the plaint - it appears that the suit is apparently in between director and a person whose appointment is put on hold by the Company Law Bench, Kolkata and as relief relates to decree for declaration of right of plaintiffs as individual and for decree for account for non-payment of remuneration along with injunction, an appointment of accounts commissioner and receiver, it is found that the suit is not barred under section 430 of the companies act 2013. Application dismissed.
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Insolvency & Bankruptcy
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2023 (4) TMI 878
Writ petition - Seeking a direction from this Court to the respondent Bank to initiate action as per the RBI Circular dated 05.05.2022 and the Pre-Packaged Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 instead of proceeding under the SARFAESI Act - proprietorship firm - HELD THAT:- There is no doubt that the entire country was affected because of the COVID-19 pandemic situation and the lockdowns were enforces to contain the pandemic. There is no doubt that several business entities including the entities like the petitioner may have suffered losses because of the COVID-19 pandemic situation. It is because of such financial distress faced by the entities like the petitioner that the Government had time and again brought out different schemes to ameliorate the grievances and the hardships faced by the business entities. It is seen that as per the RBI by circular No. DOR. STR. REC. 12/21.04.048/2021-22, the restructuring is to be invoked or shall be invoked when the lending institution and the borrower agree to proceed with the efforts towards finalizing or restructuring plan to be implemented in respect of such borrower. The petitioner submits that it had applied before the respondent bank for implementation of the said scheme by an application dated 21.07.2021. In response to the said application, the bank had replied by way of an e-mail, a copy of which is found at Annexure-A page 49 of the counter affidavit - As such by definition prescribed under the IBC, 2016 the applicant does not come within the definition of corporate applicant. Consequently, the insolvency and Bankruptcy (pre-packaged insolvency) Rules, 2021 are not applicable in so far as the petitioner is concerned. It appears that this writ petition is directed solely as a ploy to delay the further proceedings initiated under the SARFAESI Act which has already been initiated against the petitioner. The SARFAESI Act is a complete code in itself and it has statutory Authorities prescribed for redressal of grievances raised by the petitioner in the writ petition. This Court is of the considered view that there was sufficient laches on the part of the petitioner in pursuing the matter before the bank in right earnest in terms of the schemes which was floated by the RBI. The writ Court being a Court of equity cannot come to the aid of a litigant is not diligent or is guilty of laches. Where the SARFAESI Act provides for efficacious alternative remedy, ordinarily a writ Court will not exercise its jurisdiction under Article 226. In the facts and circumstances of the present case, the writ petitioner has not been able to demonstrate as to why the powers under Article 226 should be invoked by this Court without the writ petitioner exhausting the statutory alternative remedies as provided for under the SARFAESI Act - Time and again, the Apex Court has held that when a SARFAESI proceeding is initiated ordinary to the writ Courts would loathe to interfere save and except the exceptions curbed out by the Apex Court in Authorized Officer, State Bank of Travancore Anr. [ 2018 (2) TMI 25 - SUPREME COURT ], the apex court has precisely laid down the circumstances under which the writ court should interfere in SARFAESI matters. The writ petition fails and the same is therefore, dismissed.
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2023 (4) TMI 877
Rejection of application claiming the chain documents of the property sold to the Appellant through e-auction process for verification before balance sale consideration - HELD THAT:- Admittedly, the Appellant was the successful bidder of the property mentioned at Item No.5 in the e-auction document. The Liquidator sent a communication on 16.11.2021 informing the Appellant that Appellant is the successful bidder and is required to deposit amount as per the Liquidation Regulation, 2016. The submission of learned counsel for the Appellant that there was dispute raised with regard to the property in filing a Writ Petition and Suit, there was a bonafide litigation regarding title of the property and original sale deed have not shown to it. The Appellant having not deposited the balance amount within the time allowed, the Adjudicating Authority did not commit any error in rejecting the application filed by the Appellant. Appeal is dismissed.
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2023 (4) TMI 876
Condonation of delay - Time Limitations for filing appeal - period of limitation extended - sum and substance of the argument of Counsel for the Appellant is that the period of 15 days which is there in the proviso of Section 61(2) of the Code has also been extended and thus there is no delay when the appeal was filed - HELD THAT:- As per Section 61(1) any person aggrieved against the order of the Adjudicating Authority can prefer an appeal before this Appellate Tribunal but as per Section 61(2) of the Code, the Appeal in terms of Section 61(1) has to be filed within 30 days. However, proviso to Section 61(2) allows the filing of the appeal even after expiry of 30 days if the Applicant/Appellant satisfies the Appellate Authority about the presence of a sufficient cause for not filing the appeal within that time but in no case the period of 15 days can be extended. The Hon ble Supreme Court in In Re: Cognizance For Extension Of Limitation [ 2022 (1) TMI 385 - SC ORDER ] extended the period prescribed under the statute for filing the appeal but the period which is provided further within which the application for condonation of delay can be filed has not been ordered to be extended. In the case of National Spot Exchange Limited Vs. Mr. Anil Kohli, RP for Dunar Foods Limited, [ 2021 (9) TMI 1156 - SUPREME COURT ]. The Hon ble Supreme Court has held that Thus, considering the statutory provisions which provide that delay beyond 15 days in preferring the appeal is uncondonable, the same cannot be condoned even in exercise of powers under Article 142 of the Constitution . It would have been an altogether different situation had an application been filed by the Appellant during the period of 15 days which is provided in the proviso to Section 61(2) then the said application could have been considered for condoning the delay only of 15 days or whatever days the delay was caused but beyond the period of 15 days this Tribunal does not have any jurisdiction to condone the delay. This is not a fit case for condonation of delay for filing of the appeal - application dismissed.
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FEMA
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2023 (4) TMI 875
Offence u/s 57 of the FERA - Non Complaint filed in compliance of the provisions of section 61 (2)(ii) of the FERA - HELD THAT:- As in this case where an offence under Section 57 of the Foreign Exchange Regulation Act, 1973 has been alleged against the accused person, the law provides that either the Enforcement Director or an officer authorised in writing on behalf of the Director or the Central Government or an authorised officer of Reserve Bank, shall be eligible to institute a complaint. The Magistrate has also emphasized that the appellant would not have the locus standi to initiate prosecution in absence of any authorization, without however considering or taking judicial note of his evidence and Exhibit-A (i.e., authorization certificate dated (22.12.2005). The Magistrate could not ignore the ocular and documentary evidence before it, more so, when all these were uncontroverted. By virtue of holding officer at the particular period of time and having been authorized vide Exhibit-A there was no impediment for the appellant to institute prosecution, which the Magistrate has not considered and such non-application of mind has rendered his findings not tenable in the eyes of law. The Magistrate was duty bound to take note of the same, more particularly, in terms of Section 57(7) of the Evidence Act. It was a mandate of law. The notification dated 24th September, 1993 read with the direct evidence of the appellant before the Trial Court would unfailingly point out to the fact of the appellant to be competent officer under law, to institute prosecution on behalf of the Enforcement Directorate. By not considering all these factual and legal aspects, the Trial Court has committed gross error. The impugned judgment suffers from non-application of mind and illegality. Thus unable to place occurrence with the finding of the Court in the impugned judgment that provisions of Section 61 (2) (ii) of the Foreign Exchange Regulation Act, 1973 has not been complied with by the complainant in order to institute a case punishable under Section 57, as it is in this particular proceeding. In my considered opinion, the impugned judgment of the Trial Court suffers for non-application of mind and wrong appreciation of the fact situation as well as the settled provisions of law. Accordingly, the same would not be maintainable and liable to be set aside, being not inconfirmity with the laws. The impugned judgment is set aside - Appeal allowed.
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PMLA
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2023 (4) TMI 874
Seeking grant of bail - Money Laundering - proceeds of crime - predicate offence - misappropriation of amount by forging the signatures, with the help of the pledged documents - fraudulent GDR issue - Sections 44 and 45 of PMLA - HELD THAT:- There is no controversy about the following facts: (i) that the registration of the ECIR and the lodging of the prosecution complaint in the year 2022 were a sequel to the registration of the FIR for the predicate offence, way back in the year 2013, at the instance of one M. Srinivas Reddy, Managing Director, Farmax and also a sequel to the order passed by SEBI in the year 2020; (ii) that no final report has been filed in the FIR for the predicate offence, for the past nine years; (iii) that even M. Srinivas Reddy, the de-facto complainant in the FIR for the predicate offence, was sought to be arrested as an accused in connection with the ECIR, but the application of the Enforcement Directorate for remand was rejected; (iv) that the appellant is a Chartered Accountant by profession and has been in jail from 26.09.2022; and (v) that the relevant portion of paragraph 8 of the prosecution complaint filed by the Enforcement Directorate, which we have extracted in the preceding paragraph, gives room for a valid argument that the second condition found in Clause (ii) of sub-section (1) of Section 45 of PMLA is satisfied qua the appellant. Therefore, the continued incarceration of the appellant may not be justified. However, the apprehension of the Enforcement Directorate that the appellant is a flight-risk and may go out of the country if released on bail, has to be taken care of by imposing appropriate conditions. The appellant is directed to be enlarged on bail, subject to such terms and conditions as may be imposed by the Metropolitan Sessions Judge-cum-Special Court - Appeal allowed.
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Service Tax
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2023 (4) TMI 873
Adjudication of Show Cause Notice - time limitation - expiry of reasonable period of five years from the date of show cause notices - clause (b) to Section 73 (4B) of the Finance Act - HELD THAT:- Issue in the present case is squarely covered in favour of the petitioner, especially the decision rendered in M/S GPI TEXTILES LIMITED VERSUS UNION OF INDIA AND OTHERS [ 2018 (9) TMI 25 - PUNJAB HARYANA HIGH COURT] . Since, no interim stay has been granted by Hon ble the Supreme Court in the appeals, the present petition is allowed. Petition allowed.
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2023 (4) TMI 872
Non-payment of Service Tax - non-monetary consideration such as free accommodation, medical facilities, vehicle and telephone insurance and stationery and other expenses - period April 2009 to March 2012 - invocation of extended period of limitation contemplated under the proviso to section 73 of the Finance Act 1994 - HELD THAT:- The issue as to whether the aforesaid value of non-monetary consideration could be included in the taxable value has been decided in M/s. Central Industrial Security Force (CISF) vs Commissioner of Service Tax, Pune [ 2019 (1) TMI 1661 - CESTAT ALLAHABAD] , following the decision of Supreme court in UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT ], where it was held that only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Thus, for the reasons stated in the aforesaid decision of the Tribunal, with which there exists no reason to differ, the impugned order deserves to be set aside. It would, therefore, not be necessary to examine the issue relating to limitation. Impugned order set aside - appeal allowed.
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2023 (4) TMI 871
Demand of service tax with interest and penalty - the business of the partnership firm M/s. Patel Enterprises was taken over by M/s. Dee Vee Projects Ltd. and in response to the show cause notice issued to M/s. Dee Vee Projects Ltd, facts, including facts relating to M/s. Patel Enterprises, had been stated - case of Revenue is that since a separate show cause notice had been issued to M/s. Patel Enterprise, a reply should have been filed and a representative should also have appeared on the date fixed - HELD THAT:- It is no doubt true that separate notices were issued to M/s. Patel Enterprises and M/s. Dee Vee Projects Ltd, but in view of the peculiar facts and circumstances of the case that the business of M/s. Patel Enterprises was taken over by M/s. Dee Vee Projects Ltd on April 01, 2013; the period involved in both the show cause notices is 2013-14 and 2014-15, similar allegations have been made; and the fact that the demand raised against M/s. Dee Vee Projects Ltd has been dropped by an order dated November 10, 2022, it appears appropriate to remand the matter to the Adjudicating Authority so as to enable the appellant to submit a reply to the show cause notice and also appear on the date to be fixed by the Adjudicating Authority. Appeal allowed.
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Central Excise
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2023 (4) TMI 870
Scope of the order pursuant to remand back of the matter - Refund of Excess Duty paid - goods cleared to their depots on stock transfer basis under Section 4 of the Central Excise Act, 1944 - corroborative evidence or not - principles of unjust enrichment - HELD THAT:- Admittedly the appellant has paid duty at a higher value while clearing the goods from the factory to the depots and the said goods were sold to the customers at a lower price and the original authorities after verification of all the documents have found that the appellant entitled to refund of the excess duty paid by them but the Ld. Commissioner vide the impugned order has accepted the appeal of the department by holding that the appellant has failed to prove that the higher duty paid by them has not been recovered from their buyer. The identical issue was examined by the Tribunal in the case of NAHAR SPG. WVG. MILLS LTD. VERSUS COMMISSIONER OF C. EX., BHOPAL [ 2009 (2) TMI 677 - CESTAT, NEW DELHI] wherein after considering the submissions of the department that the appellant failed to co-relate the goods cleared from the factory and removal from the depot and therefore, failed to establish that the question of duty has not been passed to any other person - once it is established that the goods were sold from the depot to the customers at a lower price as is the case in the present case then it is clear that the higher duty has not been collected by the appellant and hence there is no unjust enrichment. The Ld. Commissioner (Appeals) has travelled beyond the remand order passed by the Tribunal. In remand order, the Ld. Commissioner was only to consider the issue of unjust enrichment whereas the Ld. Commissioner has gone beyond the remand order to hold that Rule 7 of the Central Excise Valuation Rules, 2000 has not been followed. The impugned order is not sustainable in law - Appeal allowed.
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2023 (4) TMI 869
Protective demand - Remission of duty under Rule 21 of the Central Excise Rules - inputs contained in the finished goods, lost on account of fire - HELD THAT:- In the given factual backdrop, confirmation of the protective demand raised, pursuant to the rejection of the remission application, howsoever authorized is a nullity in law, as this Tribunal has remitted back the matter of a decision on the remission application to the Adjudicating Authority. It is imperative that due consideration is given and a speaking order is pronounced in the matter of the remission application afresh by the lower authority. Any decision on the protective demand Show Cause Notice dated 06.11.2012 issued to the appellants can only be an outcome of the decision in the remission application, outcome of which under the present circumstances is yet pending decision. The order is set aside - appeal disposed off.
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2023 (4) TMI 868
Levy of penalty - Recovery of wrongly availed Cenvat Credit - trading activity as well as taxable service - non-maintenance of separate records - rule 6 of Cenvat Credit Rules, 2004 (CCR, 2004) - HELD THAT:- There is no denial for the fact that amount for which the demand has been confirmed is an amount of reversed Cenvat Credit and that the same was reversed much prior the issuance of Show Cause Notice. The admitted facts there seems no occasion for imposition of penalty. Further, it is observed that though the Commissioner (Appeals) in para 11 has held the suppression of facts on part of the appellant, While ordering imposition of penalty but it is also observed that in para 9 of the order itself the findings of Commissioner are as follows:- (i) There is no need to maintain separate accounts w.e.f 01.04.2016. (ii) The appellant and 2/3 options during the impugned period; that they have admittedly availed the option available under Rule 6 (3) (ii) read with rule 6 (3A). (iii) The competent officer could allow a manufacturer/provider of output service who failed to exercise the option under Rule 6 (3) to follow the procedure and pay the amount referred to in Rule 6 (3) (ii) alongwith interest. The provisions of section 11AC of CEA are inapplicable to the given set of circumstances as those can be relied only in case of short payment/non-payment of the duty. Admittedly present is not the case of short payment/non-payment of duty - the Commissioner (Appeals) has wrongly imposed penalty upon the appellant. Appeal allowed in part.
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CST, VAT & Sales Tax
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2023 (4) TMI 867
Levy of additional amount of tax - petitioner failed to prove that certain transactions were covered under Section 3 of the Central Sales Tax Act, 1956 - It is averred in the present petition that the petitioner had the relevant documents to establish the inter State sales, however, it could not produce the same because of non-receipt of any notice. HELD THAT:- The concessional rate of duty had been denied to the petitioner on the ground that the C-Forms, relied upon by the petitioner, had been cancelled by the concerned tax authorities in Haryana with retrospective effect. Mr. Satyakam, learned Counsel appearing for the respondent, submits that since the petitioner contends that it has documents to establish the inter State sales and there is no dispute that the adjudicating authorities have the jurisdiction to examine the relevant documents, the matter should be remanded to the concerned authority for deciding afresh, after affording the petitioner, an opportunity to be heard. The impugned notices of penalty and assessment dated 22.05.2019 and 02.08.2018 are set aside - matter is remanded to the assessing authority to determine the petitioner s claim afresh - Petition allowed.
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2023 (4) TMI 866
Classification of services - Deemed Sale - crane services given by the assessee to the Govt./Private institution - Transfer of right to use goods or Section 2(36) (iv) of the RVAT Act 2003 - HELD THAT:- The crane as provided to the consumer-Transport Department, could also be interchanged/exchanged at any point in time during the sustenance of the contract. Therefore, without an iota of doubt, it could be said that the consumer-Transport Department did not enjoy the exclusive control and possession of the crane, for the reasons mentioned herein-above. Accordingly, the contract dated 13.10.2008, did not give rise to a transfer of the right to use goods as stipulated under Section 2(35)(iv) of the Act of 2003 read with Article 366(29A) of the Constitution of India. It is also noteworthy that as the contract dated 13.10.2008 was essentially a contract of service, the respondent-assessee had duly paid the amount of service tax leviable upon them. Therefore, in the facts and circumstances of the instant matter, the crane services provided by the respondent-assessee do not constitute sale as provided under Section 2(35)(iv) of the Act of 2003. In the case at hand, it is clear that the contract dated 13.10.2008 was a contract of service and not sale, as the consumer i.e. Transport Department had demanded the specific services of loading, unloading, lifting and shifting, by way of the said contract. It cannot be said that consumer had the exclusive right to use the crane or that the said crane was under the control and possession of the consumer, as is illustrated by the fact that the conditions in the contract provided for the respondent-assessee to undertake the care and maintenance of the cranes during the sustenance of the contract and also supply the services of a driver and helper alongside the crane. Therefore, inadvertently, keeping the control and possession within the realms of the respondent-assessee - this Court is of the view that the crane services provided by the respondent-assessee do not constitute sale as provided under Section 2(35)(iv) of the Act of 2003 and hence, the order of the learned Tax Board does not call for any interference of this Court. The control and possession of the crane, as evidenced by the requirements imposed under Condition Nos. 17 and 28, lay with the respondent-assessee only. Hence, there were no mitigating circumstances warranting the contract dated 13.10.2008 to encapsulate a sale as provided under Section 2(35)(iv) of the Act of 2003 read with Article 366(29A) of the Constitution of India. The question of law is answered in favour of the respondent-assessee and against the Revenue - the Sales Tax Revisions are dismissed.
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Indian Laws
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2023 (4) TMI 865
Violation of principles of natural justice - penalty - debarment from participating in further tenders on account of non-supply of transformers - reason recorded in the orders impugned by the respondents for taking the extreme and extraordinary measure of debarring the appellant - HELD THAT:- The impugned order as passed by the High Court in practically denying the principal relief claimed by the appellant cannot be approved and the writ petition filed by the appellant deserves to be allowed to the extent of annulling the effect of debarment and quashing the imposition of penalty. As regards the principles of law applicable to the case, we need not elaborate on various decisions cited at the Bar. Suffice it would be to take note of the decision in UMC Technologies Private Limited [ 2020 (11) TMI 966 - SUPREME COURT ] wherein, the substance of the other relevant decisions has also been duly noticed by this Court while explaining the principles governing such actions of debarment/blacklisting. Penalty - HELD THAT:- There are force and substance in the contentions urged on behalf of the appellant that such an imposition cannot be approved for two major factors: The first and foremost being that in the show-cause notice dated 26.11.2019, the appellant was put to notice only as regards the proposition of debarment and in the said notice, nothing was indicated about the proposed imposition of penalty. Though in the cancellation orders dated 19.11.2019 and 21.11.2019, the respondents purportedly reserved their right to take appropriate steps, those orders cannot be read as show-cause notice specifically for the purpose of imposition of penalty - Looking to the terms of contract, quantification of the amount of penalty (if at all the penalty is considered leviable) could not have been carried out without affording adequate opportunity of response to the appellant. That being the position, the action of the respondents in imposing the penalty without even putting the appellant to notice as regards this proposed action cannot be approved. The authority concerned has proceeded to impose the maximum of penalty to the tune of 10% of the deficit supply without specifying as to why the maximum of penalty was sought to be imposed. In this regard, the relevant factors as indicated by the appellant could not have been ignored altogether. Unfortunately, the High Court has totally omitted to consider this aspect of the grievance of the appellant. The High Court had the opportunity to correct the obvious errors in its order dated 23.04.2021, particularly when the review petition was placed before it for consideration because one part of the matter (concerning penalty) was not even considered and as regards other part too, the pertinent contentions of the appellant did not acquire the requisite attention of the High Court. Unfortunately, the High Court chose to dismiss the review petition without even looking into the relevant factors, including the one concerning the impact of the communication dated 18.09.2019. The High Court having not dealt with the matter in the correct perspective whether in disposal of the writ petition or in disposal of the review petition, both the impugned orders could only be disapproved. Appeal allowed.
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