TMI Tax Updates - e-Newsletter
April 25, 2022

Case Laws in this Newsletter:

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

Articles

1. REQUIREMENT OF DOCUMENTS FOR AUDIT BY TAX AUTHORITIES U/S 65 OF CGST ACT AND RELATED ISSUES

   By: Anuj Bansal and NEHA BANSAL

News

1. Agricultural and Processed Food Products Export Development Authority (APEDA) inks MoU with National Research Development Corporation (NRDC)

2. Finance Minister Smt. Nirmala Sitharaman participates in the 105th Meeting of the Development Committee Plenary in Washington D.C.

3. Finance Minister Smt. Nirmala Sitharaman meets World Bank President Mr David Malpass in Washington D.C.

Notifications

GST - States

1. 01/2022-GST/SIKKIM - dated 24-2-2022 - Sikkim SGST

Seeks to implement e-invoicing for the taxpayers having aggregate turnover exceeding ₹ 20 Cr from 01st April 2022.

Income Tax

2. 44/2022 - dated 22-4-2022 - IT

U/s 280A(1) of IT Act 1961, Central Government, in consultation with the Chief Justice of the High Court of Madhya Pradesh designates Special Court in the Madhya Pradesh

3. 43/2022 - dated 22-4-2022 - IT

U/s 280A(1) of IT Act 1961, Central Government, in consultation with the Chief Justice of the High Court of Andhra Pradesh designates Special Court in the Andhra Pradesh

4. 42/2022 - dated 22-4-2022 - IT

Income-tax (10th Amendment) Rules, 2022

SEZ

5. S.O. 1913 (E) - dated 21-4-2022 - SEZ

Central Government de-notifies an area of 1.716 hectares, thereby making resultant area of the Special Economic Zone as 119.788 hectares at State Industries Promotion Corporation of Tamil Nadu Industrial Growth Centre, Sriperumbudur Taluk, Kancheepuram District, in the State of Tamil Nadu

Circulars / Instructions / Orders

IBC

1. IBBI/IP/2022 - dated 11-4-2022

Clarifications with respect to Temporary Surrender of Professional Membership

Highlights / Catch Notes

GST

• Court Quashes GST Registration Cancellation Due to Insufficient Details in Show Cause Notice; Business Activity Questioned.

  Case-Laws - HC : Cancellation of GST registration of petitioner - Validity of SCN - Probably what the Authority is trying to convey is that the registration had been merely on paper and no actual business activity is found on the place of business, as the writ applicant – a registered person was not found at the place of business of writ applicant. If such are the allegations, it is expected of the Authority to furnish some details in this regard. - The impugned show cause notice has to be quashed and set aside - HC
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• Concessional Tax Rate on HDPE Drums for Ethyl Alcohol Packaging: Clear Compliance Conditions Under Bill-to-Ship-to Model.

  Case-Laws - AAAR : Benefit of Concessional rate of tax - supply of HDPE Drums for use by the manufacturer of Ethyl Alcohol in his factory for packing his manufactured goods and supply to merchant exporter - bill-to ship-to model - The basic rule in interpretation of any statutory provision is that the plain words of the statute must be given effect to. It is only in the case of ambiguity that the principle of strict/liberal interpretation would arise. In this case, there is no ambiguity in the wordings of the impugned Notification. The conditions required to be complied with by the registered supplier and the registered recipient are very clear and does not give any scope for interpretation. - AAAR
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• Merger of GST Registrations Under Same PAN Not a Business Transfer; Para 4(c) of Schedule II Inapplicable.

  Case-Laws - AAR : Supply or not - supply of goods or not - transaction of transfer of business by way of merger of two GST registrations/ distinct persons - merger between distinct persons - the case at hand doesn’t qualify to be a “going concern to another person” as units are holders of the same PAN and they are merely distinct persons - the provisions of Para 4 (c) of Schedule II of CGST Act, 2017 do not apply in this case. Therefore, the impugned supply will be treated only as supply of goods and therefore there is no supply of services in the instant case. - AAR
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Income Tax

• High Court Grants Immunity u/s 270AA for Underreported Income; Overturns Previous Section 270A Order.

  Case-Laws - HC : Penalty u/s 270A - “underreporting” of income - right to be granted immunity under Section 270AA - In the present case, the petitioner has satisfied the aforesaid conditions, inasmuch as, (i) the tax has been paid on the additions; (ii) appeal has undisputedly not been filed; and (iii) penalty (as would be evident from the penalty notice) has been initiated on account of “underreporting” of income. - the impugned order under Section 270A of the Act is set aside and the respondents are directed to grant immunity under Section 270AA - HC
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• High Court Dismisses Petition on Reopened Tax Assessment u/s 147 After Notice Issued Per Section 148.

  Case-Laws - HC : Reopening of assessment u/s 147 - reasons to believe - In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after conducting an investigation and going through the income tax return and other related documents of the petitioner and after recording a reason to believe that the petitioner did not truly and fully disclose all the material facts, because of which income has escaped assessment. - WP dismissed. - HC
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• ITAT rules Section 40A(2)(b) issues can't justify revising assessment if not mentioned by CIT in show cause notice.

  Case-Laws - HC : Validity of Revision u/s 263 by CIT - payments made to persons specified under Section 40A(2)(b) allowed in assessment order - there is a finding by the Tribunal, as noted earlier, that no issue was raised by the CIT in respect of particulars of payment made to persons specified under Section 40A(2)(b) of the Act and even the show cause notice is silent about that. - ITAT rightly concluded that the said ground therefore cannot form the basis for revision of assessment order under Section 263 of the Act. - HC
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• Timely Tax Filing: No Penalty for Filing Under Extended Deadline per Section 271(1)(c), Explanation 5A.

  Case-Laws - AT : Penalty u/s 271(1)(c) - proof of contravention of provisions provided under explanation 5A to section 271(1)(c) - On reference to the provisions of explanation 5A to section 271(1)(c) of the Act as discussed above, it is imperative to note that the word due date has been mention and not the due date as specified under the provisions of section 139(1) of the Act. Thus to our understanding, even the assessee files the return of income during the extended time provided under section 139(4) of the Act, it shall be interpreted as if the return of income has been filed within the due date. - the assessee has not contravened any of the provisions provided under explanation 5A to section 271(1)(c) of the Act so as to attract the provisions of penalty on account of concealment of income. - AT
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• Interest Income from Fixed Deposits Treated as Business Income, Reducing Construction Project Costs in Tax Return.

  Case-Laws - AT : Taxability of interest of income on fixed deposits - The assessee had made fixed deposits with banks and derived interest income thereon only to recover the interest expenditure paid by it on the loans borrowed by it for the purpose of business. Hence, the interest income squarely partakes the character of business income. Admittedly, the business income from construction projects would be offered in the year of project completion of the project followed by the assessee. This interest income would go to reduce the closing work in progress of construction project carried out by the assessee, which has been done by the assessee in the return of income. - AT
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• India Management Fees & IC Labour Charges: Not "Fees for Technical Services" Under Article 12(4)(b); No Enduring Benefit Found.

  Case-Laws - AT : Income accrued in India - treatment to management fee and IC Labour Charges as fee for technical services/fee for included services - FTS / FIS - These services have not resulted in any enduring benefit to Everest India by way of any knowledge which could be applied by it on its own in future without depending on the assessee. These are general managerial services which are received by the assessee on recurring basis. Therefore, the test laid down under Article 12(4)(b), in our considered view, are not satisfied in the present factual scenario. - AT
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• Court Reviews Transfer Pricing Adjustment for Interest on Extended Credit to Associated Enterprise Under Arm's Length Principle.

  Case-Laws - AT : TP Adjustment - Interest on extended credit to AE - assessee granted extended credit periods to non-AEs without charging any interest on delayed payments - CIT(A) has rightly pointed out that Transfer Pricing regime normally judges the transfer pricing of the tax payer based on the results rather than on the intent to shift income from one side to another. In the normal ALP an element of implied interest would always have been there so as to compensate for the opportunity cost and notional financial cost associated with account receivable/ adjustments so called for. - AT
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• Profits from Land Sale Classified as Capital Gains, Not Business Income, Says Commissioner of Income Tax (Appeals) Decision.

  Case-Laws - AT : Realignment of profits arising on sale of land parcels - surplus arising on sale of asset - ‘capital gains’ OR ‘business income’ - The CIT(A), in our view, has come to a rational conclusion having regard to the corroborative evidences placed and conduct of the assessee over a period of several years in the past. Long period of holding, utilization of own funds, near absence of any trading activity on land except conversion of land in question are amongst vital pointers to lend support the declared intentions of acquiring the land as capital investments. - AT
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• Addition for Unaccounted Investment u/s 69 Overturned Due to Lack of Evidence on Suppressed Land Purchase Price.

  Case-Laws - AT : Unaccounted investment u/s 69 - Addition on account of suppressed purchase price of land purchased - Since the Assessing Officer failed to pinpoint any instance by bringing any cogent and corroborative evidence on record where the assessee is found guilty of making payments to sellers over and above the value shown in the registered deed, the general remarks recorded by the Assessing Officer on the basis of presumption and assumption cannot be the basis for making the addition. - AT
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Customs

• Court Orders Hearing on Denied Customs Duty Refund; Respondents Must Issue Detailed Decision Post-Hearing.

  Case-Laws - HC : Denial of refund of excess BCD alongwith the interest - Amendments in the bills of entry not made - The respondents are directed to treat the present writ petition, as a representation and deal with the same - the respondents will grant personal hearing to the authorized representative of the petitioner, and, thereafter, pass a speaking order with regard to the relief sought by the petitioner - HC
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• Retrospective Circular on EPCG Scheme Ruled Unconstitutional for Violating Promissory Estoppel and Articles 14, 19(1)(g.

  Case-Laws - HC : EPCG scheme - breach of principles of promissory estoppel - Constitutional Validity of circular dated 4.1.2019 - Having granted the EPCG licenses to the writ applicants on the basis of their disclosure that the capital goods will be used in distribution of electricity, the writ applicants cannot now be put to prejudice for the past transactions by issuing retrospective circular. Such retrospective circular, apart from being legally fallacious as held herein before, is also manifestly arbitrary and violative of Articles 14 and 19(1) (g) resply of the Constitution in so far as it operates retrospectively. - HC
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Corporate Law

• Court Rejects Winding Up Petition u/ss 433(e) and (f) of Companies Act; Defenses Not Bona Fide.

  Case-Laws - HC : Admissibility of Winding up petition filed invoking Sections 433 (e) and (f) of the Companies Act, 1956 - appointment of the Official Liquidator - The admission of the winding up petition is not automatic. If the debt is bonafidely disputed and the defence is a substantial one, the Court will not wind up the company. Therefore, before admitting such a petition, it needs to be ascertained by the Company Court, what defence the Company has taken and whether the said defence can be said to be bonafide - Both the defences raised by the appellant are rejected. At least, they are not accepted as bonafide defence. - HC
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Indian Laws

• Supreme Court Rules Arbitration Request u/s 11(6) Unmaintainable Due to 32-Year Delay Beyond Limitation Period.

  Case-Laws - SC : Maintainability of Arbitration application - time limitation - the appellant, who served the legal notice invoking the arbitration clause and requesting for appointment of an arbitrator after a period of approximately thirty-two years, cannot contend that still his application under Section 11(6) of the 1996 Act be considered as the limitation would start from the date of serving the legal notice and after completion of 30 days from the date of service of the legal notice and invoking arbitration clause. - SC
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• Court Case on Recovering Money from Dishonored Promissory Notes; Rebuttal Can Arise from Plaintiff's Case Weaknesses.

  Case-Laws - HC : Dishonor of Promissory Notes - Suit for recovery of money, based on two promissory notes - rebuttal of presumption - No doubt, by proving the execution of the promissory notes, the appellants/defendants have got the initial presumption in their favour. However, the said presumption is rebuttable one. It is needless to state once again that the rebuttal proof need not always be positive evidence from the appellants/defendants. Even the weakness and improbabilities exposed from the case of the plaintiff can also be considered as rebuttal proof. - HC
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IBC

• Financial Institution Challenges CoC Voting Process; Resolution Professional Directed to Complete Voting on Resolution Plan.

  Case-Laws - AT : Direction to Resolution Professional (RP) to complete the process of voting on the resolution plan under consideration - There is sufficient reason for the Appellant/PNB to be aggrieved since it had prayed for a position in the CoC with a higher voting share and carrying out of voting without deciding its IA No. 1078/2021 affects its interest. Therefore, it is well within its right to assail the impugned order through the present appeal. - AT
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VAT

• Input Tax Credit Approved for Loaders and Tippers in Mining: Qualify as Capital Goods Under U.P. VAT Act Section 13(1)(b.

  Case-Laws - HC : Denial of Input Tax Credit - spare parts of loader and tipper - denial of credit on the ground that loader and tipper are 'vehicles' - the exclusion clause will not be applicable in the case in hand - the tipper and loader are captively used for manufacturing activity within the mining area where the stone crushing plant is situated, are covered under the definition of “capital goods”, is entitled for Input Tax Credit under section 13(1)(b) of the U.P. VAT Act. - HC
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Case Laws:

• GST

• 2022 (4) TMI 1098
  Refund of unutilized IGST credit lying in Electronic Credit Ledger - HELD THAT:- Issue notice on the Special Leave Petition, as also on the prayer for interim relief, returnable in four weeks. List the Special Leave Petition on 8 October 2021.

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• 2022 (4) TMI 1097
  Non-payment of service tax - Commercial Training or Coaching Service - Negative List services or not - issuance for various summons - service leviable to tax or not - HELD THAT:- Perusal of the documents enclosed to the writ petition and sequence of events show that the Petitioner is alleged not to have discharged its liability under the Finance Act, 1994 nor under the Central Goods and Services Tax Act, 2017. Whether the activities undertaken by the Petitioner attract Service Tax under the Finance Act, 1994 and are exigible to GST under the Central Goods and Services Tax Act, 2017 are disputed question of facts which are necessarily to be adjudicated upon by the authorities vested with the power under the relevant statute. As regards application for supply of documents is concerned, as stated by the counsel for the Petitioner to have been pending before the authority, the appropriate authority is competent to decide the same in accordance with law. This Court does not deem it fit to interfere with the process of inquiry by the Competent Authority- Opposite Parties - Petition disposed off.

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• 2022 (4) TMI 1096
  Unblocking of electronic credit ledger - legality of negative blocking of credit - interest for illegally blocking the credit - HELD THAT:- Against an action of the Commissioner or an authorized officer under Rule 86A(1), the petitioner has remedy to submit objection before the competent authority under Rule 86A(2) of CGST/UPGST Rules, 2017. Learned counsel for the petitioner states that he has already filed objection before the respondent no.2 , which is pending - there are no merit in this petition - petition dismissed.

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• 2022 (4) TMI 1095
  Detention of goods alongwith vehicle - absence of e-Way Bill - undervaluation - bogus invoice - GSTIN number not mentioned on the invoice - HELD THAT:- It is admitted case of the respondents that the invoice accompanied with the goods in question was issued by the petitioner. Therefore, the respondent no.3 has committed a manifest error of law not to afford any opportunity of hearing to the petitioner despite persuasion made by the petitioner. Thus, the impugned order under Section 129(1)(b) of the CGST/UPGST Act, 2017 has been passed in breach of principles of natural justice. Consequently, the impugned order dated 14.03.2022, under Section 129 of CGST/UPGST Act, can not be sustained and is hereby quashed. Matter is remitted back to the respondent no.3 to pass an order afresh in accordance with law after considering the reply of the petitioner dated 16.03.2022 filed pursuant to the notice under Section 129(3) of the CGST/UPGST Act - Petition allowed by way of remand.

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• 2022 (4) TMI 1094
  Seeking grant of anticipatory bail - sale invoice (ITC) Income-tax Credit Certificate produced by applicant before GST Authority is alleged to be fraud - HELD THAT:- Upon perusal of record, it is deemed fit that the matter requires consideration - Mr. D.C. Mathur, learned counsel for opposite party has already filed a short-counter affidavit. However, considering the facts and circumstances of the case, he is directed to file a complete counter affidavit within four weeks. Applicant will have two weeks thereafter to file rejoinder affidavit. In the event of arrest, applicant Rahul Agarwal shall be released on ad-interim anticipatory bail on his furnishing a personal bond of Rs. 50,000/- with two sureties each in the like amount to the satisfaction of the Station House Officer of the police station/ concerned Court with the conditions imposed - Bail Application allowed.

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• 2022 (4) TMI 1093
  Cancellation of GST registration of petitioner - Validity of SCN - HELD THAT:- The show cause notice is bereft on any material particulars or information. In the absence of any material particulars and the details, it is difficult for any individual to respond to such a vague show cause notice. Probably what the Authority is trying to convey is that the registration had been merely on paper and no actual business activity is found on the place of business, as the writ applicant a registered person was not found at the place of business of writ applicant. If such are the allegations, it is expected of the Authority to furnish some details in this regard. The impugned show cause notice has to be quashed and set aside - Application allowed.

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• 2022 (4) TMI 1092
  Refund of IGST along with claim of duty drawback and other export entitlements of the petitioner - HELD THAT:- This writ-application is disposed of with a direction to the respondent no.5 to sanction the IGST refund claim alongwith the claim of duty drawback and other export entitlements within a period of two weeks from today. Application disposed off.

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• 2022 (4) TMI 1091
  Maintainability of petition - availability of alternative remedy of appeal - appealable order or not - demand of Central Excise Duty alongwith cess - recovery of interest and penalty - H ELD THAT:- The order passed by the Principal Commissioner, CGST Central Excise is an appealable order. There is a statutory remedy available to the writ applicants to file an appeal before the Tribunal. This writ application cannot be entertained - application rejected.

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• 2022 (4) TMI 1090
  Benefit of Concessional rate of tax - supply of HDPE Drums for use by the manufacturer of Ethyl Alcohol in his factory for packing his manufactured goods and supply to merchant exporter - bill-to ship-to model - applicability of N/N. 41/2017-IT (Rate) - HELD THAT:- In the GST regime, the government has provided special relief to the merchant exporters by way of reducing the GST rate for purchasing goods from domestic suppliers for export. Accordingly, Notification Nos 40/2017 Central Tax (Rate) and 41/2017 Integrated Tax (Rate) both dated 23-10-2017 stipulates that intra-state/inter-state supplies of taxable goods by a registered supplier to a merchant exporter shall be chargeable to GST at 0.05% (in the case of intra-state supplies) and 0.1% (in the case of inter-state supplies) subject to the fulfilment of the conditions imposed. It is a settled issue that benefit under a conditional notification cannot be extended in case of non-fulfillment of conditions and/or non-compliance of procedure prescribed therein. The basic rule in interpretation of any statutory provision is that the plain words of the statute must be given effect to. It is only in the case of ambiguity that the principle of strict/liberal interpretation would arise. In this case, there is no ambiguity in the wordings of the impugned Notification. The conditions required to be complied with by the registered supplier and the registered recipient are very clear and does not give any scope for interpretation. One must not lose sight of the fact that this Notification was introduced only to provide relief to merchant exporters under the GST regime. The merchant exporters have the option to avail the benefit of this concessional rate and export the goods under LuT and later claim refund of the concessional rate of tax paid on their procurements. However, they can choose to export the goods on payment of IGST in which case, they will not be eligible to avail the benefit of concessional rate of tax under this Notification on their procurements. The CBIC vide Circular No 125/44/2019 GST dated 18-11-2019 has also clarified that the benefit of supplies at concessional rate if tax in terms of Notification No 40/2017 Central Tax (Rate) and Notification No 41/2017 Integrated Tax (Rate) is subject to certain conditions and the said benefit is optional. The option may or may not be availed by the supplier and/or recipient and the goods may be procured at the normal applicable rate of tax. The Appellant is not eligible for the benefit of the concessional rate of tax in terms of Notification No 41/2017 IT (Rate) dated 23-10-2017 in as much as they have not complied with the conditions of the Notification - Appeal dismissed.

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• 2022 (4) TMI 1089
  Maintainability of Advance Ruling application - Levy of IGST - services procured by the applicant from Beacon US in respect of the referral of the FIS client - import of service or not - person liable to tax in respect of the said services rendered by Beacon US to applicant - Place of supply - HELD THAT:- The determination of place of supply per se is conspicuously absent in the list of issues enumerated under Section 97(2). However, in certain situations, the liability to pay tax or otherwise is dependent on the place of supply and in such cases, the determination of tax liability inevitably involves a determination of place of supply. Therefore, clause (e) of Section 97(2) covers within its scope the determination of place of supply if such determination is linked with the liability to pay tax and in such cases the Authority has the jurisdiction to pass a ruling on the issue of place of supply. In the present case, the Appellant who is the applicant of the advance ruling, although registered under GST, is not the supplier of the transaction in question but is the recipient of the supply of service. The Appellant has sought for a ruling as a recipient of service. The advance ruling mechanism under GST does not envisage giving a ruling to a recipient of supply of goods or services or both for the simple reason that any ruling passed by the Authority is applicable only to the supplier of the transaction and to the jurisdictional officer. In terms of Section 103 of the CGST Act, the advance ruling pronounced by the Authority is binding only on the applicant who has sought for the ruling on any matter referred to in Section 97(2) as well as on the concerned officer or jurisdictional officer of the applicant. The Appellant in the capacity of recipient of service is not eligible under law to seek a ruling on the taxability of a transaction which is received by him. The lower Authority does not have the authority to determine the classification or nature of service supplied by Beacon, US based on an application made by the recipient of service. If the classification or nature of the service supplied by Beacon, US cannot be determined for lack of jurisdiction, it automatically flows that determination of place of supply also cannot be determined. A reading of clauses (a) to (g) of sub-section (2) of Section 97 of the CGST Act would make it clear that 7 items are enumerated as per clauses (a) to (g) of sub-section (2) of Section 97 and all those clauses other than clause (e) thereof are in specific terms. Whereas clause (e) of sub-section (2) of Section 97 of the CGST Act clearly mandates that the larger issue of determination of liability to pay tax on any goods or services or both would also come within the ambit of the questions to be raised and decided by the Advance Ruling Authority on which advance ruling could be sought and rendered under the said provisions. Thus, it is concluded that, M/s Beacon, US is well within its rights to seek an advance ruling whether the service supplied by them to M/s Workplace Options India Pvt Ltd is liable to tax and if so whether the tax is to be paid by the latter under reverse charge treating it as an import of service. As regards this appeal, it is held that the lower Authority was correct in dismissing the application on the grounds of lack of jurisdiction. The appeal filed by the Appellant M/s. Workplace Options India Pvt Ltd, stands dismissed on all accounts.

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• 2022 (4) TMI 1088
  Scope of Advance Ruling application - Benefit of concessional rate - Works Contract service received from Contractors - applicability of Entry No. 3(v) (da) of Notification 11/2017-C.T.(R) dated 28/06/2017, as amended time to time - benefiit of concessional rate available to construction of common amenities such as club house, swimming pool and amenities of like nature or not? - HELD THAT:- It is the supplier who is expected to ask the questions by way of filing of the Advance Ruling application. In the present case, both the questions asked are such that in these transactions, the applicant is the recipient and not the supplier of goods or services or both. In the first question it is asked whether particular provisions of notification applies in respect of services received from contractor. Here, the contractor is the service provider and applicant is the recipient of service. In second question the applicant wants to know whether the benefit of concessional rate would be available to construction of common amenities such as club house, swimming pool and amenities of like nature in the subject case. Since construction activities are being undertaken by the respective contractor, in both the questions nature of transactions is such that the applicant is the recipient and not the supplier. Sub-section (1) of section 103 of the CGST Act, 2017 categorically speaks that the ruling pronounced is binding only on the applicant and on the concerned officer or the jurisdictional officer in respect of the applicant. If an application is filed by the recipient of goods or services or both on the taxability of his inward supply of goods or services and ruling is pronounced accordingly, such ruling shall be binding only on him and on the concerned officer or the jurisdictional officer of him. In no way, the ruling shall be binding on the supplier of such goods or services. Since provisions of Sec 95 (a) are very clear and unambiguous that only a supplier can file an application for advance ruling, the contentions of the applicant are not accepted. The said provisions were discussed with the applicant s authorized representative during the course of the final hearing and he agreed that the questions are not maintainable and not capable of being covered under Scope of section 95(a) of GST Act.

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• 2022 (4) TMI 1087
  Supply or not - supply of goods or not - transaction of transfer of business by way of merger of two GST registrations/ distinct persons - merger between distinct persons - transfer of business as going concern or not - transaction of transfer of business by way of merger of two GST registrations/ distinct persons would constitute supply of services or not - applicability of SI. No. 2 of Notification no. 12/2017-C.T. (R) dated 28.06.2017 - transfer of unutilized credit balance. Whether the transaction of transfer of business by way of merger of two GST registrations/ distinct persons would constitute supply under the GST law? - HELD THAT:- As per Sr. No. 2 of Schedule I to the CGST Act, 2017, supply of goods or services or both between related persons or between distinct persons as specified in section 25 of CGST Act, 2017, when made in the course or furtherance of business shall be treated as supply, even if made without consideration - Section 7(1A) of amended CGST Act 2017, mentioned as above, prescribes that, certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II - thus, there is a rendering of supply in the subject case. Whether the transaction of transfer of business by way of merger of two GST registrations/ distinct persons would constitute supply of goods under the GST law? - Whether the transaction of transfer of business by way of merger of two GST registrations/ distinct persons would constitute supply of services under the GST law? - HELD THAT:- Change in constitution of the business is essential otherwise, it cannot be said that there is transfer of business as a going concern - The concept of distinct persons has been introduced under GST law wherein the establishments of a person with separate registrations within the same State/UT are considered as distinct person . In the subject case, M/s Crystal Crop Protection Limited, Nagpur and M/s Crystal Crop Protection Limited, Akola, as units are holders of the same PAN and they are merely distinct persons. Hence, the case at hand doesn t qualify to be a going concern to another person as units are holders of the same PAN and they are merely distinct persons - the provisions of Para 4 (c) of Schedule II of CGST Act, 2017 do not apply in this case. Therefore, the impugned supply will be treated only as supply of goods and therefore there is no supply of services in the instant case. Whether merger between distinct persons would qualify as transfer of business as going concern under the purview of GST Law? - HELD THAT:- The question raised by the applicant is not covered under the provisions of Section 97 of the CGST Act, 2017 - this question not answered. In case the Applicant merges the business of Akola registration, then can the Applicant claim credit balance appearing in Akola registration via Form GST ITC 02A in Nagpur registration? - HELD THAT:- The question is not admitted, hence not answered. If the transaction qualifies as supply of services , whether the said transaction would get covered under SI. No. 2 of the Notification no. 12/2017-Central Tax (Rated) dated 28 June 2017, and therefore not liable to GST? - HELD THAT:- The impugned transaction is not a supply of services and therefore this question is not taken up for discussion and hence not answered.

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• Income Tax

• 2022 (4) TMI 1086
  Penalty u/s 270A - underreporting of income - right to be granted immunity under Section 270AA - HELD THAT:- Petitioner cannot be prejudiced by the inaction of the Assessing Officer in passing an order under Section 270AA of the Act within the statutory time limit as it is settled law that no prejudice can be caused to any assessee on account of delay/default on the part of the Revenue. In the present case, the petitioner has satisfied the aforesaid conditions, inasmuch as, (i) the tax has been paid on the additions; (ii) appeal has undisputedly not been filed; and (iii) penalty (as would be evident from the penalty notice) has been initiated on account of underreporting of income. Consequently, this Court is of the view that the petitioner acquired a right to be granted immunity under Section 270AA of the Act. In fact, this Court, in Schneider Electric South East Asia (HQ) Pte Ltd [ 2022 (3) TMI 1295 - DELHI HIGH COURT] has held, This Court is further of the view that the impugned action of Respondent No.1 is contrary to the avowed Legislative intent of Section 270AA of the Act to encourage/incentivize a taxpayer to (i) fast-track settlement of issue, (ii) recover tax demand; and (iii) reduce protracted litigation. Consequently, the impugned order under Section 270A of the Act is set aside and the respondents are directed to grant immunity under Section 270AA of the Act to the petitioner.

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• 2022 (4) TMI 1085
  Reopening of assessment u/s 147 - petitioner was not given adequate opportunity to file response to the said show cause notice-cum-draft assessment order - show cause notice-cum-draft assessment order was only placed on the portal but was not intimated to the petitioner - HELD THAT:- This Court is of the view that the impugned show cause notice-cum-draft assessment order has been issued within limitation as the same was admittedly dispatched on 31 st March, 2022 at 11.36 PM. Consequently, the petitioner is not entitled to benefit of judgement of this Court in Mon Mohan Kohli [ 2021 (12) TMI 664 - DELHI HIGH COURT] This Court is of the view that there has been a violation of principle of natural justice as detailed objections filed by the petitioner vide reply dated 14th March, 2022 were not decided prior to issuance of show cause notice-cum-draft assessment order dated 30th March, 2022. This Court is also of the view that the petitioner was not given adequate opportunity to file response to the said show cause notice-cum-draft assessment order. Consequently, as there has been a violation of principle of natural justice, the impugned assessment order and demand notice dated 31st March, 2022 are set aside and the matter is remanded back to respondent no.2/NFAC, who is directed to decide the objections filed by the petitioner dated 14th March, 2022 in accordance with law, at the first instance. In the event, respondent no.2/NFAC does not find any merit in the objections filed by the petitioner, then it shall proceed further in the matter in accordance with law and pass appropriate orders.

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• 2022 (4) TMI 1084
  Faceless Assessment Scheme u/s 144B - mandatory provision of issuance of a show cause notice and draft assessment order before issuing a final assessment order - HELD THAT:- In the present case, as no prior show cause notice as well as draft assessment order had been issued, there is a violation of principle of natural justice as well as mandatory procedure prescribed under Faceless Assessment Scheme and as stipulated in Section 144B of the Act. It is a settled law that when there is a violation of principles of natural justice, the availability of an appellate remedy does not operate as a bar to the maintainability of the writ petition. Keeping in view the aforesaid, the impugned assessment order issued under Section 147 read with Section 144B, demand notice under Section 156 and penalty proceedings initiated under Section 271(1)(c) of the Act, all dated 19th March, 2022 are set aside and the matter is remanded back to the AO, who shall issue a show cause notice as well as draft assessment order to the petitioner and thereafter pass a reasoned order in accordance with law.

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• 2022 (4) TMI 1083
  Reopening of assessment u/s 147 - Eligibility of reasons to believe - meaning of the expression change of opinion - HELD THAT:- In the present case, at the time of making the assessment originally, the Assessing Officer had not formed any opinion regarding the reasons on which the notice under Section 148 of the Act has been issued. To say it more particularly, the A.O. had not formed any opinion regarding (1) receipt of payments by the petitioner under Sections 194 I and 194 J, which had not been shown in its P L account, (2) non-disclosure of the amount of reimbursement of expenses claimed by it, (3) non-submission of the details of expenses incurred by it for verification during the assessment proceedings and (4) non-production of any ledgers, bills and vouchers of expenses incurred on behalf of the Principal Companies etc. Therefore, it is not a case of change of opinion and challenge to the notice under Section 148 of the Act on the ground that it seeks to initiate reassessment on the ground of change of opinion, cannot be accepted. The approving authority the PCIT, has stated that he agrees with the comments of the A.O., which were annexed with the order, and has recorded his satisfaction that it was a fit case for issuance of the notice under Section 148 of the Act. The aforesaid order does not indicate non-application of mind by the PCIT to the proposal made by the A.O. and we are not able to accept the submission that the PCIT has granted approval without application of mind to the proposal put up by the A.O. In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after conducting an investigation and going through the income tax return and other related documents of the petitioner and after recording a reason to believe that the petitioner did not truly and fully disclose all the material facts, because of which income has escaped assessment. We are satisfied that there was prima facie material available on record before the assessing officer for issuing a notice under Section 148 of the Act. The notice dated 26-03-2021 issued under Section 148 of the Act as well as all the proceedings undertaken in consequence of the notice, including the order dated 18-02-2022 passed by the National Faceless Assessment Centre rejecting the petitioner s objections against the notice, does not suffer from any such illegality as to warrant interference by this Court in exercise of its Writ Jurisdiction - WP dismissed.

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• 2022 (4) TMI 1082
  Reopening of assessment u/s 147 - Petitioner had unsecured loans - HELD THAT:- Re-opening proposed is purely based on change of opinion and the entire issue which is the subject matter of the reasons recorded has been raised during the assessment proceedings, response obtained from Petitioner and Petitioner s explanation has been accepted by the AO. AO also, we would say, was satisfied with the credit worthiness and details provided by third party lenders. Mr. Sharma submitted that in the Assessment Order this issue has not been discussed. That does not help the cause of Respondents because it is settled law that once query has been raised and answers have been given, even if the assessment order is silent, the Assessing Officer is supposed to have considered the issue and is deemed to have been satisfied with the explanation offered by the assessee. Moreover, in this case, notice under Section 133(6) of the Act has also been issued to third party lenders who have, as admitted in the Affidavit in reply, given confirmation about the transaction and credit worthiness. In these circumstances, we will have to note that notice issued under Section 148 of the Act dated 31st March, 2021 impugned in this Petition has to be set aside and consequently Order dated 22nd December, 2021 also has to go. If the confirmation alongwith credit worthiness and genuineness of transaction even if we assume have not been explained, certainly it would have been mentioned in the assessment order. We have to also note that in the Petition, there is an averment in paragraph 5(a) about how the loan was obtained, details of loan confirmation filed, independent inquiry made under Section 133(6) of the Act etc., none of which has been denied in the Affidavit in Reply. Therefore, we observe that statement in the Affidavit in Reply that the credit worthiness of the creditor and genuineness of transaction have not been explained is incorrect. Purely by way of indulgence, we are not issuing any notice for perjury against the officer who has filed the Affidavit in reply.

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• 2022 (4) TMI 1081
  Validity of Revision u/s 263 by CIT - payments made to persons specified under Section 40A(2)(b) allowed in assessment order - ITAT gave a finding of fact that no such issue was ever raised by CIT in the notice served upon the assessee and the assessee was not even confronted by the CIT before passing the Order - HELD THAT:- It is true that the Apex Court in Amitabh Bacchan [ 2016 (5) TMI 493 - SUPREME COURT] has held, all that CIT is required to do before reaching his decision and not before commencing the enquiry, CIT must give the assesseean opportunity of being heard. It is true that the Judgment also says no notice is required to be issued. But in the case at hand, there is a finding of fact by the ITAT that no show cause notice was issued and no issue was ever raised by the CIT regarding payments made to persons specified under Section 40A(2)(b) of the Act before reaching his decision in the Order dated 20th March, 2013. If that was not correct certainly the order of the CIT would have mentioned that an opportunity was given and in any case, if there were any minutes or notings in the file, revenue would have produced those details before the ITAT. In Amitabh Bachchan (supra), the Apex Court came to a finding that ITAT had not even recorded any findings that in the course of the suo motu revisional proceedings opportunity of hearing was not offered to the assessee and that the assessee was denied an opportunity to contest the facts on the basis of which the CIT had come to its conclusions as recorded in his order under Section 263. In the case at hand, there is a finding by the Tribunal, as noted earlier, that no issue was raised by the CIT in respect of particulars of payment made to persons specified under Section 40A(2)(b) of the Act and even the show cause notice is silent about that. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.

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• 2022 (4) TMI 1080
  Reopening of assessment u/s 147 - Eligibility of reason to believe - HELD THAT:- Having gone through the materials on record, we are of the view that all the aspects of the matter sought to be relied upon for the purpose of reopening were very much before the Assessing Officer at the time when the scrutiny assessment under Section 143(3) was carried out. To this extent, Mr. Bhatt with his usual fairness conceded. We are of the view that the case is not one of any omission or failure on the part of the writ applicant in fully and truly disclosing all the relevant aspects of the matter. No new tangible material could be said to have come to the knowledge of the respondent after the framing of the assessment. The case could be said to be one of mere change of opinion - Writ application succeeds and is hereby allowed

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• 2022 (4) TMI 1079
  Unexplained share application money with share premium u/s 68 - CIT-A deleted the addition - HELD THAT:- We find that the assessee has returned the unsecured loans outstanding to various parties who happened to be the directors of the assessee company or their close relatives and thereafter the money so repaid was brought back in the form of share application in the assessee company converting the same into the share capital and share premium. We note that the assessee has filed all the documents/evidences relating to these investors in the form of names, addresses, ITRs, PANs and confirmation etc. before the AO which were duly matching with the documents filed by these investors before the AO in response to notices issued to these parties by the AO u/s 133(6) of the Act. In our opinion, the order of Ld. CIT(A) has dealt with each and every aspect of the issue in great depth and thus passed a very speaking and reasoned order while deleting the addition. Addition on account of stocks as found by survey team during the course of survey - revenue has challenged the deletion of stock out of total addition made by the AO u/s 69 whereas the assessee has challenged the part confirmation of addition by the CIT(A) - HELD THAT:- After hearing the rival contentions and perusing the facts on record including the reconciliation statement filed by the assessee reconciling the stock as taken by the survey team and as per the books of the assessee before the AO and the Ld. CIT(A), we note that there were several infirmities/mistakes committed by the survey team while doing stock taking physically. From the perusal of reconciliation statement , it is apparent that the assessee has explained the stock differences minutely. It shows that the survey team even has omitted the stock to the extent of Rs. 36,80,834.34 whole the calculating excess stocks by committing various mistakes such as double accounting of stocks, wrong application of rate and various other reasons. Non of the authorities below has pointed out as to how the stock reconciled by the assessee is not correct. We, therefore, are inclined to accept the assessee s contention that the difference in stock inventory is only to the tune of Rs. 3,81,063.09/-. Accordingly we modify the order of the Ld. CIT(A) on this issue and direct the AO to add Rs. 3,81,063.09 . Consequently, the ground no. 2 of the revenue is dismissed and the assessee s appeal is partly allowed.

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• 2022 (4) TMI 1078
  Revision u/s 263 by CIT - genuineness of the loan accepted / taken - Reliance on audit objection report - violation of principle of natural justice -validity of assumption of revisionary jurisdiction directing the assessing officer for fresh adjudication - HELD THAT:- It is trite law that, while exercising revisional jurisdiction u/s 263 of the Act, it must bear in mind that the principles of natural justice do not permit the decision of a revisionary authority to be influenced by any other authority or agency, which indeed unfortunately the case squarely is, therefore, we are of the view that, this revisionary proceedings initiated on the thin ice of audit objection report and concluded in absence of deprecative material, is untenable in law. It was a change of opinion on the basis of audit objection on the issue duly inquired and addressed by the Ld. AO while framing assessment u/s 143(3) of the Act. In this count we shall necessarily refer the ratio drawn by Hon ble Guwahati High Court while adjudicating on similar issue in B A Plantation Industries Ltd Vs CIT [ 2006 (12) TMI 101 - GAUHATI HIGH COURT] where Hon ble Lordship have emphasised the ratio decidendi laid in Sirpur Paper Mill Ltd. [ 1970 (4) TMI 4 - SUPREME COURT ] that while exercising power, the Commissioner must have an unbiased mind and decide the dispute according to the procedure which is consistent with the principles of natural justice and cannot permit his mind to be influenced by the dictation of another authority. On the other hand, in no case, mere audit information form a sole basis material and renders the order of assessment erroneous, and the very absence of tangible material before the revisionary authority itself sufficient to hold the action as unsustainable in law and this view has been invigorated in Jeewanlal limited [ 1975 (12) TMI 34 - CALCUTTA HIGH COURT] Also in CIT Vs Gabriel India Ltd [ 1993 (4) TMI 55 - BOMBAY HIGH COURT] has also taken similar view that, unless the revisionary authority forms a conclusion on the basis of concrete, tangible evidential material, it cannot reach to the conclusion rendering the order of assessment erroneous and prejudicial to the interests of the Revenue. In the light of aforestated reasoning, we neither find any infirmity with the order of assessment nor any merits in the revisionary order, ergo we quash the revisionary order, thus the legal ground of the appellant is allowed.

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• 2022 (4) TMI 1077
  Scope of amendment brought in Sec.40(a)(i) - Assessee-in-default u/s 201(1) 201(1A) for want of Tax Deduction at Source (TDS) on purchase of an immoveable property - Entitlement to benefit of second proviso to Sec.40(a)(i) which has been inserted by Finance Act, 2019 w.e.f. 01.04.2020 - HELD THAT:- We find that it is undisputed fact that the assessee has not deducted TDS on purchase of property and accordingly, the assessee has been treated as assessee-in-default - assessee has sought benefit of second proviso to Sec.40(a)(i) which has been inserted by Finance Act, 2019 w.e.f. 01.04.2020. The Memorandum explaining amendment made to Section 40(a)(i) and section 201 of the Act by Finance (No.2) Bill, 2019 explains that amendment is to remove anomaly and the rationally of amendment. Second proviso to Section 40(a)(i) has been inserted w.e.f. 01.04.2020 and provide that where assessee fails to deduct the whole or any part of the tax in accordance with the provisions of chapter XVII - B on any such sum but is not deemed to be an assessee in default under the first proviso to Section 201(1) then it shall be deemed that the assessee has deducted and paid the taxes on such sum on the date of furnishing of return of income by the payee referred to in the said proviso. As per proviso to Section 201(1), a payee shall not be deemed to be an assessee in default in respect of such tax if such payee, (a) furnished its return of income under section 139, (b) has taken into account such sum for computing income in such return of income and (c) has paid the tax due on the income declared by him in such return of income and along with such payee furnishes a certificate to this effect from an accountant in the prescribed form. The aforesaid amendment is curative in nature and would have retrospective application. Our opinion draws strength from the fact that second proviso to Sec.40(a)(ia) and Sec. 40(a)(i) are evenly worded and pari-materia to each other. Both the provisions were introduced by the legislature in order to remove the anomaly / hardship and therefore, could be held to be curative in nature. In the case of section 40(a)(ia), Hon ble High Court of Bombay in the case of Pr. CIT Vs. Perfect Circle India (P.) Ltd. [ 2019 (1) TMI 1532 - BOMBAY HIGH COURT] as well as case of CIT Vs. Ansal Land Mark Township (P) Ltd. [ 2015 (9) TMI 79 - DELHI HIGH COURT] have already held that these provisions are applicable retrospectively with effect from 01.04.2005. Since the amendment to Sec. 40(a)(ia) was carried out in order to remove the anomalies, similar amendment brought in Sec.40(a)(i) is also to remove the anomaly and therefore, this amendment is to be considered as curative in nature having retrospective application. Therefore, we set aside the impugned order and direct assessee to furnish requisite details / documents in support of its claim under second proviso to Sec.40(a)(i) read with proviso to Sec.201(1). The Ld. AO may compute interest, as applicable, in accordance with law.

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• 2022 (4) TMI 1076
  Revision u/s 263 - unsecured loans u/s 68 - HELD THAT:- The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. To invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT ] and in the case of CIT vs. Max India Ltd.[ 2007 (11) TMI 12 - SUPREME COURT ]. The error in the assessment order should be one that it is not debatable or plausible view. In a case where the AO examined the claim took one of the plausible views, the assessment order cannot be termed as an erroneous . The issue i.e. required to be examined by us is whether or not the AO carried out any enquiry and verification on the issue of source of cash deposits as well as genuineness of the loans creditors and the assessment of gains arising on sale of shops should be under the head of business or capital gains . Source of cash deposit - The fact that the AO had examined the source of cash deposits is evident from the very impugned order as the ld. PCIT has reproduced the cash flow statements furnished before the AO. Further, it is an admitted position that the ld. PCIT had mistaken the cash withdrawals from banks as the cash deposits. PCIT had initiated the revision proceedings on wrong assumption of facts. PCIT was justified in exercising the powers of revision on the issue of source of cash deposits. Thus, the revision is not maintainable on the issue of sources of cash deposits into bank. As regards, the unsecured loan creditors, AO during the course of assessment proceedings had called for the details of loan creditors in order to satisfy himself as to the genuineness of the loan creditors. The appellant also furnished the full details before the AO by filing the ledger extract, particular of PAN of the loan creditors in whose names the loan is outstanding in the books of account. The said ledger extract was certified to be true by respective sundry creditors. AO having considered the information filed before him chosen not to make any addition. No doubt, the assessment order is silent on this issue. Merely because the assessment order is silent on this issue, it cannot be said that the Assessing Officer had not examined the issue. Once a query has been raised by the AO during the assessment proceedings and the assessee has responded to that query, it would necessarily follow, that the AO has accepted the assessee s submissions, so as to not deal with that issue in the assessment order. Hon ble Bombay High Court in the case of GKN Sinter Metals Ltd. vs. Ms. Ramapriya Raghavan, Asstt. CIT [ 2015 (1) TMI 832 - BOMBAY HIGH COURT ] had occasion to deal with the identical situations, wherein, after referring to its earlier decision in the case of Idea Cellular Ltd. [ 2008 (2) TMI 146 - BOMBAY HIGH COURT ] and in the case of Aroni Commercials Ltd. [ 2014 (8) TMI 390 - BOMBAY HIGH COURT ] It cannot be said that there is total lack of enquiry on the part of the Assessing Officer, nor was it the case of the ld. PCIT that the Assessing Officer should have conducted further enquiry. We are of the considered opinion that the power of revision cannot be exercised in respect of credits of loan creditors. As regards to the issue of assessment of gains arising on sale of shops. This issue was subject-matter of appeal before the CIT(A) as well as before the ITAT in assessment year 2011-12 in assessee s own case wherein, both the CIT(A) as well as the Tribunal had concurrently held that the gains arising from sale of shops should be assessable under the head of business . The fact that this issue was subject-matter of appeal before the CIT(A) who confirmed the stand of appellant. On further appeal before the ITAT stand of appellant was upheld it goes to prove that the issue is debatable. It can thus be seen that the view taken by Assessing Officer that gains arising on sale of shops can be assessed under the head business is plausible view. Therefore, it is not open to ld. PCIT to exercise the power of revision on this, in view of settled position of law, if after proper enquiries, the Assessing Officer adopted a view which is a plausible view, such view could not be open to revision by Commissioner. We are of the considered opinion that the ld. PCIT was not justified in exercising the power of revision u/s 263 in respect of above three items. Therefore, we hereby quash the order passed u/s 263 - Thus, the grounds of appeal raised by the assessee in all the above three appeals stand allowed.

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• 2022 (4) TMI 1075
  Delayed remittance of Provident Fund payment u/s.36(1)(va) - HELD THAT:- AO noted that the actual dates of payments of employees contribution to PF and ESI are available in tax audit report in Form No.3CD filed by assessee along with return of income in clause 20(b) of the audit report. The assessee before us filed complete details of payment and these dates are within the due date of filing of return of income u/s.139(1) of the Act i.e., before 31.08.2019. Since, the payments are made within due dates of filing of return of income u/s.139(1) of the Act, as noted in the audit report and are noted by the lower authorities, we are of the view that exactly on identical facts, the Tribunal is taking a consistent view that even the amendment brought in by the Finance Act, 2021 is not retrospective and it is prospective. See M/S. ADYAR ANANDA BHAVAN SWEETS INDIA P LTD. VERSUS THE ACIT, CENTRAL CIRLCE - 3 (4) , CHENNAI 34. [ 2021 (12) TMI 558 - ITAT CHENNAI] - Decided in favour of assessee. Short credit of TDS disallowed by AO while processing return u/s.143(1) - HELD THAT:- At the time of hearing, the ld.counsel for the assessee as well as the ld. Senior DR agreed that the assessee can file the details of TDS before AO and the AO will accordingly allow the claim. In view of the above, we direct the AO to give opportunity to the assessee to file tax credit certificates and accordingly, consider the claim of assessee afresh. This issue of assessee s appeal is allowed for statistical purposes.

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• 2022 (4) TMI 1074
  Penalty u/s 271(1)(c) - proof of contravention of provisions provided under explanation 5A to section 271(1)(c) - in response to the notice issued u/s 153A assessee also filed return of income under the provisions of section 139(4) - HELD THAT:- There is no dispute to the fact that the penalty in the instant case was levied under explanation 5A to section 271(1)(c) of the Act which is applicable to the particular assessment years - it is applicable for the search conducted on or after 1st day of June 2007 with respect to the previous year which has ended before the date of search and the income found in the search was not disclosed in the return of income filed by the assessee or the due date for filing the return of income was expired but the assessee has not filed the return of income. Whether the case of the assessee falls under clause b as discussed above i.e. the time-limit for filing the return of income for the relevant previous year has expired and the assessee has not filed the return of income ? - The answer stands in negative. It is for the reason that the assessee admittedly has furnished the return of income within the due date as specified under the provisions of section 139 of the Act. In fact, there are different dates provided under section 139(1) of the Act for filing the returns of income. For example, there are different dates for filing the return of income under section 139(1) of the Act depending upon the status of the assessee, turnover of the assessee etc. Likewise, under the provisions of section 139(4) of the Act, there is extended time available for filing the return of income even the time specified under section 139(1) of the Act has expired. On reference to the provisions of explanation 5A to section 271(1)(c) of the Act as discussed above, it is imperative to note that the word due date has been mention and not the due date as specified under the provisions of section 139(1) of the Act. Thus to our understanding, even the assessee files the return of income during the extended time provided under section 139(4) of the Act, it shall be interpreted as if the return of income has been filed within the due date. Thus we hold that the assessee has not contravened any of the provisions provided under explanation 5A to section 271(1)(c) of the Act so as to attract the provisions of penalty on account of concealment of income. Accordingly we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is hereby allowed. Addition of cash and jewellery found during the search u/s 132 - HELD THAT:- Additions made by the AO in the assessment framed under section 143(3) of the Act has already been offered to tax before the settlement commission as evident from the finding of the learned CIT-A as discussed above. At the time of hearing the learned DR has not controverted the finding given by the learned CIT-A. Accordingly, we hold that there cannot be any addition in the year under consideration for the amount of income as discussed above otherwise it would lead to the double addition which is unwanted under the provisions of law. Accordingly, we do not find any infirmity in the order of the learned CIT-A and therefore we decline to interfere in his order. Hence the ground of appeal of the Revenue is hereby dismissed.

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• 2022 (4) TMI 1073
  Service charges for quality audit of the bottlers - allowable business expenditure u/s 37(1) - test of `wholly for the purpose of the assessee s business - word of `exclusively as a sine qua non for allowing deduction - HELD THAT:- This very issue has been examined by the Tribunal in its order for A.Y. 1997-98 [ 2019 (9) TMI 300 - ITAT PUNE] and a decision has been rendered that such expenses are allowable in terms of section 37(1) of the Act. Albeit there is a massive force in the contentions of the ld. DR, but we do not wish to accord our imprimatur to the same by disturbing the consistency of the Tribunal s conclusion on the issue because the matter is already sub judice before the Hon ble High Court. Respectfully following the Tribunal order for the immediately preceding year, we hold that the disallowance of service charges paid by the assessee to CCI Inc. at 25% is unwarranted. The same is, ergo, directed to be deleted. The only issue raised in the cross appeals for the assessment year 1999-2000 is about the extent of deductibility of service charges paid by the assessee to CCI Inc. For this year also, the assessee claimed deduction of service charges after adjustment of certain debit notes with the gross amount - AO, following the parity of reasoning given for the earlier years, disallowed the full amount of service charges. The ld. CIT(A), however, restricted the disallowance to 30%. Both the assessee as well as the Revenue have come up in cross appeals on their respective stands. The rival parties fairly conceded that the facts and circumstances of the appeals for the instant year are mutatis mutandis similar to those of the preceding year, which was argued by them at length. In fact, the parties simply adopted their arguments made for the assessment year 1998-99[ 2019 (9) TMI 300 - ITAT PUNE] . The only distinguishing feature brought to our notice was that the assessee did not carry out any bottling activity in the instant year. Having regard to the fact that there is no distinction in the facts and circumstances of the case qua the Service charges paid by the assessee to CCI Inc., following the view taken by the Tribunal for the preceding years, we direct to allow the deduction for service charges in full. At the cost of repetition, it is once again made clear that the deduction is being allowed so as to maintain consistency in the view of the Tribunal as the matter is sub judice before the Hon ble High Court notwithstanding the fact that the Department has a good arguable case. Appeal of assessee allowed.

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• 2022 (4) TMI 1072
  Levy of penalty u/s. 271(1)(C) - excess expenses disallowed - Authorities below rejected the reasonable explanation offered by the assessee that the assessee had not concealed any income and had declared the entire income and the addition made was due to mistake committed by the chartered accountant who had been engaged by the assessee and consequently there was no concealment - HELD THAT:- Under Section 271(1)(c), two faults or omissions exposes the assessee to concealment penalty i.e. concealment of particulars of income and furnishing inaccurate particulars of such income. Assessee has admitted before the AO that the new auditor appointed, had pointed out certain mistakes in the expenses claimed by the assessee and submitted the revised computation correcting the wrong claim work-in-progress as expenditure. This fact is being confirmed by the AO in the assessment order. Assessee has filed a complaint before the Institute of Chartered Accountants of India against the auditor who had filed the original return of income of the assessee. In our considered view, in the instant case, what has emerged is that the assessee, having realised that the expenditure claimed was not tenable as pointed out by the new auditors, offered the amounts expended to be added to the income and, accordingly, paid the requisite tax. This was not a case in our opinion, where, the assessee could be said to have either concealed particulars or furnished inaccurate particulars of the income. It was, essentially, a case, where, an untenable claim for deduction of work-in progress had been made and that too based on the advice of a professional, i.e., Chartered Accountant. The explanation to section 271(1) provides that the penalty under subsection (c) is leviable when the person fails to prove that the explanation of facts is bona fide. In assessee s case the wrong claim of the expenditure is not intentional and is based on a wrong professional advice. The fact that once the assessee is pointed out the error, the assessee has admitted the same before the AO and paid taxes is proof enough that there is no intentional concealment. The coordinate bench of the Tribunal is assessee s own case [ 2022 (1) TMI 330 - ITAT BANGALORE] has examined the claim of the assessee with regard to wrong professional advice and had deleted the penalty u/s.271B stating that it is a reasonable cause . The assessee in the present appeal also contending the levy of penalty on the same premise that the assessee was under the bona fide belief that the accounts are maintained properly by the auditor and that there is no intention to conceal the income. In our view therefore, the ratio laid down by the coordinate bench of the Tribunal is applicable in the present case of the assessee. The delay in furnishing the revised computation is also considered by the coordinate bench of the Tribunal where the Hon ble Tribunal has taken cognizance of the fact that severing relationship with earlier CA might take time. We are of the view that the claim of the expenditure by the assessee is bona fide and accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to delete the penalty levied u/s 271B(1)(c) for the year under consideration. Appeal of assessee allowed.

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• 2022 (4) TMI 1071
  Disallowance of additional depreciation - Extending benefit of initial depreciation to the power sector - HELD THAT:- We find that in terms of the provisions of Sec. 32(1)(iia), in case of any new machinery or plant (other than ships and aircrafts) which has been acquired and installed after 31.03.2005 by an assessee engaged in the business of any article or thing, a further sum equal to 20% of actual cost of such machinery or plant shall be allowed as deduction. However, the benefit of such provisions has been extended to power sector by Finance Act, 2012 by insertion of the words or in the business of generation or generation and distribution of power under these provisions with effect from 01.04.2013 As decided in MR. M. SATISHKUMAR, [ 2012 (11) TMI 215 - ITAT CHENNAI] we are of the considered opinion that generation of electricity is a manufacturing activity. The assessee is involved in the manufacturing activity and fulfils the conditions as laid down under section 32(1)(iia). The Government vide Finance Act, 2012 has amended the provisions of section 32(1)(iia) to include the business of generation or generation and distribution of power, eligible for benefit under section 32(1)(iia). Although the said amendment is with effect from April 1, 2013 but it gives impetus to the view that generation of electricity is a manufacturing process and qualifies for the benefits under section 32(1)(iia). In view of the above, the order of the Commissioner of Income-tax (Appeals) is upheld and the appeal of the Revenue is dismissed being devoid of merit. The revenue has relied upon the decision of coordinate bench of Tribunal in assessee s own case for AY 2011-12 wherein the coordinate bench has confirmed the stand of Ld. CIT(A) on the ground that the business of generation, transmission or distribution of power was brought within the ambit of Section 32(1)(iia) of the Act, by the Finance Act, 2012 w.e.f. 01.04.2013 i.e., from the assessment year 2013-14. Another finding as rendered by the bench is that it is not the case of the assessee that the assessee is claiming the additional depreciation with respect to its manufacturing activities. We find that so far as the first finding is concerned, the same is not in accordance with the cited decisions of Hon ble High Court of Madras M/S. VTM LIMITED [ 2009 (9) TMI 35 - MADRAS HIGH COURT] . However, the second finding is vital one and the same would require concrete findings by the lower authorities. It has been observed by the bench that it is not the case of the assessee that the assessee is claiming the additional depreciation with respect to its manufacturing activities. If this finding is correct, the assessee would certainly be not eligible to claim additional depreciation in view of the fact that the assessee is engaged in manufacturing and selling of windmills. On the other hand, if the same run contrary, the assessee would be eligible to claim the depreciation in terms of aforesaid decisions. Therefore, we set aside the impugned order and restore the matter back to the file of Ld. AO to render a finding on the aspect that the additional depreciation was with respect to assessee s manufacturing activities. If this fact is established, the assessee would be eligible to claim the additional depreciation otherwise not. The assessee is directed to file requisite details and substantiate its case. Appeal stand allowed for statistical purposes

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• 2022 (4) TMI 1070
  Claim of deduction u/s.10A 10B - denial of claim as assessee company had not obtained further approval and ratification from Board in order to avail the exemption of income u/s.10B - HELD THAT:- As in the case of the assessee, the green card by the Software Technology Park of India has been granted on 26.08.2005 recognizing the unit of the assessee as 100% EOU for Computer software. Therefore, the approval is in accordance with the provisions of section 10B. Hence, the assessee cannot be denied deduction u/s.10B on the ground that assessee has not got approval from Board appointed by the Central Government u/s 14 of Industrial (Development and Regulation) Act, 1951. We noted from the arguments of assessee that the assessee is a 100% export oriented company engaged in manufacture and export of Computer software. The unit of the assessee company has been approved under the STP scheme of the Government of India as a 100% Export Oriented Unit (EOU) for Computer software. The assessee has also been allotted the green card by the Software Technology Park of India. We are of the view that the Ld.CIT(A) has rightly allowed the claim of deduction u/s.10B of the Act as the alleged approval by Board, the powers have been delegated in regard to approval of 100% EOU to the Development Commissioner and accordingly, the assessee being a 100% EOU is approved by the Development Commissioner. We confirm the order of the Ld.CIT(A) and this issue of Revenue is dismissed. Alternate claim allowed by the Ld.CIT(A) on the claim of deduction u/s.10A of the Act. Since, the claim of deduction u/s.10B of the Act is allowed, we need not to adjudicate the alternate claim as adjudicated by the Ld.CIT(A), because, that has become academic. Thus, these two appeals filed by the Revenue are dismissed.

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• 2022 (4) TMI 1069
  Revision u/s 263 by CIT - As per CIT AO has wrongly adjusted carry forward business loss and unabsorbed depreciation loss while passing the assessment order for A.Y. 2010-11 - HELD THAT:- We find that the ld. CIT relied on various judgments holding that when the AO did not make proper enquiry and accepted the return income of the assessee, the revision order u/s. 263 is justified. On perusal of assessment order u/s. 143(3) of the Act, we observe that there is no discussion in this regard to the points raised by the ld. CIT in the impugned order. We observe that the ld. CIT in the impugned order has categorically held that the AO has not made any enquiry, inter alia, directed the AO to make fresh assessment When Findings of the ld. CIT was confronted to ld. A.R. of the assessee that whether the AO has conducted any enquiry on the above aspects, no satisfactory reply was forthcoming. From the above, we observe that the Assessing Officer has not made any enquiry and examination of the matter. We also observe that the CIT has directed the AO to make proper enquiry and pass fresh assessment order after giving due opportunity of hearing to the assessee. Hence, we do not find any infirmity in the order of the ld. CIT, which is hereby confirmed - Decided against assessee.

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• 2022 (4) TMI 1068
  Difference in receipt as shown by assessee and 26AS statement - assessee submitted that since it was an ex-parte assessment order, therefore, efforts to reconcile the above could not be achieved - HELD THAT:- On due consideration of the above fact, we find force in the contention of the ld. Counsel for the assessee. We remit this issue to the file of the ld. Assessing Officer for re-adjudication. Ld. Assessing Officer would determine whether there is actual difference in the total receipts which has element of income. The assessee is directed to submit the complete details for establishing the nexus. Different expenditures debited by the assessee in the accounts under eight Heads - Since no details were submitted in support of these expenditures, AO made ad hoc disallowance at 25% of the total expenditures - HELD THAT:- We are of the view that there is no dispute that whenever a disallowance is to be worked out on the basis of an estimation, then some guesswork will always be involved. In the present case nature of expenses are salary wages, staff welfare expenses, travelling, telephone, etc. There might be some element of personal nature in some of the expenditure. But again that element would not be estimated at 15%, because certain expenditure namely demurrage to Railway, advertisement, salary wages are of such a nature, where no element of personal nature could be worked out. Therefore, after taking into consideration the totality of expenditure, we direct the Assessing Officer to work out a disallowance at 10% of total expenditure, as confirmed. Addition u/s 40(a)(ia) - assessee failed to detect the TDS on the rent paid - assessee submitted that rent was paid to Railways i.e. almost to the Government Undertakings and this recipient must have recognized those receipts as their income and if the recipient has recognized the receipts as their income, then no disallowance is to be made on the basis of that TDS was not deducted - HELD THAT:- We are of the view that ld. Assessing Officer has statutory powers to call for such details from the recipients. It will be very difficult for the assessee to collect the details from the Government Undertakings and then submit it to the ld. Assessing Officer. Therefore, we do not find force in this contention of ld. CIT(DR). We set aside this issue to the file of the ld. Assessing Officer for fresh adjudication. The Assessing Officer shall exercise his statutory powers to direct the recipients to submit the requisite details, which can be verified by him, i.e. whether the rental receipts in their hands suffered tax or not. After recording a specific finding to this effect, he will re-adjudicate this issue whether any disallowance is called for under section 40(a)(ia) or not. Appeal of the assessee is allowed for statistical purposes.

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• 2022 (4) TMI 1067
  Disallowance u/s 40(a)(ia) - assessee s claim for deduction of construction expense that were payable by the assessee whether or not the 2nd proviso to Section 40(a)(ia) of the Act is to be given a retrospective effect? - disallowing the construction expenses on the ground that no taxes were deducted at source from contractual payments related to said expenses despite the fact that the partnership firm which received the said payments (i) had furnished its return of income for the year u/s. 139(ii) had taken into account aforesaid payment in the computation of income in such return and (iii) had paid tax due on the income declared by it in the said return - HELD THAT:- We find that the issue is settled in PERFECT CIRCLE INDIA PVT LTD [ 2019 (1) TMI 1532 - BOMBAY HIGH COURT] held as the insertion of the 2nd proviso to section 40(a)(ia) of the Act was declaratory and curative in nature, therefore, the same would have a retrospective effect from 01.04.2005 i.e., the date of insertion of Section 40(a)(ia) - even in absence of the 2nd proviso to Section 40(a)(ia) of the Act, had held, that where a payee had already paid the tax, then, in such circumstances, the payer/deductor can only be asked to pay the interest qua the delay in depositing of the tax - See M/S. HINDUSTAN COCA COLA BEVERAGE PVT. LTD VERSUS COMMISSIONER OF INCOME TAX [ 2007 (8) TMI 12 - SUPREME COURT] As in the present case before us, the payee, viz. M/s. BRED had duly included the aforementioned amount in its return of income that was filed within the stipulated time period and had paid the taxes on the same, therefore, the said amount could not have been disallowed under section 40(a)(ia) in the hands of the assessee. In order to support her claim that having cumulatively satisfied the conditions contemplated in the 1st proviso to Section 201(1) of the Act, she could not be held as an assessee-in-default, the assessee had placed on our record a certificate dated 29.11.2017 in Form No. 26A from a Chartered Accountant, evidencing the fact that the payee, viz. M/s. BRED had included the aforementioned amount of Rs. 29,00,838/- (supra) in its return of income for the year under consideration that was e-filed on 15.09.2012 and had paid the corresponding taxes on the same. Thus we are of the considered view, that the assessee having cumulatively satisfied the conditions contemplate in the 1st proviso to Section 201(1) of the Act, thus, could not have been held as an assessee-in-default, and resultantly, the aforesaid amount in question could not have been disallowed under Section 40(a)(ia) - Decided in favour of assessee.

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• 2022 (4) TMI 1066
  Excess sugar cane price paid to the Members and Non-members - Sale of sugar cane at concessional rate to the Members - HELD THAT:- We find that the same issues have been adjudicated in the case of Karmaveer Shankarrao Kale Sahakari Sakhar Karkhana Ltd [ 2020 (12) TMI 1330 - ITAT PUNE] both the issues i.e. excess sugar cane price paid to Members and Non-members and the issue of sale of sugar at concessional rate to Members is remanded to the file of the ld. A.O for fresh adjudication for the purpose of giving effect to the directions of the Hon ble Apex Court in its proper perspective. A.O shall comply with the principles of natural justice and adjudicate the issues as per law. The grounds of appeal raised by the assessee in both the appeals are therefore, allowed for statistical purposes.

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• 2022 (4) TMI 1065
  Assessment of trust - Computation of income and income as computed by CPC - excess application of income - additions were on account on non-compliance of the provisions of the Act and therefore, the exemption as applicable to Trust on this income would not be available to the assessee - CIT(A) noted that the assessee itself filled Column 5(vi) amount disallowable u/s 11(1) r.w.s. 40(a)(ia) and then failed to disallow the same - HELD THAT:- To compute the application of income, the disallowance as mentioned in Sec.40(a)(ia) or Sec.40A(3) / (3A) shall be added back and not considered as application of income. After perusal of Form No.10B as placed on record, it could be seen that the assessee has applied an amount for the purpose of charitable trust. However, as per Explanation-3 to Sec.11(1), the disallowance u/s 40(a)(ia) would not be considered as application of income. Thus, the amount which has been applied for charitable purposes would be differential amount. The assessee has earned income of Rs. 5,17,39,216 out of which an amount of Rs. 5,06,87,511/- (as computed above) has been applied for charitable purpose. The balance i.e., Rs. 10,51,705/- would be the income of the assessee since as per Form No.10B, the assessee has not set-apart any amount for application is subsequent years. This income is the same which has been computed by the assessee in its computation of income and paid taxes thereon. Therefore, correctly applying the provisions of law, the assessee s income is to be computed as Rs. 10,51,705/-. Merely because there is mistake in filing the corresponding columns in the return of income, the same would not result into enhancement of the assessee s income. Therefore, we direct CPC to rectify the intimation and compute the income as Rs. 10,51,705/- as offered by the assessee to tax. We order so.

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• 2022 (4) TMI 1064
  Revision u/s 263 by CIT - AO allowed set off of brought forward business loss under section 115JC - HELD THAT:- AO has taken contrary interpretations of Total Income , whereas he has arrived at a NIL total Income under the Normal Computation method after setting off of the brought forward losses with the net profits. However for AMT computation, the AO adopted a position that Total Income means net profits and he has computed the Alternate Minimum Tax (AMT) on net profits without setting off with the brought forward losses. Section 115JC stipulates that the Alternate Minimum Tax (AMT) would need to be computed only on the Total Income of the Appellant. Further section 2(45) defines Total Income is to be computed after giving effect to the provisions of the Act which includes section 72 of the Act which stipulates that brought forward losses is to be set off with the net profits. Section 139(1) stipulates that the assessee has to furnish the return of income in the prescribed form and verified in the prescribed manner after setting forth such other particulars as may be prescribed. In this regard the Appellant has furnished a copy of its return of income (ITR-4) filed wherein it is seen that in Part 8 - TI Computation of Total Income of the Income Tax Return Form, the Total Income is computed after setting off of the brought forward losses with the income. Further on a perusal of Schedule AMT in the Income Tax Return Form ITR-4, AMT is computed only on Total Income. Further Schedule AMT in ITR-4 mentions that the Total Income figure is to be adopted from item 13 of Part 8-TI of the Return i.e. Total Income figure computed after setting off of the brought forward losses with the net profits. Given the above, it is clear that AMT is to be computed on Total Income and that the Total Income is to be computed after setting off of the brought forward losses with the net profits. Hence the AO is directed to compute the Alternate Minimum Tax (AMT) on Total Income after setting off of the brought forward losses with the net profits as stipulated under section 115JC. CIT(A) has rightly decided the issue of computing total income after set off of brought forward losses with the net profit as stipulated under section 115JC of the Act and therefore, no interference is warranted. Accordingly, the ground raised by the Revenue is dismissed.

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• 2022 (4) TMI 1063
  Disallowance of administrative and selling expenses - assessee s accounting method - AO proceeded to disallow the entire administrative and selling expenses debited in the profit and loss account by the assessee and claimed as deduction and added the same to closing work-in-progress of the construction project in progress - HELD THAT:- As decided in own case assessee has regularly and consistently been following the said method of accounting as per the provisions of section 145A - AO has not assigned any cogent reason as to why the method, which has been consistently followed by assessee and accepted by the department in past as well in succeeding assessment years and which is in accordance with the recognized principles of accounting by ICAI, is being rejected. In our view, the action of the Revenue Authorities in rejecting the assessee s accounting method, without assigning any reason is not justified. The accounting method followed by the assessee and thereby excluding the indirect expenses such as office employees salary, administrative expenses and marketing selling expenses is as per the recognized principles of accounting and as such the claim of the assessee deserves to be allowed. We hold accordingly. The additions made by the lower authorities on this issue are hereby ordered to be deleted. Case of the assessee is on better footing as the assessee was carrying out different projects though at the same location, hence it was not a case of single project. Even otherwise the resultant income from the project is a loss even after capitalisation of expenditure by the AO to work in progress. Hence, there is no tax implication, so far as the year under consideration is concerned and the loss otherwise also has to be carried forward. Under such circumstances, it cannot be said that the assessee has adopted the above stated accounting method to avoid tax on income for the year under consideration. The assessee, thus, has followed the accounting method which has been consistently followed by it and which is as per the recognized principles of accounting. - Decided against revenue. Taxability of interest of income on fixed deposits - HELD THAT:- Admittedly, the surplus funds had been generated by the assessee out of its business. Hence, it could be safely concluded that the monies generated by the assessee were from its business and hence, only the business funds has been parked with the bank in the form of fixed deposits which had eventually yielded interest income. Admittedly, the business of the assessee had already commenced in as much as the construction activity had been started by the assessee and the cost incurred thereon were included in the closing work in progress in the balance sheet. Only, in view of the fact that assessee is following the project completion method for recognition of revenue, there is no income from construction activity disclosed by the assessee in the profit and loss account. This does not mean that assessee had not commenced its business. In fact the assessee is given an option either to follow percentage completion method or project completion method for recognition of Revenue from construction projects. The assessee had made fixed deposits with banks and derived interest income thereon only to recover the interest expenditure paid by it on the loans borrowed by it for the purpose of business. Hence, the interest income squarely partakes the character of business income. Admittedly, the business income from construction projects would be offered in the year of project completion of the project followed by the assessee. This interest income would go to reduce the closing work in progress of construction project carried out by the assessee, which has been done by the assessee in the return of income. Hence, no fault could be attributed in the accounting treatment and the income tax treatment given by the assessee. Also find from the perusal of the balance sheet that similar interest income has been earned by the assessee in A.Y.2014-15 also for which no addition was made by the ld. AO. Hence, even going by the principle of consistency when there is no change in the facts and circumstances of the case as has been held by the Hon ble Supreme Court in the case of Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] the interest income earned on fixed deposits in the instant case would only go to reduce the cost of construction of closing work in progress and cannot be taxed separately as income from other sources. - Decided against revenue.

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• 2022 (4) TMI 1062
  Income accrued in India - treatment to management fee and IC Labour Charges as fee for technical services/fee for included services - FTS / FIS - inclusion of managerial services within the scope of FTS/ FIS - taxability of management fee received by the assessee on account of management support services rendered to Everest India under the provisions of the Act and/or under India-USA DTAA - DR strongly relied on the order of the CIT(A) / AO and submitted that the management services rendered by the assessee to Everest India fall within the scope of the definition of FIS under the India-USA DTAA as these services satisfy the make available requirement enabling Everest India to make use of these services on its own in future - HELD THAT:- As considering the services provided by the assessee (listed above), in our view, these are not technical services nor do they require any technological knowledge, skill or experience. There is no transfer of technology involved. Everest India is not enabled to apply any technology on its own without recourse to the service provider i.e. the assessee. These services have not resulted in any enduring benefit to Everest India by way of any knowledge which could be applied by it on its own in future without depending on the assessee. These are general managerial services which are received by the assessee on recurring basis. Therefore, the test laid down under Article 12(4)(b), in our considered view, are not satisfied in the present factual scenario. Thus, management fee received by the assessee from Everest India is not taxable as FIS under the provisions of India-USA DTAA. Accordingly, this ground is allowed in favour of the assessee. Taxability of IC Labour Charges received by the assessee on account of supply of manpower to Everest India under the provisions of the Act and/or under India-USA DTAA as FTS/FIS - HELD THAT:- Admittedly, the manpower is supplied by the assessee under an Inter-Company Sharing Agreement. Under this agreement, if any group entity is in shortage of a manpower resource, any other group entity which has excess manpower resource lends the same and in consideration charges 60% of standard fee rate of employee lent to compensate itself for the salary cost of the employee lent. The assessee does not satisfy the make available requirement as per the provisions of Article 12(4) of the India-USA DTAA so as to make it taxable in India as FIS. This is for the reason that there is no rendition of technical or consultancy services by the assessee through the supply of manpower which has enabled Everest India to apply any technical knowledge, experience, skill, know-how on its own without the recourse to the manpower supplied by the assessee. The agreement is continuous in nature and the lending entity is free to withdraw the manpower resource if it requires the resource for its own business. The objective of agreement is not to make Everest India self equipped/self sufficient for future. Accordingly, in our view, the IC Labour Charges received by the assessee from Everest India are not taxable as FIS under the provisions of Article 12(4)(b) of the India-USA DTAA. Hence, this ground is allowed in favour of the assessee. Addition on account of miscellaneous services rendered to third party clients - These services comprises of two components i.e. access to published research reports by subscribing to the same and customized research advisory - HELD THAT:- By allowing access to database what assessee grants to customers is only a right to use a copyrighted material (i.e. published report). The assessee does not grant the right to use the copyright. Hence, consideration (subscription fee) received by the assessee is not taxable as royalty under the provisions of Article 12(3) of the India-USA DTAA. Similarly in customized research advisory services the assessee is providing only advisory services through emails or presentations. The output of custom research advisory is not provided through subscription mode or data base access mode and, therefore, the question of access to data base does not arise at all. Further there is no transfer of any copy right to the customers. Thus, the considerations received by the assessee towards customized research advisory services are not taxable under the head Royalty. This ground of appeal is allowed. Levy of interest under section 234B and 234C - HELD THAT:- It is worth noting that the Ld. CIT(A) has himself not levied interest under section 234B/C for AY 2011-12 and AY 2012-13. Respectfully following the judgment of the Hon ble Supreme Court in ZTE Corporation [ 2021 (7) TMI 1336 - SC ORDER] this ground of appeal is allowed.

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• 2022 (4) TMI 1061
  Income deemed to accrue or arise in India - Receipt towards software license fees as Royalty within the meaning of Article 12 of the India-Netherlands Double Taxation Avoidance Agreement - HELD THAT:- While dealing with the identical issue in the case of the assessee for the A.Y. 2013-14 has observed that the appellant company granted the software license fee on non-exclusive non-transferable basis during the license term. While deciding the issue in favour of the assessee the Tribunal found that the subject software is standard software not customized software. The title, the ownership and all rights in patents, copyrights and trade secrets and other software contained does not get transferred to the customer. The Courts as well as OECD commentary on Article 12 of the DTAA recognized the distinction between copyrighted article and copyright right in the programme and software which incorporates a copy of the copyrighted programme. Any payment made for acquisition of copy of the software is held not to be Royalty. In the light of the judgment of Hon ble Supreme Court [ 2021 (3) TMI 138 - SUPREME COURT] and respectfully following the decision of the Tribunal [ 2022 (1) TMI 281 - ITAT PUNE] for the immediately preceding assessment year, we hold that fee for grant of software license cannot be taxed in India. Since we have held that the subject transaction of receipt of consideration for grant of software license is not Royalty under the provisions of Income Tax Act, 1961, the question of considering under the provisions as per DTAA between India and Netherland does not arise. Thus, ground of appeal No.1 filed by the assessee stands allowed. Direction of the DRP directing the A.O to bring to tax software maintenance, consulting service fees, Training fees, other services within the meaning of Article 12(5)(a) of the India and Netherland Treaty - D.R.P held that the receipts of the assessee from software maintenance fees, consulting services, training fees and other services are chargeable to tax as fee for Technical Services as per Article 12(5)(a) of India and Netherland treaty - Assessee submitted that the question of treating the above consideration as fees for technical services does not arise as the consideration received towards software licence fees cannot be considered as Royalty as per para4 of Article 12 of DTAA. - HELD THAT:- In the absence of any distinguishing facts and respectfully following the precedent, we hold that software maintenance fees, consulting service fees, and other services cannot be held to be Fees for technical services . Short credit of deduction of tax at source - HELD THAT:- This ground of appeal is restored to the file of the A.O with a direction to allow tax as per information contained in form No. 26AS. Thus, this ground of appeal is allowed for statistical purposes.

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• 2022 (4) TMI 1060
  Late payment of Employees contribution to EPF and other Welfare Funds - no payment till the due date, mentioned in the respective Acts, but before the due date of filing return of income u/s. 139(1) of the Income Tax Act - HELD THAT:- As relying on RAJA RAM [ 2021 (11) TMI 370 - ITAT CHANDIGARH] additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s. 139(1) under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.

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• 2022 (4) TMI 1059
  Reopening of assessment u/s 147 - link between the tangible material and the formation of the reasons to believe that income had escaped assessment - bogus sales which escaped to tax in the hands of the Assessee - HELD THAT:- Demonstration of link between the tangible material and the formation of the reasons to believe that income had escaped assessment is necessary for reopening the case u/s 147/ 148 of the Act and the information received from the Investigation Wing cannot be said to be a tangible material per se without further inquiry being undertaken by the AO. The conclusion of the AO, based on the investigation report indeed is a borrowed satisfaction. The Hon ble High Court in MEENAKSHI OVERSEAS PVT. LTD. [ 2017 (5) TMI 1428 - DELHI HIGH COURT] also held that it is established principle of law that if a particular authority has been designated to record his/her satisfaction on a particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be independent and not borrowed or dictated satisfaction Admittedly in this case, the AO while recording reasons for selection of the case, neither made any enquiry qua the information dated 14.03.2017 of the ADIT, Investigation, Faridabad nor made any effort to find out the veracity and authenticity of information and any corroborative evidence/material thereto, but only acted on the information while forming belief qua escapement of the income and initiation of proceedings u/s 147/148 of the Act, without connecting tangible material and the formation of the reasons to believe for escapement of income. The reasons recorded in the instant case are vague and based on un-substantive reasoning, uncorroborated material and lack of evidence and hence as per decisions of the jurisdictional High Court referred above, the reasons referred above tantamount to be based on borrowed satisfaction and according to our considered view, does not sound valid reasons in the eyes of law, for reopening of the case. CIT(A) without appreciating the facts of the case, explanation submitted and evidences places on record judiciously, was absolutely unjustified in upholding the reopening of the assessment u/s 147 of the Act. Consequently the order under challenge whereby the addition made by the AO has been sustained by the Ld. CIT(A) along with the re-assessment order stands quashed. - Decided in favour of assessee.

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• 2022 (4) TMI 1058
  TP Adjustment - Interest on extended credit to AE - assessee granted extended credit periods to non-AEs without charging any interest on delayed payments - Legality of not charging interest while extending credit to its USA-Associated Enterprise for payment of sale consideration by the AE - HELD THAT:- TPO has equated normal trade credit with the loan. The loan invariably and compulsorily will carry interest amount while there was no compulsion in charging trade credit. As per the submissions of the assessee and the observation of the CIT(A), since the AE was having net loss, there was no business consideration to shift profit as there cannot be any tax liability on account of such loss. Before the CIT(A) the assessee demonstrated that it has extended credit profit to non-AE without charging any interest for delayed payment proving that it has been even handed and consistent in this area. There was no adjustment on this issue in the TPO s order for A.Y. 2002-03 2003-04 implying thereby that transaction was held to be at ALT. There is no change whatsoever in the nature of transactions or time thereof. CIT(A) has rightly pointed out that Transfer Pricing regime normally judges the transfer pricing of the tax payer based on the results rather than on the intent to shift income from one side to another. In the normal ALP an element of implied interest would always have been there so as to compensate for the opportunity cost and notional financial cost associated with account receivable/ adjustments so called for. Thus, USD LIBOR rate at that point of time was 1.22% with markup of 80 basis point would be appropriate for determining ALP interest for trade credit which was be charged to the AE. Thus, the CIT(A) granted the partial relief thereby making adjustment at the rate of Rs. 37,50,475/-. But this observation appears to be vague as no period was quantified or verified by the Assessing Officer as well as by the CIT(A) while giving this partial relief. This needs to be verified. Therefore, we are remanding back this issue to the file of the Assessing Officer/Transfer Pricing Officer to verify the period as well as the interest rate which is available at that particular point of time in the open market and as per the practice on. Thus, ground no.1 2 of the assessee s appeal is partly allowed for statistical purpose. Claim of deduction under Section 10A - AO Reduced the consideration in respect of export by expenditure incurred in foreign currency on telecommunications charges - HELD THAT:- The assessee pointed out that the assessee claimed the said amount in the return of income by adjusting both export turnover and total turnover. The assessee relied upon the decision of the Special Bench in the case of ITO vs. Sak Soft Ltd. [ 2009 (3) TMI 243 - ITAT MADRAS-D] . The ld. A.R. relied upon the decision of the Tribunal in assessee s own case for A.Y. 2002-03 - The Hon ble Bombay High Court has also granted relief in A.Y. 2004-05 - Thus, in the light of the decision of the Hon ble Bombay High Court in assessee s own case for A.Y. 2004-05, we follow the same as the factual aspects are identical in this A.Y. i.e. 2005-06 and, therefore, the ground raised in Revenue s appeal is dismissed.

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• 2022 (4) TMI 1057
  Revision u/s 263 - Reopening of assessment u/s 147 - bad debts claim u/s. 36(1)(vii) - HELD THAT:- As relying on THE CITY COOPERATIVE BANK LTD.[ 2017 (9) TMI 1982 - ITAT MUMBAI] we are inclined to allow the claim of the assessee. Moreover, the assessment was originally assessed u/s. 143(3) of the Act and subsequently reopened to examine the same issue. After verification, the Assessing Officer has accepted the contention of the assessee. Once again Ld. Pr.CIT raised the same issue and directs the Assessing Officer to verify the same once again after giving opportunity of being heard to the assessee. Pr.CIT cannot impose his views on the issue which was verified twice and respective Assessing Officer s has taken their view. Considering the sequence of events in our view Ld. Pr.CIT has no jurisdiction to interfere with the completed proceedings otherwise, there is no end to the assessment proceedings. Therefore, the revision order passed u/s.263 is accordingly, set aside. Grounds raised by the assessee are allowed.

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• 2022 (4) TMI 1056
  Revision u/s 263 - Non-disallowance of amount of provision out of provision for IDRF, as an unascertained liability - Excess provision for bad debts claimed u/s 36(1)(viia) - HELD THAT:- We concede with the contention of the Ld AR that, in support of appellant claim as expounded herein there was indeed unvarying and indistinguishable material placed be fore both these tax authorities during the course of regular assessment vis- -vis revisionary proceeding, which in turn demonstrates that, the AO considering the same submission of the assessee carried out enquiry with respect to eligibility of claim, basis of claim and compliance relating thereto(if any) and then finalized the assessment taking one of the plausible view in the light of settled legal position in allowing the deduction u/s 36(1)(viia) and claim of loss on account of diminution in the value of securities / investment reclassification, this evidently concludes that the adjudication squarely fell within aforementioned Queen Principle . Whereas under revisionary proceedings Ld PCIT yet again conducted an enquiry into the claim of the appellant based on the like material and sitting on the same fence displaced with the views of Ld AO and directed for modification of assessment by additional disallowance which is ostensibly impermissible under a law following the ration laid in down by Hon ble Jurisdictional High Court in CIT Vs Gabriel India Ltd. [ 1993 (4) TMI 55 - BOMBAY HIGH COURT] and the Hon ble Apex Court in Malabar Industrial Co Ltd. Vs CIT [ 2000 (2) TMI 10 - SUPREME COURT] - Ergo,in the above context, we find the order of Ld PCIT is unsustainable in law, consequently we set aside the 263 revisionary order and restore the order of assessment passed u/s 143(3). - Appeal of assessee allowed.

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• 2022 (4) TMI 1055
  Disallowance of the employee s contribution to the Employee Provident Fund and Employee State Insurance Fund on account of its delayed deposit with the prescribed authority u/s. 36(1)(va) - HELD THAT:- The view expressed by the Tribunal is in fact in agreement with that projected by the Board per its Circular (No. 22/2015, dtd. 17/12/2015), as also that canvassed per the impugned order with reference to the cited decisions, both explaining, as did the Explanatory Notes on the insertion of s. 36(1)(va) on the statute, the object of the said provision. It is this view, which in fact, as also noticed by the Tribunal, represented the uniform view across all the Hon ble Courts prior to the deletion of the second proviso to s. 43B by Finance Act, 2003, w.e.f. 01/4/2004, which the Explanations to ss. 36(1)(va) and 43B by Finance Act, 2021 seek to statutorily clarify in view of the conflict of judicial opinion, passing thus the test of retrospectivity, even as unequivocally expressed per the unambiguous language thereof. The Explanations under reference were therefore clarificatory and, thus, retrospective. The said Explanations , the Tribunal continued, had however been, as clear from a reference to the Notes on the Clauses to, and the Memorandum explaining the Provisions of, the Finance Bill, 2021, reproducing the same, proposed as prospective amendments. The amendments by way of Explanation 5 to s. 43B and Explanation 2 to s. 36(1)(va), it concluded, are to therefore take effect only from AY 2021-22, and which view is unmistakable on a plain reading of the said documents.. There is, in view of the foregoing, no question of the said Explanations being read as retrospective, so as to apply for the relevant year, sustaining the impugned additions, which therefore fail. This is, however, subject to any decision/s by the Hon ble jurisdictional High Court, which would, where so, hold, even justifying a rectification u/s. 154/254(2), even where rendered after the date of the order sought to be rectified (Asst. CIT v. Saurashtra Kutch Stock Exchange Ltd. [ 2008 (9) TMI 11 - SUPREME COURT ]; CIT v. Aruna Luthra [ 2001 (8) TMI 84 - PUNJAB AND HARYANA HIGH COURT ] No such decision has been found, or otherwise pointed out by the parties, as was the case before the Tribunal in Nikhil Mohine [ 2021 (11) TMI 927 - ITAT JABALPUR ] Any such decision, even if discovered later, may operate to amend this order, or the order giving appeal effect thereto, to bring it in conformity or agreement with the said decision/s, of course, after allowing a fair opportunity of hearing to the assessee. - Decided in favour of assessee.

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• 2022 (4) TMI 1054
  Realignment of profits arising on sale of land parcels - surplus arising on sale of asset - capital gains OR business income - CIT-A granted relief by the CIT(A) with regard to realignment of profits arising on sale of land parcels under the head capital gains as claimed by the assessee - contention of the assessee that mere conversion of land into NA cannot draw adverse inference to the declared intentions - HELD THAT:- The question whether the surplus arising on sale of asset is in the nature of capital receipt or a trading receipt is essentially a question of fact. CIT (A), in our view, has analysed the salient features of the transactions in its natural perspective and has come to a benign conclusion. The declared intentions are supportable by the facts and circumstances of the case and thus cannot be displaced in a light hearted manner merely to deny concessional benefits attributable to such gains. Noticeably, section 2(14) stipulates that property can be capital asset even if connected with business of the assessee. Assessee is entitled in law to hold certain class of assets as capital assets even while he is dealing with the asset of similar type in business with idea of commercial exploitations. Thus, case built by the AO on the grounds of the assessee engaged in business as developer of land would not ipso facto vitiate the nature and character of land holdings declared in a particular manner. The CIT(A), in our view, has come to a rational conclusion having regard to the corroborative evidences placed and conduct of the assessee over a period of several years in the past. Long period of holding, utilization of own funds, near absence of any trading activity on land except conversion of land in question are amongst vital pointers to lend support the declared intentions of acquiring the land as capital investments. Having regard to totality of facts and circumstances existing in the case, we do not see any justifiable reason to diverge from the conclusion drawn in the first appellate order. - appeal of revenue is dismissed.

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• 2022 (4) TMI 1053
  Unaccounted investment u/s 69 - Addition on account of suppressed purchase price of land purchased - HELD THAT:- A glaring mistake was committed by the AO while computing the differential amount between purchase cost shown in purchase deed and market value determined by Stamp Valuation Authority. During search, original purchase deed and photocopies thereof were found and seized and the Assessing Officer inadvertently taken into consideration both the documents i.e. original purchase deed and photocopies thereof treating the same two different and distinct documents. We find that neither the sellers of impugned lands have admitted that impugned lands were sold over and above the amount disclosed in the registered deed nor any incriminating evidence was found and seized during the course of search to corroborate the allegation of the Assessing Officer and only making guesswork on the guideline value of the land and the transaction value, AO presumed that cash transaction was made. AO noted an example in the assessment order that one Mr. Sanjay Sharma sold 18 acres land to Mr. Mukesh Jhaveri and admitted on money receipt - However, having gone through the remand report, the ld. CIT(A) recorded that the assessee firm never purchased any land from Mr. Sanjay Sharma. We are of the view that under Section 69 the onus is on the Assessing Officer to prove that the assessee made some unaccounted investment in purchase of property but in the present case, the Assessing Officer failed to discharge his onus and simply on guesswork, the addition was made. Since the Assessing Officer failed to pinpoint any instance by bringing any cogent and corroborative evidence on record where the assessee is found guilty of making payments to sellers over and above the value shown in the registered deed, the general remarks recorded by the Assessing Officer on the basis of presumption and assumption cannot be the basis for making the addition. Thus, we find that the ld. CIT(A), having made discussion on facts and relevant judicial pronouncements thereof, rightly held that the addition made is not based on any tangible evidence and there are no corroborative evidences in the hands of Revenue to substantiate the allegations of cash transaction - Decided against revenue.

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• Customs

• 2022 (4) TMI 1052
  Refund of IGST - Zero rated supply - HELD THAT:- The Special Leave Petition is dismissed. Pending application, if any, stands disposed of.

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• 2022 (4) TMI 1051
  Refund claim - Exemption from IGST on goods imported under EPCG Scheme - rejection on the ground that Notification No. 33/2015-2020 dated 13.10.2017 of the Ministry of Commerce and Notification No.79/2017-Cus dated 13.10.2017 of the Ministry of Finance under which such imported goods were exempted from payment of IGST, came into force only on 13.10.2017, but the petitioner had filed the bill of entry on 3.8.2017 - exemption of import of such goods from payment of IGST. HELD THAT:- Leave granted.

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• 2022 (4) TMI 1050
  Termination of services - forfeiture of the entire amount of security deposit - Respondent submitted that no show cause notice was issued to Respondent under the CHALR calling upon Respondent to show cause why they should not be held responsible for lack of adherence to Regulation 19(8) of CHALR - HELD THAT:- Mr. Deshmukh could not dispute this fact because if a show cause notice had been issued, it would have been annexed to the Appeal Memo file. Moreover, COC has not explained as to how termination of its temporary employee Mr. Vijay Dixit would amount to lack of adherence to Regulation 19(8) of CHALR by Respondent. There are no justifiable reason to interfere in the Order of Custom Excise Service Tax Appellate Tribunal. The Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then that question as pressed do not raises any substantial question of law - Appeal dismissed.

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• 2022 (4) TMI 1049
  Seeking directions to the respondents to take their responses to the questionnaires on record - seeking consideration of data comprising of the facts and figures stated therein as well as the documents and other materials filed along with the said response before arriving at any finding in the anti-dumping investigation - Order in rem or in personam - HELD THAT:- This Court is of the view that the order dated 4th June, 2021 is an order in personam as the relief had been extended by this Court to enable the petitioners therein (importers) to place information before the Designated Authority and not the petitioners herein (exporters). However, this Court is of the view that since in an anti-dumping investigation, the respondent has to pass a single consolidated order after hearing the exporters as well as the importers and the time limit for filing of objections by the importers had been extended by this Court vide order dated 4th June, 2021 beyond the next date of hearing i.e, 19th July, 2021, no useful purpose would be served by foreclosing the right of the exporters, i.e. the petitioners herein from filing their responses till 21st July, 2021. The responses filed by the petitioners between 25th June, 2021 and 31st July, 2021 are directed to be taken on record subject to the payment of costs of Rs. 1,00,000/- by each of the petitioners to Armed Forces Battle Casualties Welfare Fund - Petition disposed off.

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• 2022 (4) TMI 1048
  Denial of refund of excess BCD alongwith the interest - Amendments in the bills of entry not made - petitioner has paid excess Basic Customs Duty (BCD) against the bills of entry pertaining to the June July 2018 - it is the case of petitioner that due to amendment not carried out in the bills of entry, the refund of excess Customs Duty was denied - HELD THAT:- The respondents, says that the amendment sought by the petitioner in the bills of entry, can only be carried out in terms of Section 149 of the Customs Act, 1962. In this regard, he has drawn our attention to the first proviso appended to the said provision - petitioner, on the other hand, says, as noticed above, the document which would show that the petitioner has paid excess BCD is the exemption notification dated 02.02.2018. The respondents are directed to treat the present writ petition, as a representation and deal with the same - the respondents will grant personal hearing to the authorized representative of the petitioner, and, thereafter, pass a speaking order with regard to the relief sought by the petitioner - petition disposed off.

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• 2022 (4) TMI 1047
  Classification of the imported goods - CCTV cameras - Classified under CTH 8525 8010 as claimed by the appellant or under CTH 8525 8090, as ordered by the authorities below? - HELD THAT:- Upon perusal of the materials placed, which would disclose that the appellant in all the documents placed before the authorities below, have mentioned their imported goods as classified under CTH 8525 8010, this court is inclined to set aside the orders passed by the authorities below for proper verification and are accordingly, set aside. The matter is remitted to the Assessing Officer for considering all the materials and passing orders afresh, on merits and in accordance with law, after providing due opportunity of hearing to the appellant, within a period of four weeks from the date of receipt of a copy of this judgment - appeal allowed by way of remand.

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• 2022 (4) TMI 1046
  EPCG scheme - breach of principles of promissory estoppel - Constitutional Validity of circular - retrospective application of the Circular - vires of Para 5.01(g) of the Foreign Trade Policy 2015-20/Foreign Trade Policy 2009-14 read with the provisions and scheme of the Electricity Act - direction to Respondents to forthwith return/issue EPCG licenses and invalidation letters surrendered by the Petitioners. Whether the policy circular dated 4th January 2019 is only in the nature of clarification so as to have retrospective effect or whether it introduces a new substantive condition in the EPCG scheme which can, if at all, operate only prospectively? - HELD THAT:- It is not in dispute that the para 5.01(g) of the EPCG scheme which was introduced w.e.f. 18th April 2013 only used the term transmission in the prohibited list of activities. Thereafter, by a specific amendment dated 29th January 2016, the generation of electricity was also brought within the ambit of negative list of activities. Even then there was no reference to the distribution of electricity. Even in the Public Notice No. 47/2015-20 dated 6th December 2017 containing a list of capital goods prohibited under the EPCG scheme, there was no reference to distribution of electricity - It was only in the impugned circular dated 4th January 2019 that for the first time reference was made to distribution of electricity and it was clarified that even distribution of electricity was debarred under the provisions of the EPCG scheme. It is apparent that transmission and distribution are separate activities for the purpose of the Electricity Act and they are distinctly understood by persons such as the writ applicants who are engaged in the business involving supply of electricity - It is well established by a series of judgements that the terms used in fiscal statute are to be interpreted as they would be interpreted by persons engaged in the relevant trade. It thus appears that even the Respondents at the relevant point of time believed that the EPCG licenses could be issued to the persons engaged in the distribution of electricity. Had the respondents raised objection to issuance of the EPCG licenses at the relevant point of time, then the entire issue would not have arisen. Having granted the EPCG licenses to the writ applicants on the basis of their disclosure that the capital goods will be used in distribution of electricity, the writ applicants cannot now be put to prejudice for the past transactions by issuing retrospective circular. Such retrospective circular, apart from being legally fallacious as held herein before, is also manifestly arbitrary and violative of Articles 14 and 19(1) (g) resply of the Constitution in so far as it operates retrospectively. The circular dated 4th January 2019 (annexed at Annexure A) issued by the Government of India is declared and held to be ultra vires Para 5.01(g) of the Foreign Trade Policy 2015- 20/Foreign Trade Policy 2009-14 read with the provisions and scheme of the Electricity Act. It is further declared that the retrospective operation of the circular dated 4th January 2019 is manifestly arbitrary and violative of Articles 14 and 19(1)(g) resply of the Constitution of India - Application allowed.

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• 2022 (4) TMI 1045
  Direction to destuff the cargo from the containers and return the empty containers to the writ applicant - containers filled with cargo declared to be fuel oil in specialized containers referred to as flexi bags - HELD THAT:- This Court finds that considering the nature of hazardous substance lying in the subject containers, it would be appropriate to direct the respondent customs authorities to complete the proceedings as regards the misdeclaration of the imported goods followed by the confiscation order, if any, within a period of 30 days from the date of receipt of this order. It is made clear and as assured by the learned Senior Standing Counsel appearing for the Customs authorities that if no such order is passed within a period of 30 days, the respondent authorities including respondent no.3 herein shall proceed to de-stuff the cargo into any other suitable containers. The respondent authorities including respondent no.3 are at liberty to even auction the imported cargo as proposed in the final notice issued by the respondent no.3 herein under Section 48 of the Act and at the same time, hand over the custody of the empty subject containers to the writ applicant within 15 days thereafter. Present application disposed off.

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• 2022 (4) TMI 1044
  Refund of balance SAD, paid at the time of import - goods were re-sold and on such sale, the rate of VAT/Sales Tax was nil - CBE C Circular No.6/2008 dated 28.04.2008 - HELD THAT:- There is no merits in the grounds of appeal. SAD is applicable at the time of import by way of an equitable levy in lieu of sales tax, so as to protect the domestic industry. Further, the Customs Tariff Act itself provides for refund of SAD on re-sale of the goods. The mechanism of refund has been provided vide notification no.102/2007-Cus, which provides that one of the conditions for refund is that the goods must be re-sold and appropriate VAT/Sales Tax should have been paid. This Tribunal in precedent ruling of the M/S GAZAL OVERSEAS, M/S MAYANK ENTERPRISES, M/S ANAND ASSOCIATES VERSUS COMMISSIONER OF CUSTOMS, NEW DELHI [ 2015 (12) TMI 427 - CESTAT NEW DELHI] has held that the refund of SAD is available even if the rate of VAT/Sales Tax is lower than the rate of SAD or nil. There is no error in the impugned order-in-appeal - Revenue dismissed.

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• Corporate Laws

• 2022 (4) TMI 1043
  Legality of detention/custody of the applicant - detention, post filing of charge sheet - cognizance of the complaint not taken - whether the detention/custody of the applicant i.e. remand orders are illegal, since the Special Court has not taken cognizance of the complaint filed by the SFIO, even after filing of the complaint? - HELD THAT:- The Court can remand an accused person to custody, under sub-section (2) of Section 309, pre and post filing of charge-sheet/complaint. On a plain reading of Section 309, it is evident that the said provision applies to an inquiry or trial . The question is, when inquiry commences within the meaning of sub-section (2) of Section 309 - the issue of taking cognizance has been dealt with by the Supreme Court in a catena of decisions. In a nutshell, the expression taking cognizance means application of mind . Though the expression cognizance has not been defined in the Cr.P.C, several decisions to the effect reveal that taking cognizance does not involve any formal action or indeed action of any kind, but occurs as soon as the Magistrate applies his mind to the suspected commission of an offence. Infact, the common practice is that when a police report is submitted before the Magistrate, it is not necessary that there has to be a formal order of taking cognizance. Infact, an inquiry within the meaning of Section 309(2) may commence before the Magistrate, no sooner than charge-sheet is submitted, so as to vest him with a power of remand under sub-section (2) of Section 309 of the Cr.P.C. In SURESH KUMAR BHIKAMCHAND JAIN VERSUS STATE OF MAHARASHTRA ANR. [ 2013 (2) TMI 821 - SUPREME COURT] , despite the charge-sheet having been submitted and the Magistrate not having taken cognizance of the same, yet, the accused was remanded to custody, post filing of charge-sheet. The arguments of the petitioner in Suresh Kumar was, that on filing of charge-sheet, the Magistrate could not have remanded the accused to custody, without taking cognizance and as the Magistrate was awaiting sanction to be accorded, the accused therein was entitled, as a matter of right, to be released on bail. The question that arose in Suresh Kumar was whether the remand of accused on submission of charge-sheet, without taking cognizance, was sustainable in law - Similar is the situation in the present case. In the instant case, despite charge-sheet having been filed, no cognizance has been taken of the same and the learned Magistrate has continued to pass remand orders, post filing of charge-sheet. In the present case, prima facie, it appears that the accused (non-applicant) in the said case, have been protracting the proceedings. It is always open to an accused to challenge the cognizance taken by the Court, in the event, cognizance is taken by the Court. No doubt, cognizance has to be taken at the earliest, as soon as the the complaint/charge-sheet is filed, ofcourse, unless there are inevitable circumstances resulting in delay in taking cognizance. Considering that the complaint is pending at the pre-cognizance stage from 30th May 2019, the trial Court is directed to decide the issue of cognizance as expeditiously as possible. Application dismissed.

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• 2022 (4) TMI 1042
  Admissibility of Winding up petition filed invoking Sections 433 (e) and (f) of the Companies Act, 1956 - appointment of the Official Liquidator - HELD THAT:- According to the petitioner (the respondent in the appeal), the respondent Company (the appellant in the appeal) is indebted to it for more than 24 million USD. The petitioner had given notice to the Company, as required under Sections 433 and 434 of the Act on 21.01.2015, which was duly served, which was not responded. On these points, there is no dispute. For this reason, the deeming fiction under Section 434 (1) (a) of the Act would come in play and in view of the provision of Section 439 (1) (b) of the Act, the petitioner, whose status is of a creditor, would be entitled to move this Court for winding up of the Company, which it has done. The admission of the winding up petition is not automatic. If the debt is bonafidely disputed and the defence is a substantial one, the Court will not wind up the company. Therefore, before admitting such a petition, it needs to be ascertained by the Company Court, what defence the Company has taken and whether the said defence can be said to be bonafide - The Company Court has, on the basis of the material on record, arrived at satisfaction that, the defence which the respondent Company has taken can not be said to be bonafide. The defence raised by the Company is two fold. Firstly that the documents relied by the petitioner Credit Suisse, Switzerland are not stamped and therefore the Courts in India will not take cognisance thereof and secondly, the S.R.Technics did not have valid license from the Director General of Civil Aviation (DGCA) and therefore it could not have legally maintained the Aircrafts / Engines of the appellant Company and consequently no amount could be said to be payable by the appellant to it and thereby there is bonafide dispute with regard to the said payment. Both the defences raised by the appellant are rejected. At least, they are not accepted as bonafide defence. The admission of the petition therefore need not be interfered with. The stand of the appellant as quoted above would also justify admission of the petition under Section 433 (f) of the Act as well. Appointment of Provisional Liquidator - HELD THAT:- Though no observation for / or against any of the parties in this regard is made, the fact remains that the said pendency has not helped the petitioner in any manner. The appellant claims to be one of the largest passenger carrier in the civil aviation industry of our Country, which by its own stand has carried hundreds of thousands of passengers for all these years without maintenance of its Air Crafts and engines from any service provider with valid license from DGCA. The admission of petition under Section 433 (f) of the Act may become more relevant in this background - Though learned Senior Advocate for the appellant has relied on number of authorities, which are noted above, according to us, in the facts and the findings which are noted above, none of the said authorities would help the appellant. Further, none of the said authorities would make the order of the Company Court, admitting winding up petition and appointment of Official Liquidator as Provisional Liquidator, unsustainable. These appeals are dismissed.

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• 2022 (4) TMI 1041
  Sanction of the Scheme of Amalgamation - Section 232(3) and other applicable provisions of the Companies Act, 2013 - HELD THAT:-Various directions with regard to holding, convening and dispensing with various meetings issued - directions with regard to issuance of notices also issued. It is ordered that in case of any default including any Provisions of Income Tax Act in this respect of the Transferor Companies the Income Tax department, the ROC, West Bengal and all other Statutory Department shall be at liberty to initiate appropriate proceedings against the Transferee Company, which after the sanction of the scheme by this Tribunal is in any case responsible for the liabilities/non-compliance of the Transferor Companies also. Petition disposed off.

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• Insolvency & Bankruptcy

• 2022 (4) TMI 1040
  Direction to Resolution Professional (RP) to complete the process of voting on the resolution plan under consideration - HELD THAT:- It is noted that the Adjudicating Authority vide impugned order dated 14.12.2021 recognised the fact that an application was filed by PNB regarding condoning delay in submission of proof of its claim as is evident in Para 7 (c) of the impugned order, and ordered that the CoC, as it existed on 14.12.2021, shall consider the resolution plan of Loka Properties Pvt. Ltd. There is sufficient reason for the Appellant/PNB to be aggrieved since it had prayed for a position in the CoC with a higher voting share and carrying out of voting without deciding its IA No. 1078/2021 affects its interest. Therefore, it is well within its right to assail the impugned order through the present appeal. A perusal of the impugned order makes it clear that the Adjudicating Authority first considered the application for liquidation filed by the RP on the ground that 270 days period of CIRP had expired on 12.04.2021 and that there was no consensus amongst the members of the CoC for taking further exclusion or extension of the CIRP period, and additionally a resolution plan was under consideration of the CoC vide Adjudicating Authority s order dated 27.10.2021, the application for liquidation was disposed of as not pressed . Thereafter, the Adjudicating Authority considered I.A. No. 922/KB/2021 filed by the one Loka Properties Pvt. Ltd., whose resolution plan was receiving consideration by the CoC, and proceeds to pass an order which can be seen in Paragraph 7(d) of the impugned order, whereby a total exclusion of 245 days has been given in the CIRP period. It is apparent that while certain yardsticks of natural justice and achievement of objective of IBC were being considered in relation to the application of Loka Properties Pvt. Ltd. and SBI regarding consideration of its proposed resolution plan and exclusion of time period from CIRP period, no such opportunity was given to the Appellant which had been pursuing the matter of its revised claim quite diligently. The delay in submission of proof of PNB s claim should be condoned - the RP is directed to consider the documents submitted by the Appellant/PNB as proof of its claim and revise its claim if the documents have merit - appeal allowed - decided in favor of appellant.

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• 2022 (4) TMI 1039
  Seeking discharge of overdue amount of revenue share - agreement for payment of revenue share and operation costs to the Corporate Debtor was done, but the said agreement was not honoured - HELD THAT:- It appears from the Postal Tracking Report that notice to Respondent was duly served on 22.02.2022. But he has neither taken steps nor appeared in person and contested the matter. So, the case is set ex-parte vide order dated 02.03.2022. Since the Respondent did not contest the case and the relief sought by the Applicant/Liquidator appears to be legitimate, and that the liquidation process cannot be delayed, the respondent are directed to discharge the total overdue amount of Rs. 19,57,637/- together with interest @ 6% till the date of realization of dues, within a period of two weeks from the date of receipt of this order. Application disposed off.

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• 2022 (4) TMI 1038
  Extension of time of CIRP as permitted under section 12 of the Code - exclusion of 35 days lost due to the stay granted by the Hon ble High Court - HELD THAT:- In view of the Resolution passed by CoC, this Adjudicating Authority deems it fit to exclude a period of 33 days, as resolved by CoC. Thus, a period of 33 days is hereby excluded. Application disposed off.

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• 2022 (4) TMI 1037
  Liquidation of Corporate Debtor - sections 33(1)(A), 33(2) and 34(1) of the I B Code, 2016 - HELD THAT:- Having regard to the resolutions adopted by the Fifth CoC, and by virtue of the fact that this Adjudicating Authority did not receive any Resolution Plan under Sub-Section (6) of Section 30, this Adjudicating Authority inclines to exercise powers conferred under Sub-Clauses (i), (ii) and (iii) of Clause (b) of Sub-Section (1) of Section 33 of the I B Code, 2016. This Adjudicating Authority hereby orders for liquidation of M/s. Bharani Commodities Pvt. Ltd., the Corporate Debtor herein, which shall be conducted in the manner as laid down in Chapter III of part II of the I B Code, 2016 - Application allowed.

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• 2022 (4) TMI 1036
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Non-Performing assets - existence of debt and dispute or not - application is barred by limitation or not - application is filed by a competent person or not - Creditor-Debtor relationship between the Financial Creditor and Corporate Debtor herein or not? Whether the application is barred by limitation? - HELD THAT:- On perusal of the records, it is found that the Financial Creditor has filed this application on 31.03.2021. The application has been filed within the prescribed period of limitation. Hence the contention taken by the Corporate Debtor regarding limitation has no force - From a reading of Part IV of the application and the documents annexed thereto; wherein it is clearly stated that the loan accounts of the Corporate Debtor in the Federal Bank Limited became NPA on 05.06.2018 and the date of default is also same - this Application is maintainable before this Tribunal. Whether this application is filed by a competent person? - HELD THAT:- The Financial Creditor has the proper authority to file the present application through the Power of Attorney Holder, and the objection raised by the counsel for the Corporate Debtor is merely incongruous, and therefore, holds no water. Moreover, the Assistant Vice President of the Financial Creditor had signed the application as an authorised person of the Financial Creditor with specific authorization letter to file Insolvency Application before this Bench. Hence, the technical objection on the ground of maintainability is only for the sake of objecting and hence stands rejected. Whether there is a Creditor-Debtor relationship between the Financial Creditor and Corporate Debtor herein? - HELD THAT:- There is a Creditor- Debtor relationship between the Financial Creditor and the Corporate Debtor, since the Corporate Debtor admitted that they received money from the Financial Creditor through various documents produced before this Tribunal and the Corporate Debtor has no case that they have repaid the money received from the Financial Creditor - the Corporate Debtor failed to honour the conditions in the restructuring proposal, and thus the restructuring proposal was rejected. From the above it is clear that the Corporate Debtor is not willing to make any payment, instead they want to prolong the payment by filing various cases. As there is a default in the payment of the financial debt, which has been confirmed by them in the counter affidavit that the Financial Creditor paid the money to the Corporate Debtor, we are of the view that the present application filed by the Financial Creditor satisfies all the definitions of Financial Creditor , Default and Financial Debt and qualifies for filing an application under Insolvency and Bankruptcy Code. By mentioning various technical snags, the Corporate Debtor cannot wash its hands in repaying the amount borrowed, which is a financial debt owed by them. Hence, there is a Creditor-Debtor relationship with them. The application filed in the capacity as a Financial Creditor for a financial debt which is recoverable from the Corporate Debtor viz., M/s. Foodco Delicacies India Pvt. Ltd. is a fit case for admission and initiation of CIRP against the Corporate Debtor. The documents produced on record prove the disbursement of various loan facilities by the Financial Creditor to the Corporate Debtor and their failure to honour the payment even after approval of the restructuring proposal - The Corporate Debtor committed default in repayment of the loan amount to the Financial Creditor, and hence its Loan Account was declared as NPA - the existence of debt and default is reasonably established by the Financial Creditor as a major constituent for admission of an application under Section 7(4) of the I B Code. The Application under Sub-Section (4) of Section 7 of I B Code, 2016 is complete in all respects - Application admitted - moratorium declared.

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• Service Tax

• 2022 (4) TMI 1035
  Levy of Service Tax - Business Auxiliary Services - incentives / commission from CRS Developers (Centralized Reservation System) received for booking of tickets through the computerized reservation booking system offered by the said companies - HELD THAT:- The Larger Bench in the case of KAFILA HOSPITALITY TRAVELS PVT. LTD. VERSUS COMMISSIONER, SERVICE TAX, DELHI [ 2021 (3) TMI 773 - CESTAT NEW DELHI] has held that the said incentive is not subject to levy of service tax. The demand cannot sustain - Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2022 (4) TMI 1034
  Denial of Input Tax Credit - spare parts of loader and tipper - denial of credit on the ground that loader and tipper are vehicles - integral part of manufacturing process or not - HELD THAT:- The facts are not in dispute that tipper and loader are said to be used captively within the mining area. After mining/extraction, the boulders are shifted to the stone crushing plant with the help of tipper and after which the boulders are loaded on the hopper of the stone crushing plant by the loader. The Hon ble Supreme Court in the case of CHOWGULE CO. PVT. LTD. VERSUS UNION OF INDIA [ 1980 (11) TMI 61 - SUPREME COURT] has held that if any machinery or vehicle is used for carrying from mining site to the place of processing, which covers for inclusion in the registration certificate, as without which the entire operation of mining and processing work cannot be done and is to be treated as one integral process. Further, this Court in the case of THE COMMISSIONER, COMMERCIAL TAX, LKO. VERSUS S/S ANAND TYRES, JHOKHAN BAG, JHANSI [ 2015 (2) TMI 430 - ALLAHABAD HIGH COURT] , while considering the issue as to whether hydraulic excavator is machinery or a motor vehicle, has held that hydraulic excavator will come within the purview of machinery . The Hon ble Supreme Court in the case of BOSE ABRAHAM VERSUS STATE OF KERALA AND ANOTHER (AND OTHER APPEALS) [ 2001 (2) TMI 890 - SUPREME COURT] has treated excavators and roadrollers as motor vehicles required registration for the purpose of Motor Vehicle Act, liable for levy of entry tax. The Hon ble Apex Court in the said judgement dealt with the issue with regard to levy of entry tax or not on excavators and road rollers. On the said background, the Hon ble Court was pleased to hold that merely because of motor vehicle is put to a specific use, such as, being confined to enclose premises, will not render the same to be a different kind of vehicle as they are registered under the Motor Vehicle Act and liable for payment of entry tax - The issue in hand is entirely different. The issue in hand is not the levy of tax, but the issue is as to whether purchase of loader and tipper can be considered as capital goods within the meaning of section 2(f) of the VAT Act or not. The levy of tax is not in dispute in the case in hand and therefore, the judgement in the case of Bose Abraham will not be of any help to the Revenue and the same is distinguishable on the facts circumstances of the present case. The Revenue has failed to bring on record any material that the tipper was used beyond the shifting of boulders from the mining area upto the point of crushing plant or loader was not used for loading boulders on hopper of crushing plant. Therefore, it was captively being used as inter-dependent or integral part of the processing operation. It is not the case of the Revenue that the applicant is selling boulders. It only sales gitti and bhassi after crushing the boulders, which could be said to be the final product of the applicant. Prior to coming into existence of gitti, boulders cannot, by any stretch of imagination, be said to be goods so far as the applicant is concerned as its raw material. Therefore, the exclusion clause will not be applicable in the case in hand - the tipper and loader are captively used for manufacturing activity within the mining area where the stone crushing plant is situated, are covered under the definition of capital goods , is entitled for Input Tax Credit under section 13(1)(b) of the U.P. VAT Act. Revision disposed off.

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• 2022 (4) TMI 1033
  Validity of writ of demand issued u/s 137 of the Delhi Land Reforms Act 1954 - no valid notice of default was served on the petitioner - violation of principles of natural justice - HELD THAT:- Once the objection is filed, the concerned authority will hear the petitioner, as to whether in the given circumstances, the petitioner would be required to make the pre-deposit of the tax and interest demanded of it, and, if so, the amount that would be remitted towards pre-deposit before hearing the objection. Since the petitioner had approached this Court and the petitioner is relegated to avail an alternate remedy, the concerned authority we are sure will take a benign view and, accordingly, exclude the time spent in this Court. Petition disposed off.

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• Indian Laws

• 2022 (4) TMI 1032
  Maintainability of Arbitration application - time limitation - Entitlement for additional amount for the excess quantity of work done - Section 11(6) of Arbitration and Conciliation Act, 1996 - HELD THAT:- It is required to be noted that in the present case, work order was issued on 7.4.1982 and the work/excess work was completed in the year 1986. Even as per the statement of claim, the amount due and payable was under work order dated 7.4.1982, which was executed up to 11.05.1986 and work order dated 15.01.1984 which was executed up to 26.8.1985. Therefore, right to claim the amount, due and payable, if any, can be said to have accrued in the year 1985/1986. Thereafter, the correspondences under the RTI Act had taken from the year 2012 onwards. Thereafter, for the first time, the appellant served a legal notice upon the General Manager, South Eastern Railway on 22.10.2018 requesting either to release the amount which was overdue or to refer the dispute to the arbitrator under clauses 63 64 of GCC under the 1996 Act. The aforesaid legal notice is thereafter followed by three to four letters/communications and thereafter the appellant herein filed the present application under Section 11(6) of the 1996 Act before the High Court in the year 2019. Merely because for the claim/alleged dues of 1985/1986, the legal notice calling upon the respondent to pay the amount due and payable or to refer the dispute to the arbitrator is made after a period of approximately thirty-two years, the appellant cannot be permitted to say that the cause of action to file the application under Section 11(6) of the 1996 Act had accrued in the year 2018/2019. In the present case, the legal notice has been served and the arbitration clause is invoked and request to appoint the arbitrator was made after a period of approximately thirty-two years from the date of completion of work. Therefore, the appellant, who served the legal notice invoking the arbitration clause and requesting for appointment of an arbitrator after a period of approximately thirty-two years, cannot contend that still his application under Section 11(6) of the 1996 Act be considered as the limitation would start from the date of serving the legal notice and after completion of 30 days from the date of service of the legal notice and invoking arbitration clause. The High Court has not committed any error in dismissing the application under Section 11(6) of the 1996 Act on the ground that it is hopelessly barred by limitation and is a stale claim - Petition dismissed.

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• 2022 (4) TMI 1031
  Review of Order - error apparent on the face of record or not - review of order in exercise of power under Order XLVII Rule 1 r/w Section 114 of the Code of Civil Procedure - Seeking direction to grant applicants/respondents pro-forma/notional promotion to the post of Principal Commissioners of Income Tax and consequential retirement benefits - HELD THAT:- While considering the provisions of Order 1 Rule XLVII of the Code of Civil Procedure in the case of S. BAGIRATHI AMMAL VERSUS PALANI ROMAN CATHOLIC MISSION [ 2007 (12) TMI 456 - SUPREME COURT] held that the error contemplated under Rule 1 of Order 47 CPC for permissibility of review must be such which is apparent on the face of the record and not an error which has to be fished out and searched. In other words, it must be an error of inadvertence. It should be something more than a mere error and it must be one, which must be manifest on the face of the record. When does an error cease to be mere error and becomes an error apparent on the face of the record depends upon the materials placed before the Court. If the error is so apparent that without further investigation or enquiry, only one conclusion can be drawn in favour of the applicant, the review will lie. Admittedly, in the present case, it is not the case of the review petitioners that there is error apparent on the face of the record to review the order dated 21st January, 2020 passed by the Co-ordinate Bench of this Court, but the reason for filing the review petition is only because of change of law in a subsequent decision by another Co-ordinate Bench of this Court which is impermissible in view of the provisions of Explanation of the Order XLVII Rule 1 of the Code of Civil Procedure. It is well settled that the first and foremost requirement while entertaining a review petition is that the order, review of which is sought, suffers from any error apparent on the face of the record and permitting the order to stand will lead to failure of justice. In the absence of any such error, finality attached to the judgment/order cannot be disturbed. An error, which is not self evident and to be detected by the process of reasoning, can hardly be said to be an error apparent on the face of the record, justifying the Court to exercise the power of review. The point raised in the present review petition is answered in the negative holding that the review petitioners have not made out any ground to review the order, in exercise of review powers under Order XLVII Rule 1 r/w Section 114 of the Code of Civil Procedure - Review petition dismissed.

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• 2022 (4) TMI 1030
  Validity of suit pronote - presumption as contemplated under section 118[a] of the Negotiable Instruments Act, 1881, is presumed unless and until the same is rebutted by the defendants, or not? - the suit pronote was proved or not - whether the endorsement made by the original promisee assigning the right under the pronote in favour of the plaintiff is valid or not? - HELD THAT:- The question of law raised by the appellant is on the assumption that the plaintiff/appellant has let in evidence to prove due execution of the Pronote. When the Courts below have concurrently held that the Pronote is not proved in the manner known of law, the statutory presumption under Section 118 of the Negotiable Instruments Act, cannot be applied. Though the learned counsel for the appellant raised a question of law with regard to the appreciation of evidence of PW.1 and PW.2, this Court is unable to find any irregularity or perversity in the findings of the Courts below on the appreciation of oral and documentary evidence adduced by both sides. In the absence of any perversity or illegality in the decisions rendered by the Courts below, this Court is unable to interfere with the findings of facts reached by the Courts below. Appeal dismissed.

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• 2022 (4) TMI 1029
  Dishonor of Promissory Notes - Suit for recovery of money, based on two promissory notes - rebuttal of presumption - HELD THAT:- Even at the time of filing the suit, it is stated by the respondent/plaintiff that the deceased Tiruppathi did not pay any amount towards interest or principal. Despite that there is no demand made by the respondent/plaintiff to the deceased Tiruppathi to repay the loans, during his life time. DW 3, who is the scribe of both the promissory notes has stated in his evidence that at the time when the loan amount of Rs. 10,00,000/- and Rs. 7,00,000/- were given on two different dates, the first appellant Muruganantham was also present. Though the scribe of the document/PW 3 could have a limited role to play, he has stated in his cross examination that during the life time of deceased Tiruppathi, demand to repay the loan amount was made after one year period from the date of the loans. It is understandable if the plaintiff could tell the details about the demands for repayment. When the plaintiff was silent, the scribe of the promissory notes/PW 3 has stated that after one year from the date of promissory notes, demand for repayment was made and it was during the life time of Tiruppathi. The role of scribe has come to an end after drafting the promissory notes. He could not have any interest in getting the loan repaid. The above evidence of PW 3 would show that he has some interest in pursuing the repayments also. This conduct of PW 3 would show that he is an interested witness of the plaintiff. Unless the scribe is neutral, his evidence could not be reliable - Even if it is presumed in favour of the respondent/plaintiff that the appellants father had affixed his signature in the promissory notes and executed the same by agreeing to the amount found therein, it is obligatory on the part of the plaintiff to prove that the promissory notes were supported by consideration, especially when the defendants deny the passing of the consideration. No doubt, by proving the execution of the promissory notes, the appellants/defendants have got the initial presumption in their favour. However, the said presumption is rebuttable one. It is needless to state once again that the rebuttal proof need not always be positive evidence from the appellants/defendants. Even the weakness and improbabilities exposed from the case of the plaintiff can also be considered as rebuttal proof. The evidence of DW 2 would show that at the time when the loan amount was given to the father of the appellants/defendants, the first appellant was at his College. The Principal Incharge of TELC Industrial Training Centre, Dindigul has spoken in his evidence about the said fact. During his examination, Admission Register and the Attendance Register were produced as Ex. X1 and Ex. X2 and they would show that at the relevant date, the first appellant/first defendant was attending the College from 9.00 a.m. to 5.30 p.m. When the facts are so, the first appellant could not have been present during alleged loan transaction, which was said to have happened in the morning 10.00 a.m to 11 a.m - the improbability exposed from the evidence would also serve as rebuttal proof in favour of the appellants/defendants, though they could not produce any other evidence from their side. Since the plaintiff failed to prove that the suit promissory notes are supported by consideration, points 1 2 are answered in favour of the appellants. The appeal is allowed.

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• 2022 (4) TMI 1028
  Dishonor of Cheque - insufficiency of funds - cause of action for instituting the case, against the petitioners or not - Section 138 r/w Section 141 of Negotiable Instruments Act 1881 - HELD THAT:- A perusal of the documents filed by the petitioners in support of their case shows that the amounts as stated had been paid by the petitioners and they are reflected in the accounts statement of the respondent. The purchase order dated 13.11.2014 shows that the post dated cheques were issued by the petitioners to the respondent, obviously as a security for the supply of the goods. The e-mail correspondence from the petitioners to the respondent dated 12.02.2015 shows that the respondent undertook to return the cheques for which payment had been already made through RTGS. With regard to the impugned four cheques, it was mentioned in the e-mail that the cheque nos. 798097, 804836, 804584 and 804657 would be returned once RTGS transfer is made. This E-mail was sent on 12.02.2015, even before the statutory notice was sent on 24.03.2015. It reinforces the claim of the petitioners that the cheques concerned in this cases had been given as a security for ensuring the payments due in the business transaction from the petitioners. In the case before hand, it is not the case of the petitioners that the cheque were issued as an advance payment. It is claimed that the cheques were issued as a security. Of course, there are materials to suggest that the cheques were issued as security. However, the petitioners did not deny their liability to pay the money to the respondent. Though it is claimed that a sum of Rs. 5,91,000/- Rs. 70,164/- and 21,52,662/- were paid on 08.04.2015, 07.05.2015 and 08.07.2015 respectively, all these payments have been made after the receipt of the statutory notice - The reasons for the issuance of the cheques, alleged discharge of the liability are disputed facts are required to be decided only after recording the evidence. This Court cannot decide the disputed facts in this petition. Petition allowed.

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