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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter April 5, 2021 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Articles Provisional attachment of Bank Accounts─ Unbridled powers with CBIC─Legally valid WHEHTER THE LIQUIDATOR IS REQUIRED TO FILE INCOME TAX RETURN? Notifications GST - States G.O.MS.No.68 - dated 16-3-2021 - Andhra Pradesh SGST Andhra Pradesh Goods and Services Tax (Fourteenth Amendment) Rules, 2020 G.O.MS.No 67 - dated 16-3-2021 - Andhra Pradesh SGST Andhra Pradesh Goods and Services Tax (Thirteenth Amendment) Rules, 2020 89/2020– State Tax - dated 31-3-2021 - Delhi SGST Seeks to waive penalty payable for noncompliance of the provisions of notification No.14/2020 – State Tax, dated the 04 November, 2020. - Non issuance of invoice having Dynamic Quick Response (QR) code 85/2020– State Tax - dated 31-3-2021 - Delhi SGST Special procedure for making payment of 35% as tax liability in first two month - in case of registered persons who have opted to furnish a return for every quarter or part thereof 77/2020– State Tax - dated 31-3-2021 - Delhi SGST Amendment in Notification No. 47/2019 – State Tax dated the 24th December, 2019 64/2020– State Tax - dated 31-3-2021 - Delhi SGST Amendment in Notification No. 21/2019- State Tax, dated the 17th October, 2019 49/2020– State Tax - dated 31-3-2021 - Delhi SGST Seeks to bring in force section 2 and 13 of the Delhi Goods and Services Tax (Amendment) Act, 2020 13/2020– State Tax - dated 31-3-2021 - Delhi SGST Supersession Notification No. 70/2019 – State Tax, dated the 28th August, 2020 38/1/2017-Fin(R&C)(192) - dated 24-3-2021 - Goa SGST Amendment in Notification No. 38/1/2017-Fin(R&C)(133) dated 30th March, 2020 05/2021-State Tax - dated 18-3-2021 - Gujarat SGST Implementation of e-invoicing for tax payers having aggregate turnover exceeding ₹ 50 Cr 10 /GST-2 - dated 31-3-2021 - Haryana SGST Amendment of notification no.17/GST-2, dated 31.03.2020 (to implement e-invoicing for the taxpayers having aggregate turnover exceeding ₹ 50 Cr. from 01st April, 2021) under the HGST Act, 2017 (02/2021)FD 16 CSL 2021 - dated 20-3-2021 - Karnataka SGST Seeks to implement e-invoicing for the taxpayers having aggregate turnover exceeding ₹ 50 Cr from 01st April 2021. F-A-3-10-2020-1-V(19) - dated 26-3-2021 - Madhya Pradesh SGST Supersession Notification No. F-A-3-10-2020-1-V (25), dated 4th May 2020 F-A-3-61-2017-1-V(16) - dated 10-3-2021 - Madhya Pradesh SGST State Government constitutes the State Level Screening Committee F-A 3-01-2021-1-V(12) - dated 23-2-2021 - Madhya Pradesh SGST Seeks to bring in force various sections of Madhya Pradesh Goods and Services Tax Act (Amendment) Act, 2020 F A 3-48-2019-1-V(09) - dated 23-2-2021 - Madhya Pradesh SGST Waiver of penalty for non-compliance of the provisions of notification No. F A 3-48-2019-1-V(31), dated 4th May 2020 F A 3-31-2020-1-V(11) - dated 23-2-2021 - Madhya Pradesh SGST Amendment in Notification No. F-A-3-31-2020-1-V(67), dated 05th December, 2020 F.12(1)FD/Tax/2021-298 - dated 31-3-2021 - Rajasthan SGST Amendment in Notification No. F.12(46)FD/Tax/2017-III-260, dated the 2nd December, 2020 F.12(1)FD/Tax/2021-293 - dated 26-3-2021 - Rajasthan SGST Corrigendum - Notification No. F.12(46)FD/Tax/2017-Pt.IV-20, dated the 28th June, 2019 F.12(1)FD/Tax/2021-292 - dated 26-3-2021 - Rajasthan SGST Corrigendum : Notification No. F.12(46)FD/Tax/2017-pt-II-05, dated 18/04/2018 F.12(1)FD/Tax/2021-291 - dated 26-3-2021 - Rajasthan SGST Seeks to bring into force amendment in Section 54 of RGST Act, 2017, in pursuance of RGST (Amendment) Act, 2020 F.1-11(91)-TAX/GST/2021 - dated 26-3-2021 - Tripura SGST Notification to implement e-invoicing for the taxpayers having aggregate turnover exceeding ₹ 50 Cr. from 01.04.2021 Highlights / Catch Notes GST Invocation of bank guarantee furnished by the petitioner for release of the goods - If the petitioner files statutory appeal challenging the order at Ext.P3 within the prescribed period of limitation, then the respondents should not invoke bank guarantee furnished by the petitioner for a period of one week after filing of the statutory appeal - HC Visit to Get Source Rate of tax - Composite supply of Works Contract or not - supply of erection, commissioning and installation of ZLD plant along with O&M services for a period of 5 years - t service of supply, erection, commissioning and installation of waste-water pretreatment plant qualifies as Composite supply of Works Contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017. - the services of setting up of ZLD plant supplied to KPCL by the applicant are classified under SAC 9954 and liable to tax at the rate of 12% of GST - AAR Visit to Get Source Income Tax Capital gain computation - Not allowing the deduction of cost of improvement - The assessee has not brought on record any document to show that this cost was paid by the assessee. The benefit of indexed cost of improvement can only be claimed where the cost has been actually incurred by the assessee till the date of sale. - AT Visit to Get Source Profit in the business of development - method of determining the profit - Merely because assessee had followed an unrecognised method to compute taxable income in the immediately preceding and succeeding assessment year, cannot be an estoppel under the statute to correct the mistake that has crept in. - AO was duty-bound to correct the method of computation of income by adhering to either of recognised accounting standards. - AT Visit to Get Source Exemption u/s 11(1A) - It is true that the claim was not made in the return of income. It is equally true that revised return of income was also not filed. In our considered view, a legal claim can be made at any stage and the decision of the Hon'ble Supreme Court [supra] relied upon by the ld. CIT(A) does not put any fetter on the appellate authorities. - AT Visit to Get Source Addition of advance received u/s. 2(22)(e) - The commercial transaction between the related company do not necessarily attract the provisions of Section 2(22)(e) unless convincingly proved that the transactions were not commercial in nature by bringing appropriate material on record and with proper investigation. I - AT Visit to Get Source Interest expenditure disallowance u/s 36(1)(iii) - The term ‘put to use’ applies to capital asset only because capital asset is held to facilitate the business activity and sometimes it needs to be prepared after its acquisition for being used to facilitate business activity. As against this, purchase and holding of inventory itself is a business activity. - AT Visit to Get Source Additions towards excessive wastage as making charges - AO as well as learned CIT(A) were erred in estimating making charges mere relying upon statements of two goldsmiths recorded at the back of the assesse, even though the assessee has demonstrated with evidences that statement given by goldsmiths was incorrect. Further, the learned CIT(A) was also not justified in ipso facto, affirming version of the AO without giving due credence to the facts put forth by the assessee. - AT Visit to Get Source Order passed by the AO u/s 143 (3) read with section 144C (1) titling it as “Draft Assessment Order” - AO while passing the impugned order, issued the demand notice u/s 156 - it is mandatory for Ld.AO to follow the procedures laid down under section 144C in an assessment that involves assessment of international transaction. - such orders passed by the Ld.AO without following due process of law are liable to be set aside. - AT Visit to Get Source Exemption u/s 54F in respect of investment made in a house property in USA (foreign country) - In the light of the judgment delivered by Division Bench of this Court, as the controversy involved has already been adjudicated, the questions of law are answered against the revenue and in favour of the assessee. - HC Visit to Get Source Reopening of assessment u/s 147 - The tabulations indicates that during some of the months there were less than 10 workers employed by the petitioner. Therefore, there is sufficient ground for re-opening of the assessment under Section 148 read with 147 of the Income Tax Act, 1961. Therefore, no merits in the writ petition as far as the Assessment Year 2006-2007 is concerned. - HC Visit to Get Source Capital gain tax - cost of acquisitionn - the long terms capital gains has to be from the date from which the capital asset in question was held by the previous owner and the indexed cost of acquisition also has to be determined on the very same basis, consequently, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of such asset. - AT Visit to Get Source Exemption u/s 11 - Educational activiity u/s 2(15) - CIT-A treated the income from recording studio as business income under section 11(4A) treating the income from recording studio as business income under section 11(4A) - The trust deed is to be read as a whole - Benefit of exemption allowed - AT Visit to Get Source Customs Refund of SAD - SEZ unit - The authorities seems to have rejected Refund claims by O-I-O and then by O-I-A dated. 12-09-2018 for one or the other unjustified & unwarranted reasons. - also, Refund claims were filed in permitted time limit of one year. - claimant also becomes eligible to get interest after three months from the date of filling refund application. - AT Visit to Get Source Waiver of demurrage, rent and detention charges - The goods could not released only for the reason that they were detained by the customs authority. - the importer cannot be fastened with any liability whatsoever. The statutory scheme is very clear. - However, warehousing entity cannot be left remediless - if there is any delay due to Court, the maxim 'actus curiae neminem gravabit' will become applicable. Whether the warehousing entity has to be compensated and if so, by whom and what will be quantum of damages are issues that will have to be determined in the lights of the facts obtaining in each case. If the Court cannot undertake the exercise of confiscation, it can mandate the customs authorities to do it. - HC Visit to Get Source Service Tax Failure to pay Service Tax - Penalty on the office bearers - In view of the definition of company in Section 3 of Companies Act that the appellants Society is not a Company but a Co-operative Society whose affairs are to be handled by a committee of office bearers having a life span of five years. It is also apparent from the record that the impugned period of demand has two different set of office bearers. Seen from any stretch of imagination the penalty cannot be imposed upon all of them - once the penalty is imposed upon the appellants Society, none other can be burdened with the penalty for the same omission as is alleged against the Society. - AT Visit to Get Source Extended period of limitation - It is observed that admittedly appellant was regularly filing its return and was discharging the duty liability. There is nothing on record to prove the alleged concealment of any material information by the appellant from the Department. Admittedly there had been a routine audit of the appellants conducted by the Department. The question of concealment or suppression of any relevant information does not at all arise on part of the appellant. Thus extended period cannot be invoked. - AT Visit to Get Source Central Excise 100% EOU - Refund of unutilized Cenvat credit availed on inputs/input services - export of goods - appellant had not physically exported their goods but cleared the same to another EOU - physical export or not - The impugned order denying the cash refund is not sustainable in law and the appellant is entitled to cash refund as per sub-section 3 and sub-section 6(a) of Section 142 of CGST Act - AT Visit to Get Source CENVAT Credit - sale of discarded scrap, i.e. used empty drums and empty bags - applicability of Rule 6 (3) - the said Rule has wrongly been invoked in case of the appellant for demanding the reversal of Cenvat Credit availed by him at the rate of 6% of the value of empty packets of raw-material and empty drums of the oils used by the appellant in manufacture of PP woven fabric when cleared for consideration - AT Visit to Get Source CENVAT Credit - input services - nexus with the output goods - expenses incurred in relation to after sales service - as long as services of TVSFS in relation to financing of the vehicles manufactured by the assessee promotes the sale of vehicles manufactured by the assessee, such service is taxable under Business Auxiliary Services. - Credit was rightly allowed - HC Visit to Get Source Rejection of refund claims - The finding of fact recorded by the Commissioner of Appeals in respect of the fulfillment of the requirement under Notification No. 20/2007 dated 25.04.2007 by the petitioner, in view of the dismissal of the Revenue appeals by the CESTAT has attained finality. Such findings of fact cannot be unilaterally disregarded by the Departmental Officer merely because it was not agreeable to them. - HC Visit to Get Source VAT Restriction on Input tax credit - job-work - The amended Rule 133 came into force w.e.f., 1.4.2006 and provides that where a registered dealer carries on the business in taxable as well as exempted goods or exempted transactions and taxable transactions, the input tax deduction on capital goods be allowed proportionately, keeping in view the formula laid down under Rule 131 of the KVAT Rules. - HC Visit to Get Source Reversal of Input Tax Credit (ITC) on furnace oil and LSHS oil - the furnace oil was used in the process of manufacturing of the final product and it has to be treated only as an input tax credit and that therefore, the input tax paid on the purchase of furnace oil can be claimed as input tax credit - HC Visit to Get Source Disallowance of discount from the taxable turnover - There is no evidence that the dealer paid to the assessee the original value of the goods and not the discounted price - the authorities below have adopted a too technical an approach in disallowing the deduction of discount from the taxable turnover of the assessee. - HC Visit to Get Source Case Laws: GST 2021 (4) TMI 143 Rate of tax - Composite supply of Works Contract or not - supply of erection, commissioning and installation of ZLD plant along with O M services for a period of 5 years - taxable at 12% of GST in terms of N/N. 11/2017 Central Tax (rate) Dated 28/ 06/2017 - HELD THAT:- It could be inferred from the definition of the works contract that any contract for erection, installation, commissioning, repair and maintenance of immovable property wherein transfer of property in goods ( whether as goods or in some other form ) is involved in the execution of such contract qualifies as works contract transaction as per entry No.6 (a) of the Schedule II. In the instant case applicant has undertaken erection, installation, commissioning of the ZLD plant which is permanently fastened to earth and hence the ZLD plant becomes immovable property. Construction, supply of relevant goods, assembly, commissioning of such immovable structure qualifies as a works contract transaction. It is observed that service of supply, erection, commissioning and installation of waste-water pretreatment plant qualifies as Composite supply of Works Contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017. The service of setup of ZLD plant is supplied to the KPCL which is Government Entity. Thus all the conditions of Entry No.3(iii) of the Notification No.11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by the Notification No.20/2017- Central Tax (Rate) dated 22.08.2017 and Notification No. 31/2017 - Central Tax (Rate) dated 13.10.2017 are satisfied. Hence the services of setting up of ZLD plant supplied to KPCL by the applicant are classified under SAC 9954 and liable to tax at the rate of 6% under the CGST Act, 2017 and similarly taxable at the rate of 6% under the KGST Act, 2017. Whether the O M of said ZLD plant for a period of 5 years qualifies to be a composite supply of works contract or not? - HELD THAT:- The O M service is inclusive of supply of spares as well as maintenance service, which are taxable supplies. Supply of spares arises consequent to maintenance and hence the said supply is ancillary to the supply of service of maintenance of the ZLD plant. Thus these taxable supplies are naturally bundled and supplied in conjunction with each other where the maintenance service is predominant and hence becomes principal supply. Therefore the O M service qualifies to be a composite supply of maintenance service. Whether the setting up of ZLD plant, a composite supply of works contract and the supply of O M service, a composite supply of maintenance service are a composite supply of works contract or not? - HELD THAT:- The definition of works contract as per Section 2 (119) of CGST Act, 2017 includes repair and maintenance of any immovable property. In the instant case the O M services are meant for maintenance of the ZLD plant, an immovable property and hence the O M services are covered under Sr. No. 3 (iii) of Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017 as amended and attracts GST @ 12%. 2021 (4) TMI 141 Invocation of bank guarantee furnished by the petitioner for release of the goods - petitioner intend in preferring an appeal under Section 107 of the CGST Act - HELD THAT:- In terms of Section 107 of the CGST Act read with Rule 108 of the Goods and Services Tax Rules, the petitioner has time of three months to challenge the order at Ext.P3 which is received by the petitioner on 20.03.2021. The petitioner is intending to file statutory appeal within the prescribed period of limitation. If the petitioner files statutory appeal challenging the order at Ext.P3 within the prescribed period of limitation, then the respondents should not invoke bank guarantee furnished by the petitioner for a period of one week after filing of the statutory appeal - petition disposed off. 2021 (4) TMI 140 Seeking to file appeal - appeal could not be filed as the record of the petitioner is lying seized - HELD THAT:- The petitioner to file appeal(s) for the relevant assessment years before the appellate authority in accordance with law expeditiously preferably within a period of two weeks from today. In case the petitioner finds any difficulty in filing the effective appeal for want of some information, the petitioner may move an application to the appellate authority who will consider the same and, if necessary, provide the necessary information to enable the petitioner to supplement his appeal. Application allowed. 2021 (4) TMI 134 Revision of declaration in FORM GST TRAN-1 on 18.09.2017 - HELD THAT:- The writ petition is allowed directing the respondents to permit the petitioner to file/revise TRAN-1 either electronically or manually on or before 31.03.2021. However, the Department is reserved liberty to examine the validity and genuineness on merits of the claim of the petitioner, in accordance with law. Petition disposed off. 2021 (4) TMI 130 Violation of principles of natural justice - grievance of the petitioner is that the respondent-authorities without conducting fair and proper enquiry and without giving adequate notices to all stake holders and aggrieved persons has passed impugned exparte confiscation order - HELD THAT:- Since prima facie the order under challenge is passed without affording any opportunity to the petitioner, the impugned order/endorsement issued by the 1st respondent as per Annexure-T is not sustainable and the same is set aside. The matter stands remitted back to the 1st respondent to hear afresh by affording opportunity to the present petitioner herein. The 1st respondent authority is directed to first hear the petitioner on application filed seeking release of goods as well as vehicle - Petition allowed by way of remand. Income Tax 2021 (4) TMI 142 Nature of receipt - compensation received for refraining from carrying on competitive business - Tribunal was right in dismissing the Department Appeal observing that the Finance Act, 2002 brought to tax the capital receipts under Section 28 (va) with effect from 01.04.2003? - HELD THAT:- Since the substantial questions of law that are raised in the present appeal are covered by the decision of the Hon'ble Division Bench of this Court in Commissioner of Income Tax, Chennai Vs. TTK Healthcare Ltd.[ 2016 (6) TMI 302 - MADRAS HIGH COURT] , we decide the substantial questions of law raised in the present appeal against the Revenue and in favour of the assessee. 2021 (4) TMI 132 Reopening of assessment u/s 147 - benefit of deduction under Section 80IB denial - HELD THAT:- Admittedly, in this case, the manufacturing activity was carried out as it is evident from the reading of the impugned order that it was with the aid of power inasmuch as one of the process namely 'holes notching' was with the aid of power. Therefore, the only requirement for the petitioner to satisfy for claiming deduction was regarding the number of workers employed by it for manufacturing process. In the impugned order dated 11.07.2011, there are three tabulations. Each of the tabulations gives the number of workers employed by the petitioner during the months. For the Assessment Year 2004-2005, the tabulations indicates that more than 10 employees were worked at any given point of time. In case during the Assessment Year 2004-2005, the number of employees were more than 15 per month and the average between 15 to 23. Though at the time of original assessment, no documents appears to have been filed by the petitioner to substantiate the same, nevertheless, the survey conducted under Section 133(a) of the Act, indicates that there were more than 10 employees employed during the Assessment Year 2004-2005, even though not all the employees worked right through the period. There is the substantial compliance of the conditions by the petitioner. Therefore, the invocation of Section 148 of the Act is without any merits. There was no justification in re-opening of the assessment for the Assessment Year 2004-2005. Similarly, for the Assessment Year 2005-2006 also the tabulation in the impugned order indicates that there were more than 10 employees employed by the petitioner though not all of them worked right through the month. There are months which indicates that there was no production. Nevertheless, there are indications in the table that more than 10 employees were employed. That apart, at the time of passing of original assessment order on 31.12.2010, the issue regarding the number of workers employed by the petitioner was considered by the Assessing Officer. Re-opening of the assessment for the Assessment Year 2005-2006 is not sustainable. Assessment Year 2006-2007 - The tabulations indicates that during some of the months there were less than 10 workers employed by the petitioner. Therefore, there is sufficient ground for re-opening of the assessment under Section 148 read with 147 of the Income Tax Act, 1961. Therefore, no merits in the writ petition as far as the Assessment Year 2006-2007 is concerned. It is therefore for the petitioner to satisfy before the officers namely the respondent that it was indeed eligible for deduction under Section 80IB of the Act, for the Assessment Year 2006-2007 with sufficient records. Therefore, the writ petition as far as the Assessment Year 2006-2007 is concerned is dismissed. The petitioner is therefore directed to participate in the proceedings before the respondent. Though certain observations have been made in this order touching on the merits for the Assessment Year 2006-2007, the respondent is directed to refrain from referring to the same while passing the order on merits as the observations are merely come to a conclusion that the petitioner has not made out a case for interference at this stage. 2021 (4) TMI 131 Tribunal remitting the issue back to the file of the Assessing Officer - as assessee submits that the assessee already filed the declaration/undertaking under the Vivad Se Vishwas Scheme and orders were passed on 30.12.2020 in Form No.3. - HELD THAT:- In the light of the subsequent event, the assessee is given liberty to restore this appeal in the event the ultimate decision taken on the declaration filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeal and on such request made by the assessee by filing a miscellaneous petition for restoration, the Registry shall place such petition before the appropriate Division Bench for orders. The tax case appeal stands disposed of with the aforementioned liberty. 2021 (4) TMI 129 Exemption u/s 54F in respect of investment made in a house property in USA (foreign country) - Whether assessee has not fulfilled the conditions set out in the said section to avail benefit under the said provision as the assessee has invested in property outside India which cannot be said that assessee has satisfied the conditions set out in the said section? - HELD THAT:- As decided in case of Commissioner of Income Tax vs. Vinay Mishra [ 2020 (9) TMI 96 - KARNATAKA HIGH COURT ] assessee has made investment in a residential house in USA (foreign country) prior to 01.04.2015 and would be entitled to claim exemption under Section 54F in respect of investment made in a house property in USA (foreign country). In the light of the judgment delivered by Division Bench of this Court, as the controversy involved has already been adjudicated, the questions of law are answered against the revenue and in favour of the assessee. 2021 (4) TMI 126 Tribunal remitting the issue back to the file of the Assessing Officer - as assessee submits that the assessee already filed the declaration/undertaking under the Vivad Se Vishwas Scheme and orders were passed on 30.12.2020 in Form No.3. - HELD THAT:- It is not out of place to make a mention that an identical issue has been considered by a Division Bench of this Court, to which, one of us (TSSJ) was a party, in the decision in the case of CIT Vs. Manish D.Jain [HUF] [ 2020 (12) TMI 740 - MADRAS HIGH COURT ] and the issue has been answered in favour of the Revenue. In the light of the subsequent development that the respondent/assessee opted to avail the benefit of the said scheme, the assessee is given liberty to restore this appeal in the event the ultimate decision taken on the declaration filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeal and on such request made by the assessee by filing a miscellaneous petition for restoration, the Registry shall place such petition before the appropriate Division Bench for orders. 2021 (4) TMI 120 Order passed by the AO u/s 143 (3) read with section 144C (1) titling it as Draft Assessment Order - AO while passing the impugned order, issued the demand notice under section 156 of the Act in Form 7, along with penalty notice u/s 274 read with section 271 of the Act on the even date - HELD THAT:- As per section 144C of the Act, it is mandatory for the Ld.AO to pass Draft Assessment Order in accordance with the procedure laid down therein. Various decisions relied by the Ld.AR reproduced hereinabove highlight that, it is mandatory for Ld.AO to follow the procedures laid down under section 144C in an assessment that involves assessment of international transaction. AO passed order under section 143(3) read with section 144C(1) of the Act dated 25/02/2015 and along with demand notice issued u/s 156 and penalty notice under section 274 read with section 271 of the Act. Ratio of Hon ble Madras High Court in VIJAY TELEVISION (P.) LTD. VERSUS DISPUTE RESOLUTION PANEL, CHENNAI [ 2014 (6) TMI 540 - MADRAS HIGH COURT] has expressed the view that such orders passed by the Ld.AO without following due process of law are liable to be set aside. We place reliance on the decision of Kaneel Oils Export Inds. Ltd. Vs. JCIT [ 2009 (8) TMI 806 - ITAT AHMEDABAD-C] which is a Third Member decision. As the assessment order passed dated 25/2/2015 has been quashed and set aside. 2021 (4) TMI 116 Additions towards excessive wastage as making charges - - Additions for non deduction of tds u/s 40(a)(ia) - TDS u/s 194C - CIT(A) opined that, TDS has to be deducted, even if a sum is payabe by any other name or accounted under any other head in the books of account. - HELD THAT:- There is no uniform yardstick to quantify making wastage in any process of manufacturing of goods, including manufacturing of gold ornaments. But, it all depends upon nature of goods manufactured or types of gold ornaments manufactured by the parties. AO has considered 1% wastage and to support his stand taken statement from goldsmiths, where they have stated that they have returned 94 gms of gold out of 100 gms gold received from the assessee. Except this, no other independent evidence was brought on record to support his findings. Assessee has filed affidavit from goldsmiths to support its arguments, where they have clearly stated that normal wastage in manufacturing of gold ornaments is between 6 to 7%. AO as well as learned CIT(A) erred in assuming wastage charges at 1% without any evidence to support their stand, ignoring specific evidences filed by the assessee to prove that normal wastage incurred while manufacturing gold ornaments was at 6 to 7%. AO has quantified excessive wastage purely on arbitrary and suspicious manner, which cannot be justified in the given facts and circumstances of the case. Assessee has also produced necessary evidences to prove that it has separately paid making charges to goldsmith and further, deducted TDS, wherever applicable. AO as well as learned CIT(A) were erred in estimating making charges mere relying upon statements of two goldsmiths recorded at the back of the assesse, even though the assessee has demonstrated with evidences that statement given by goldsmiths was incorrect. Further, the learned CIT(A) was also not justified in ipso facto , affirming version of the AO without giving due credence to the facts put forth by the assessee. Wastage allowed by the assessee to goldsmiths is as a matter of business prudence /commercial expediency and the same cannot be called upon to question by the AO unless, he had evidence to prove that the same is excessive. Case laws relied on the assessee in the case of Interactive Avenues (P) Ltd. [ 2020 (12) TMI 81 - ITAT MUMBAI] supports the case of the assessee that unless deduction is claimed for any expenditure, the provisions of section 40(a)(ia) of the Act cannot be pressed into service at all. The ITAT., Delhi in the case of Green Valley Tower Pvt.Ltd. [ 2021 (1) TMI 737 - ITAT DELHI] has taken a similar view and held that if assessee has not claimed deduction for any expenditure, then the provisions of section 40(a)(ia) cannot be invoked to disallow such payments. We are of the considered view that addition made by the AO and confirmed by the learned CIT(A) towards estimated making charges by treating wastage claimed by the assessee in process of manufacturing gold ornaments is purely on suspicious and conjecture manner without there being any material evidence and hence, additions made by the Assessing Officer u/s.40(a)(ia) of the Act for non-deduction of TDS u/s.194C of the Act cannot be sustained - we direct the Assessing Officer to delete addition made u/s.40(a)(ia) - Decided in favour of assessee. 2021 (4) TMI 115 Interest expenditure disallowance u/s 36(1)(iii) - as per AO interest cost on loan borrowed for the purpose of acquisition of asset needs to be capitalized till such asset is put to use in the business of the assessee - as per CIT-A when the assessee has not yet commenced its business, the question of deduction of interest u/s.36(1)(iii) does not arise - HELD THAT:- The present case, acquisition of land for its development in the course of real estate activities of the assessee itself is a business activity. The assessee is about to complete one project and to continuing its activities has purchased another land to develop another project. The purchase of inventory is continuation of the same business activity in routine course and cannot be termed as extension of the business activity. The term put to use applies to capital asset only because capital asset is held to facilitate the business activity and sometimes it needs to be prepared after its acquisition for being used to facilitate business activity. As against this, purchase and holding of inventory itself is a business activity. Respectfully following the decision of case of CIT Vs. Aditya Propcon Pvt. Ltd. [ 2017 (11) TMI 392 - RAJASTHAN HIGH COURT] , we are of the considered view that interest paid on loan borrowed for purchase of land and holding it as inventory cannot be considered as acquisition of capital asset for the purpose of disallowing interest by invoking provisions of proviso to section 36(1)(iii) - AO well as the learned CIT(A) without appreciating legal position has disallowed interest paid on loans u/s. 36(1)(iii) of the Act. Hence, we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to delete the addition made towards disallowance of interest under section 36(1)(iii) of the Act. Appeal filed by the assessee is allowed. 2021 (4) TMI 114 Capital gain tax - cost of acquisitionn - Date of index cost of acquisition for computation of capital gain - whether should be the year in which the previous owner acquired the property and not the year in which the assessee became the owner of such property? - AO held that the property in question has devolved onto the assessee upon the dissolution of the partnership firm on account of the death of his father and in such a situation, the cost in the hands of the assessee would be the cost at which the firm transfers its assets in the hands of a partners after paying the due capital gains tax, if any, that arises on dissolution of the firm as per provisions of section 45(4) - AO estimated the value of the property for the purpose of calculation of long term capital gains in the hands of the assessee by allowing cost inflation index from the financial year 2000-01- HELD THAT:- To ascertain the facts, we had asked the Ld. counsel to file a copy of Deed of Conveyance . The same was filed on 15.02.2021. The facts in the present case and in Shri Nandlal R. Mishra are similar [ 2015 (10) TMI 1074 - ITAT MUMBAI] wherein held t in the case of an assessee covered under s. 49(1) of the Act, the capital gains liability has to be computed by considering that the assessee held the said asset from the date it was held by the previous owner and the same analogy has also to be applied in determining the indexed cost of acquisition. For determining the capital gain, the cost of acquisition of capital asset is crucial. We hold that the long terms capital gains has to be from the date from which the capital asset in question was held by the previous owner and the indexed cost of acquisition also has to be determined on the very same basis, consequently, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of such asset. See Commissioner of Income-tax Versus Manjula J. Shah [ 2011 (10) TMI 406 - BOMBAY HIGH COURT] - Decided in favour of assessee. 2021 (4) TMI 113 Exemption u/s 11 - Educational activiity u/s 2(15) - CIT-A treated the income from recording studio as business income under section 11(4A) treating the income from recording studio as business income under section 11(4A) - HELD THAT:- The assessee is a charitable trust engaged in imparting education in the field of classical music and light music based on the Gurukul Philosophy, where the student learns by virtually staying with the Guru. The institution was founded in 1932 by Acharya Jialal Vasant and has 84 years of rich heritage. The institution has a repute for providing scientific training in Hindustani Classical Music and Light Music. The trust has a studio namely Ajivasan Sounds which is used for the purpose of training students in professional singing and also the same is made available to various artists for the purpose of recording. We find that the gross receipts are only ₹ 16.72 lakhs which subsidize the fees for ₹ 33.01 lakhs for 785 students which works out to ₹ 4206/- per student per year. In the instant case, the maintenance of studio is intrinsic and in pursuance of the objects of the assessee which is education. It is well understood that teaching of Indian Classical Music is within the field of education . The activities of the studio are carried on in order to achieve the main object of the Trust and cannot be construed as business. As mentioned earlier, since the trust is engaged in education, the proviso to section 2(15) does not apply as clarified by CBDT Circular No. 11 dated 19.12.2008. As mentioned earlier, in the case of Sri Thyaga Brahma Gana Sabha [ 1990 (6) TMI 27 - MADRAS HIGH COURT] affirmed the order of the Tribunal in holding that letting out of building did not involve profit-earning activity even assuming it to be an activity. The trust deed is to be read as a whole. Similar are the facts in the instant case. Therefore, following the above decision of the Hon ble Madras High Court, we set aside the order of the Ld. CIT(A). Facts being identical, our decision for the AY 2010-11 applies mutatis mutandis to AY 2012-13. 2021 (4) TMI 112 Correct head of income - head under which rental income is to be taxed - assessee is earning rental income from commercial malls and offered the same under the head Profit and Gains of Business or Profession - AO has taxed the said rental/lease income under the head income from house property - HELD THAT:- Hon ble Delhi High Court in DISCOVERY ESTATES PVT. LTD. [ 2013 (3) TMI 124 - DELHI HIGH COURT] has directed to treat the rental income earned by the assessee from commercial properties as income under the head House Property instead of Income from business or profession. As the learned CIT(A) has followed the binding precedent in the case of the assessee itself, we do not find any error in the order of the learned CIT(A) on the issue in dispute and accordingly uphold the same. The grounds of the appeals are dismissed. 2021 (4) TMI 111 Grant of registration u/s 12AA - Exemption u/s 11 - absence of submission of requisite details during the proceedings - HELD THAT:- As assessee is stated to be engaged in educational activities. As registered with Charity Commissioner. We find that ld. CIT(Exemption) has rejected application of the assessee for grant of registration in the absence of details, which he sought from the assessee for consideration of application for registration. Before us, the assessee has filed a paper book containing copies of trust deed, books accounts, auditor's report etc. It has also filed an affidavit duly sworn in by Shri Manharsinh Prabhatsingh Zala, Trustee of the assessee-trust, deposing therein the reasons for non-submissions of requisite details called for by the department for proceedings under section 12AA. It seems to us that upto the date of hearing, the assessee did not file the details. CIT has given opportunity upto 19.7.2018. Though the action of the ld. CIT in rejecting the application of the assessee may be justified to some extent, but looking to the reasons narrated by the trustee of the assessee-trust in his affidavit dated 9.2.2021 placed on record i.e. non-cooperation of its accountant who is looking after accounting and other related work of the Trust in timely submission of requisite details before the ld. CIT(E) during 12AA proceedings, little leniency for larger interest of justice is to be shown to the assessee, which is a trust said to be engaged in educational activities and providing medical relief to the needy sections of the society. Assessee should be given one more opportunity to support its case, and therefore, in the interest of justice, we set aside the impugned order and restore the issue back to the file of the CIT(E) for reconsideration of its application for registration after providing reasonable opportunity to the assessee. Assessee is also directed to cooperate and ensure timely submission of details/clarifications as and when called for by the CIT (Exemptions). We accordingly allow grounds of appeal of the assessee for statistical purpose. 2021 (4) TMI 110 Disallowance u/s 14A rwr 8D - AO referring to the CBDT Circler No. 05/2014, dated 11/02/2014, computed the disallowance u/s 14A rwr 8D(ii) by holding that since the assessee had investments during the year the disallowance u/s 14A as per the amended rule 8D, has to be made - HELD THAT:- It is settled position of law that the provisions of section 14A can be applied to quantify the expenses in relation to exempt income. The Rule 8D can be applied only when there is difficulty in finding the expenditure relating to exempt income. In the case under consideration, we find during the course of hearing that the assessee has not derived any exempt income in the relevant previous year so as to attract section 14A rwr 8D as per case law Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] , Chettinad Logistics Private Limited [ 2017 (4) TMI 298 - MADRAS HIGH COURT] and CIT vs. Corrteck Engineering Pvt. Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] . It is however made clear that the learned Assessing Officer shall be at liberty to examine the assessee s financials along with source of investments in the year in which they yield exempt income. Appeal of the revenue is allowed for statistical purposes. 2021 (4) TMI 109 Unexplained cash deposits and un-explained expenditure u/s 68 and 69C - HELD THAT:- We notice that the Revenue is also unable to rebut the clinching fact that the Assessing Officer has not discussed at all the cash balances in the relevant accounting period from 01-04-2011 to 31-03-2012 before making the impugned additions. We therefore deem it appropriate to restore both these issues back to the Assessing Officer for the purpose of finalising afresh reconciliation of the assessee's cash in hand and balances viz-a-viz impugned negative balance as well as investments - These two grounds are taken as accepted for statistical purposes therefore. Disallowance depreciation on motor vehicles - AO and CIT-A disallowed the assessee's claim to the tune of 50% thereby alleging personal usage element of the corresponding assets - HELD THAT:- We find no reason to sustain the impugned reasoning in principle. More so when the assessee has not added any new asset in the corresponding block in the relevant previous year. The fact also remains that personal usage per se of the office vehicles cannot be altogether ruled out. Faced with this situation, we deem it appropriate to restrict the impugned depreciation disallowance to lumpsum amount of ₹ 1.5 lakhs only with a rider that the same shall not be taken as a precedent. The assessee's third substantive grievance is partly accepted in assessee's favour. Disallowance of director's remuneration claim - taking note of her clarification that she was not playing any key role. All this made the Assessing Officer to invoke the Section 40A(2) terming the impugned payment as excessive and unreasonable - HELD THAT:- We are unable to agree with the impugned amount disallowance as well since the said clarification had come on 16-01-2015 whereas we are in A.Y. 2012-13 only. It was made clear to the AO that the said director had transformed the companies fortunes in designing and internal logistics which in turn helped it to secure in bulk corporate orders in regular course of business. We thus are of the opinion that both the lower authorities' have erred in law and on facts in disallowing the impugned director's remuneration claim.The same is directed to be deleted. 2021 (4) TMI 108 Addition of advance received u/s. 2(22)(e) - Agreement of purchase of the property from the assessee by GLFPL cancelled - HELD THAT:- We find that the decision cannot be made merely on the basis of non-notarization or registration of the document. The revenue need to prove that the documents have been fabricated or made believe to bring the amount to tax u/s. 2(22)(e). The burden of proof laid on the department has not been discharged. The commercial transaction between the related company do not necessarily attract the provisions of Section 2(22)(e) unless convincingly proved that the transactions were not commercial in nature by bringing appropriate material on record and with proper investigation. In the present case, there is no prima facie reason to dispute that GLFPL intended to purchase the space from the assessee and the assessee failed to release the mortgage which consequently led to cancellation of the transaction and returning of the amounts. Hence, we decline to interfere with the order of the ld. CIT(A). Appeal of the revenue is dismissed. 2021 (4) TMI 107 Exemption u/s 11(1A) - CIT(A) held the assessee Trust as disentitled to the exemption u/s.11(1 A) on the capital gains merely because it was posted under a wrong head in the return of income is arbitrary, erroneous, unfair and unjust and must be quashed with directions for the relief - assessee stated that due to inadvertent mistake in filing the return of income electronically, the claim as regards investment of sale proceeds in acquisition of new capital asset in mutual funds in terms of section 11(1A) of the Act could not be made properly - as per assessee that during the course of scrutiny assessment proceedings, the said claim was made but was denied by the Assessing Officer stating that such claim was never made in the return of income nor by way of revised return of income - HELD THAT:- It is true that the claim was not made in the return of income. It is equally true that revised return of income was also not filed. In our considered view, a legal claim can be made at any stage and the decision of the Hon'ble Supreme Court [supra] relied upon by the ld. CIT(A) does not put any fetter on the appellate authorities. CIT(A) ought to have considered the claim regarding investment in mutual funds. Since no such verification has been done, we deem it fit to restore the issue to the file of the Assessing Officer. The assessee is directed to demonstrate that the sale proceeds have been invested in acquisition of new capital assets in nature of mutual funds. The Assessing Officer is directed to verify the same, and when satisfied, allow the claim of the assessee. Whether income of the society are not covered under amended proviso to section 2(15)? - HELD THAT:- The assessee society is registered u/s. 12A of the I.T. Act. The trust was formed on 27.09.1966 with the primary aims of carrying out public charitable objects and purposes including relief of the poor, education, medical relief and advancement of any other object of general public utility not involving the carrying on any activity for profit. In accordance with the object of the trust, it is providing free education upto preparatory kindergarten to children from poor and economically weaker section of society. In furtherance of its objects, the assessee has also given donation of ₹ 2 lakhs and claimed the same as application of income. There is no dispute that the assessee trust is carrying on its activities since its inception and has never been denied the claim of exemption u/s. 11 of the Act. We find that the ld. CIT(A) has correctly appreciated the facts of the case and allowed the claim of exemption - Decided in favour of assessee. 2021 (4) TMI 106 Order passed u/s. CIT-A u/s 250(6) - non speaking order - Disallowance on account of late payment of ESI and EPF and Labour Welfare Expenses - HELD THAT:- Considering the fact that the order passed by the Appellate Authority ld. AR was an ex-parte order the ld. AR was required to address the reasons for staying non-represented before the said Authority and not availing of the Appellate Forum provided under the Statute. As deemed appropriate to set aside the impugned order back to the file of the CIT(A) with the direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. It is directed that fresh/supporting evidences etc. which the assessee may need to file shall be admitted. The assessee in its own interests is directed to ensure full and proper participation before the said authority. Appeal of the assessee is allowed for statistical purposes. 2021 (4) TMI 105 Levy of penalty u/s 271(1)(c) - Defective of notice - non specification of charge - HELD THAT:- As relying on BIJOY KUMAR AGARWAL [ 2019 (6) TMI 721 - CALCUTTA HIGH COURT ] and DR. MURARI MOHAN KOLEY [ 2018 (9) TMI 1 - CALCUTTA HIGH COURT] we quash the order passed u/s 271(1)(c) on the ground that notice issued for levy of penalty has not specified the charge.- Decided in favour of assessee. 2021 (4) TMI 104 Expenditure related to ESOP - HELD THAT:- These expenses were incurred in the course of business of assessee and were let out as well as expanded wholly and exclusively for the business purpose only. Though in the original order of assessment, the Assessing Officer has not taken cognizance of this aspect and the assessee also has not made this claim it is not justifiable on the part of the CIT(A) in rejecting this additional claim. Therefore, we direct the Assessing Officer to examine this claim as per the law and allow these expenses/expenditure in respect of ESOP according to the provisions of law. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. The appeal of the assessee is partly allowed for statistical purpose. 2021 (4) TMI 103 Profit in the business of development - method of determining the profit - percentage of completion method OR project completion method - appellant has agreed for the addition during the assessment proceedings and it is consistently followed for preceding and subsequent years - addition with respect to profit on development even if the authorized representative of the appellant has agreed for such addition as there is no estoppel against the law - neither the principles of valuation of WIP adopted by the appellant nor the method of determination of profit by the assessing officer is correct in law - appellant being a developer and not a contractor, the revenue or income can be recognized only when the appellant sells the units - HELD THAT:- Method adopted by assessee though was not a recognised method; the method of computation of additional income by AO is also uncalled for. We rely on Circular No. 14 of 1955 dated 11/04/1955 issued by CBDT, wherein it is expressed that assessing officers are expected to educate the assessee and allow claims that alleged timidly due to assessee, even when such a claim is not made. In the present case, the Ld. AO ought to have guided assessee for adopting one of the recognised method of accounting to arrive at the correct income vis- -vis the method of accounting adopted by assessee in the previous assessment year or the immediately succeeding assessment year. We rely on the decision of Hon'ble Supreme Court in case of CIT vs British Paints India Ltd. [ 1990 (12) TMI 2 - SUPREME COURT] observed that assessee was valuing the work in progress and finished products at raw material cost by excluding other overriding expenditure. Hon'ble Supreme Court, held the method adopted by assessee therein was not acceptable, as it was not recognised method. We note that the method adopted by the Ld. AO to determined taxable income in the hands of assessee is not correct. It was incumbent on the Ld. AO to correct the mistake in the method adopted by assessee to compute taxable income for year under consideration. Merely because assessee had followed an unrecognised method to compute taxable income in the immediately preceding and succeeding assessment year, cannot be an estoppel under the statute to correct the mistake that has crept in. AO was duty-bound to correct the method of computation of income by adhering to either of recognised accounting standards. We refer to and rely upon to the decision of Hon'ble Bombay High Court in case of in case of Nirmala L. Mehta vs. A. Balasubramaniam, CIT Ors., [ 2004 (4) TMI 43 - BOMBAY HIGH COURT] held that, merely because the assessee has offered the income, that would not take away the right to contend that amount was not chargeable to tax. We therefore remand this issue back to Ld. AO to consider it afresh. The Ld. AO shall resort to either of the recognised methods of accounting standards acceptable under the Income tax Act to compute the income in the hands of assessee if any for the year under consideration. As submitted that for assessment year 2012-13, also assessee had computed its income in similar manner. Accordingly we remand the issue raised by assessee in ground No. 2-7 for asst. year 2012-13, for recomputing the income in the hands of assessee in accordance with the recognised methods of accounting standards acceptable under income tax act. Assessee shall be granted proper opportunity of being heard. Assessee is directed to file all requisite relevant documents in support and to assist the Ld. AO in computing the correct taxable income for years under consideration. Additional ground raised by assessee for assessment year 2011-12. 2021 (4) TMI 102 Exemption u/s 11 - entitled to registration under section 12A - Charitable activity u/s 2(15) - whether the application is made in accordance with the requirements of section 12A of the Act and whether form No.10A has been proper or not? - HELD THAT:- Admittedly, at the time of grant of registration the Commissioner is not empowered to examine the application of income but he has to examine whether the application is made in accordance with the requirements of section 12A of the Act and whether form No.10A has been proper or not. The Commissioner is further to examine whether the objects of the trust are charitable or not and also to satisfy himself about the genuineness of the activities of the trust or the institution. Commissioner is not to examine the application of income at this juncture. The Hon'ble Supreme Court in CIT v. U.P. Forest Corpn. [ 1998 (3) TMI 5 - SUPREME COURT] held that in order to take advantage of the provisions of section 11 of the Act, the trust or the institution has to get itself registered. Whether the income of the institution can be regarded as being held for charitable purposes and whether the institution is entitled to registration under section 12A of the Act, requires investigation of facts. In view thereof, section 12AA of the Act recognizes the principle laid down by the Hon'ble Supreme Court and Commissioner under section 12AA of the Act is empowered to call for such documents or information from the trust or the institution in order to satisfy himself that the objects of trust are charitable and also about the genuineness of the activities of the trust or the institution and is also empowered to make such enquiries as he deem necessary in this regard. From the enquiries conducted by the ld. CIT (E), we find that ld. CIT (E) has not brought anything on record to prove that the objects of the trust or institution are not charitable in nature. Reliance is being placed on the judgment in the case of Ananda Social and Education Trust [ 2020 (2) TMI 1293 - SUPREME COURT] . Hence, we set aside the order of the ld. CIT (E) declining the registration u/s 12AA.- Appeal of the assessee is allowed. 2021 (4) TMI 101 Addition on the basis of cash found during the search accepted in his statements u/s 132(4) and statement u/s 131 - separate addition can be made while framing assessment u/s 153A allowed or not? - HELD THAT:- In the statement recorded u/s 132(4) of the Act, the assessee has stated that he was not maintaining books of accounts as income was being disclosed u/s 44AD which did not require maintenance of books of accounts - CIR(A) has further held that in the general analysis, if as per evidence found as a result of search, the total turnover is exceeding the limit prescribed u/s 44AD, the income has to be computed as per regular provision and not under presumptive scheme. If what is found is only relating to payments made which has nexus with the business of civil construction carried on and not in respect of any other activity, the payment will be merging into calculation of presumptive scheme and no separate addition can be made while framing assessment u/s 153A. The assessee has not been able to establish factually the presence of cash of ₹ 6,47,500/- and the ld. CIT(A) held that this cash is part of the turnover which is not disclosed by the assessee, therefore, the AO shall tax it at the rate of 8.04% in terms of section 44AD (8.04% declared by assessee). In view of the above facts and circumstances of the case, we find no infirmity in the order of the ld. CIT (A), the same is upheld. Ground no. 1 is allowed. Addition on account of interest payment on the loan taken on 25.05.2012 and returned on 12.01.2013 - AO made the addition of this amount on the ground that the same was not verifiable from the books of accounts - CIT(A) has deleted the addition under consideration by holding that the statement recorded u/s 132(4) of the Act, the assessee has categorically stated that he was not maintaining books of accounts as income was being disclosed u/s 44AD which did not require maintenance of books of account - HELD THAT:- . In view of this, the statement recorded u/s 132(4) would prevail over statement recorded u/s 131 - assessee has further quoted various board circulars decrying surrender in confessional statement. CIT(A) has in agreement with the submission of the assessee that when income was declared u/s 44AD and so accepted by the AO there was no case for making addition of the payment of interest on the ground that it was not verifiable. The assessee was not in a position to get the payment of interest verified with reference to books of accounts as no books of accounts has been maintained. In view of the above facts and circumstances of the case, we find no infirmity in the order of the ld. CIT (A), the same is upheld. Ground no. 2 is allowed. Unaccounted cash payment - AO made the addition on the basis of pages on the ground that the payment as unexplained and not verifiable - statement recorded u/ 131 ignoring the statement recorded under section 132(4) at the time of search on 24.05.2013 - HELD THAT:- AO has referred the statement of the appellant recorded u/s 131 on 16.07.2013 wherein assessee was made to accept the expenditure as unexplained as he was not in a position to get the same verified with reference to books of accounts as no books of accounts has been maintained. CIT(A) also held that the assessee has disclosed gross receipts of ₹ 56,40,320/- and on such gross receipts income of ₹ 4,53,640/- has been disclosed by way of rate application of 8.04%. Income was disclosed u/s 44AD and the same was accepted. In the statement recorded u/s 132(4) assessee has categorically stated that he was not maintaining books of accounts as income was being disclosed u/s 44AD which did not require maintenance of books of accounts. In view of this the statement recorded u/s 132(4) would prevail over statement recorded u/s 131, the ld. CIT(A) held that when income was declared u/s 44AD and so accepted by the Assessing Officer there was no case for making addition of the cash payment which stood covered by the deemed expenditure of ₹ 51,86,680/- -The order of the ld. CIT (A) is upheld. Ground No. 3 is allowed. Addition on account of unaccounted expenditure - AO made the addition on the basis that the assessee has failed to verify the expenditure from his books of accounts - CIT(A) has deleted the addition - HELD THAT:- AO has referred the statement of the assessee recorded u/s 131 on 16.07.2013 wherein assessee has accepted the expenditure as unexplained as he was not in a position to get the same verified with reference to books of accounts as no books of accounts has been maintained - CIT(A) has considered the reply of the assessee, wherein it has been stated that the above page itself discloses that it was an estimate of expected expenditure on construction at three sites. Further the assessee has submitted these construction work receipts stand disclosed in Assessment Year 2013-14 of ₹ 98,60,000/- and Assessment Year 2014-15 of ₹ 56,40,320/-. Considering the above facts and circumstances of the case as discussed by the ld. CIT (A), we find no infirmity in the order of the ld. CIT (A), the same is upheld. Addition based on the statement under section 131 on account of unaccounted expenditure - Addition based on seized paper - CIT(A) has deleted the addition under consideration by holding that in the statement recorded u/s 132(4) of the Act, the assessee has categorically stated that he was not maintaining books of accounts as income was being disclosed u/s 44AD which did not require maintenance of books of accounts - HELD THAT:- We find that the ld. CIT (A) after considering the facts of the case as well as the submissions of the assessee has rightly concluded there was no case for making addition of the cash payment which stood covered by the deemed expenditure of ₹ 51,86,680/-. Therefore we find no justification or relevance to interfere or deviate from the order passed by the ld. CIT (Appeals). Therefore, we upheld the order of ld. CIT (A) and delete the addition. 2021 (4) TMI 99 Capital gain computation - Maintainability of revenue appeal - valuation to DVO for determining the value of property - computing long term capital gain u/s 50C - appeal by Revenue is against the findings of CIT(A) in directing the AO to consider fair market value of the property as determined by the DVO on the date of agreement of sale - HELD THAT:- We find that the tax effect involved in the present appeal by the Revenue is less than the monetary limit specified by CBDT Circular No. 17 of 2019 dated 03.03.2019 for filing of appeals before the Tribunal. Therefore, without adverting to the merits of issue raised in appeal, this appeal by the Revenue is dismissed on account of low tax effect. Not allowing the deduction of cost of improvement - The contention of the assessee before CIT(A) was that Municipal Corporation of greater Mumbai has constructed a Nalla Wall on the land of the assessee and had raised a bill of ₹ 46,12,155/- in February, 2002. The assessee instead of making payment of ₹ 46 lacs to the BMC transferred the said liability with interest to the purchaser and the credit for the said amount was given to the purchaser. Thus, the assessee claimed the benefit of indexed cost of improvement for construction of Nalla Wall on the plot of the assessee - CIT(A) has rejected the contention of the assessee by observing that the assessee has not brought on record any document to show that this cost was paid by the assessee. The benefit of indexed cost of improvement can only be claimed where the cost has been actually incurred by the assessee till the date of sale. We concur with the findings of the CIT(A). Accordingly, we uphold the same. The ground raised by the assessee is without any merit, hence, dismissed. 2021 (4) TMI 96 Application seeking approval u/s 80G - assessee has been granted approval u/s 12A - HELD THAT:-It is seen that the assessee continues to enjoy registration u/s 12A of the Act and, therefore, their appears to be no apparent reason for which the assessee s request for recognition u/s 80G of the Act was denied. In our considered opinion, interest of substantial justice would be served, if the Ld. CIT(E) re-considers the assessee s application. Accordingly, we restore this file to the office of Ld. CIT(E) with a direction to consider the application of the assessee keeping in mind that the assessee enjoys registration u/s 12A of the Act after giving proper opportunity to the assessee to present its case. Appeal of the assessee stands allowed for statistical purposes. 2021 (4) TMI 95 Deemed dividend u/s 2(22)(e) - Whether the assessee company, which is not a registered shareholder of the company providing loan to it, may be brought under the scanner of deemed dividend? - HELD THAT:- The provisions of section 2(22)(e) of the Act can only be invoked in case of a shareholder who is holding substantial interest. The provision of section 2(22)(e) of the Act nowhere talks about taxing an entity/company which is not a shareholder holder in lender company but to shareholder of such company holding substantial share in lender company - Coming to the case on hand, admittedly, the assessee company in not holding any shares or rights of M/s. Planet Automotive Pvt Ltd. Thus considering the above discussion and judgment of Hon ble court in case of Mahavir Inductomelt [ 2017 (1) TMI 1159 - GUJARAT HIGH COURT] AO was not justified in invoking the provisions of section 2(22)(e) of the Act in given facts and circumstances. Thus we hold that the learned CIT(A) rightly deleted the addition made by the AO. Hence, the ground of appeal of the Revenue is dismissed. 2021 (4) TMI 94 Capital gain computation - Addition u/s 50C - whether the relaxation provided vide 3rd proviso to section 50C of the Act which comes into force vide Finance Act 2018 w.e.f. 01-04-2019 can be given a retrospective effect? - difference between the stamp value and sales consideration of land is of 0.78% only which is less than 5%.The actual sale consideration declared by the assessee should be taken for the purpose of computing the income under the head capital gain - HELD THAT:- Where consideration on sale or transfer of property being land or building falls below the value on which stamp duty is paid to State Government under relevant Act then such value should be taken as consideration for purpose of computing capital gain on such transfer. This deeming fiction was creating hardship to the assessee where there were marginal variation between stamp value and actual consideration due to genuine reason. Therefore the legislator inserted new proviso to section 50C(1) of the Act which provided exemption from the levy of this section when difference between actual consideration and stamp value is less than 5%. Therefore in our considered whenever an amendment brought in statute by the legislature with view to erase the hardship caused to the assessee then such amendment should be given a retrospective effect without going into the fact whether the same is written specifically or not. In holding so we find support and guidance from the judgment of coordinate bench of this case Dharamshibhai Sonani [ 2016 (9) TMI 1259 - ITAT AHMEDABAD] where the issue was that whether the amendment brought in section 50C of the Act with regard to the point of time for taking stamp value vide Finance Act 2016 is retrospective in nature or not. The above amendment or proviso was inserted by the legislature with view to minimize the hardship caused to assessee due to deeming fiction.the amendment brought in section 50C by Finance Act 2018 is in retrospective in nature. Accordingly, the variation in the amount of consideration shown by the assessee is within permissible limit of the stamp value consideration. Therefore, no addition is required for the amount showing the difference between the actual consideration and stamp value. Accordingly we direct the AO to delete the addition by him. Hence the ground of appeal of the assessee is allowed. Addition u/s 68 - unexplained Cash deposit in bank account - HELD THAT:- As explained by the assessee that he has received a sum of ₹72,000, from the party to whom he has sold his car against the payment of the EMIs. Originally the assessee acquired car on the loan which was sold to the party but the ownership was not transferred. In other words the loan was continuing in the name of the assessee only. Thus the other party was paying the AMI to the assessee which was subsequently paid to the bank. In this regard, conversely, we find that contention of the assessee was not based on any documentary evidence. In the absence of necessary documents, we do not find any merit submission of the assessee. Accordingly we confirmed the addition for the sum of ₹72,000 to the total income of the assessee. Regarding the balance amount, it was explained by the assessee that money was deposited out of the cash withdrawal from the bank. The assessee to this effect has filed the cash book which is placed on pages 27-28 of the paper book. We find force in the argument of the learned AR for the assessee. If the amount has been deposited in cash by the assessee out of the cash withdrawal from the bank, then no addition, to our mind is warranted particularly in a situation where there is no finding of the authorities below suggesting that the amount withdrawn from the bank was utilized by the assessee for any other purpose. In the absence of such finding, an inference can be drawn that the amount withdrawn by the assessee from the bank was utilized for the purpose of subsequent deposit in the bank. However, we are inclined to direct the AO to verify whether the withdrawal from the bank was deposited in the bank subsequently. If that be so the addition is not warranted. Addition on account of low withdrawal of household expenses - HELD THAT:- There cannot be addition on the basis of estimation. Facts of the case on hand are different insofar the expenses incurred by the assessee towards the children education fee. The AO has given very clearcut finding that the assessee has been incurring children education fee of ₹10,350.00 for each child aggregating to ₹ 31,050.00. Furthermore, it has also been pointed out that the family of the assessee consist of 5 members in totality. Thus in such circumstances the drawings shown by the assessee to the tune of ₹36,000 does not appear to be reasonable. We also find that the assessee has not produced any documentary evidence in support of his contention that there was the income in the hands of his wife and mother. Accordingly, in the absence of the necessary documents, it can be inferred that there was no income in the hands of his wife and mother as claimed by the assessee. Accordingly, it seems that the drawings shown by the assessee should certainly be more than the sum of ₹ 36,000 as shown by the assessee. Estimate the drawings the assessee - HELD THAT:- There is no standard jacket formula to work out the drawings of the assessee based on the documentary evidence in the given facts and circumstances.Some element of guesswork is required to work out drawings of the assessee. Accordingly, we hold that the drawings to the tune of ₹15,000 per month for the household expenses are sufficient and reasonable in the light of the above stated facts and discussion. Thus, the total drawings works out at ₹1,80,000 and the assessee has already shown a sum of ₹36,000 towards the drawings in the income tax return. Accordingly, the balance amount of ₹1,44,000 is added to the total income of the assessee. Hence the ground of appeal of the assessee is partly allowed. Customs 2021 (4) TMI 135 Seeking provisional release of goods - waiver of demurrage, rent and detention charges - whether the direction given by the customs authority waiving the warehouse rent is valid or not? - customs cargo services provider or not - HELD THAT:- Clause 2(1)(b) of the Handling of Cargo in Customs Areas Regulations, 2009, defines the Customs Cargo Services provider as meaning any person responsible for receipt, storage, deliver, dispatch or otherwise handling of imported goods and export goods and includes a custodian as referred to in section 45 of the Act and persons as referred to in sub-section (2) of Section 141 of the said Act - In the case on hand, the goods imported were very much in the custody of the warehousing entity. Therefore, even a plain meaning of the aforesaid provision would clearly lead one to the conclusion that Al-Hilai Storage, Tuticorin is a customs cargo services provider. There are no hesitation to reject the initial contention urged by the learned senior counsel for warehouse entity. This is because the said entity had not only received and stored goods but eventually delivered the same to the importer in the months of January and November 2012. Therefore, it would be rather futile to claim that the said entity falls out side the statutory definition of customs cargo services provider. The goods could not released only for the reason that they were detained by the customs authority. Clause 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 states that the customs cargo services provider shall not charge any rent or demurrage on the goods detained by the customs authorities - the importer cannot be fastened with any liability whatsoever. The statutory scheme is very clear. Whether the warehousing entity should be left utterly remediless? - HELD THAT:- The answer will have to be in the negative. The warehousing entity cannot be left remediless. The time-line or the sequence of events would speak for themselves. The goods had arrived way back in November 2010. The goods are edible items/perishable commodities. It is of course open to the customs authority to entertain reasonable suspicion and detain the goods, but then, this cannot be stretched to an unreasonable period - A warehousing entity as a part of its license obligations cannot charge rent/demurrage on the detained goods, if a waiver certificate is issued by the customs authority. But Clause 6(1)(l) of the Regulations will not be applicable for the period beyond a reasonable time-limit. Whoever is responsible for the resulting state of affairs must bear the burden. It can be the importer or the customs authority. Of course, if there is any delay due to Court, the maxim 'actus curiae neminem gravabit' will become applicable. Whether the warehousing entity has to be compensated and if so, by whom and what will be quantum of damages are issues that will have to be determined in the lights of the facts obtaining in each case. If the Court cannot undertake the exercise of confiscation, it can mandate the customs authorities to do it. A claim petition is to be submitted for compensation before the Chief Commissioner of Customs (Preventive), No.1 - petition closed. 2021 (4) TMI 124 Refund of SAD - Failure to produce any documentary evidence in support of the claim that imported goods were of the description as mentioned in the Notification - provisions exist in the SEZ Act for grant of refund, or not - Unjust enrichment - penalty - HELD THAT:- The findings of Commissioner (Appeals) are not correct as under Section 30 of the SEZ Act 2005, goods removed from SEZ to DTA are chargeable to customs duties. Hence, such excess duty paid as Customs duty can only be claimed as Refund under section 27 of Customs Act 1962. Customs authorities have inherent powers under Customs Act 1962 to process the Refunds. Accordingly, this Tribunal vide final orders dated 05- 10-2015 and 16-08-2016, has directed to process refund claims under Customs Act 1962. Provisions exist in the SEZ Act for grant of refund, or not - HELD THAT:- The view that no provisions exist in SEZ Act for grant of refund is incorrect. CBIC Circular No. 11/2017-Cus dated 31-3-2017 has clarified in Para 3.3, question how old cases of refund pending as on the date of coming into effect of Notification dated 05-08-2016 will be sanctioned by Customs, Central Excise or Service Tax or CGST authorities. Inserted Rule 47(5) in SEZ Rules 2006 empowers Customs officers to issue refund claims. All field officers are bound to follow directives issued by CBIC. The authorities seems to have rejected Refund claims by O-I-O and then by O-I-A dated. 12-09-2018 for one or the other unjustified unwarranted reasons. - also, Refund claims were filed in permitted time limit of one year. This is clear from the fact that section 27 amended w.e.f. 08-04-2011 has substituted the period of Six months to One year. Unjust enrichment - HELD THAT:- The incidence of ₹ 2,79,924/- and ₹ 54,733/- paid against said 10 Bill of Entry have not been recovered from any other person or customers and has been absorbed by M/s Suchi Fastners PVT Ltd. Further, Declarations submitted by DTA importer with their CA Certificates also show that they have also not recovered excess amount of duty from any other persons. These documents are adequate to pass the hurdle of unjust enrichment . Interest - HELD THAT:- There is no dispute that SAD refund of ₹ 54,733/- was filed on 11-10-2010 and BCD Refund claim of ₹ 2,79,924/- was filed on 12-11-2011.It is settled law that after filling Application for Refund, if Refund is delayed by three months, claimant also becomes eligible to get interest after three months from the date of filling refund application. This is provided in section 27A of the Customs Act 1962. Accordingly, Appellant is eligible for Interest u/s 27A of Customs Act 1962 @ 6 %. Appeal allowed - decided in favor of appellant. 2021 (4) TMI 123 Classification of imported goods - steel round bars - to be classified under Customs Tariff heading 72284000 of Customs Tariff Act, 1975 or under Customs Tariff Heading 72284000 - argument of the appellant is based on the process of manufacture - Benefit of N/N. 21/2002-Cus dated 01.03.2002 (Serial No. 207) - HELD THAT:- From Chapter Note (ij) of Chapter 72, it is seen that only product with solid section are classifiable as semifinished products. The products which are not of solid section cannot be classified as semifinished products. The Revenue is seeking to classify the product as hollow profile. The appellant have argued that the product tubes and pipes and hollow profiles are products made out of the process of extrusion, whereas the product imported by the appellant is a forged product, which has been proof machine. The argument of the appellant is based on the process of manufacture which has no relevance as far as classification under Chapter Heading 7304 is concerned. It is seen that for the purpose of classification in these heading the process of manufacture is not relevant. The appellant has sought classification of the product as other bars and rods relying of Chapter Note (m). The product covered are those having uniform solid cross section along their whole length. In the instant case the product does not have solid cross section and therefore, Chapter Note 1(m) has no application - It clearly covers the hollow products and gives dimensional parameters necessary for the product to fall under Chapter Heading 7304. The product imported by the appellant, therefore, automatically gets classified under Chapter Heading 7304. There are no merit in the appeal filed by the appellant and the same is dismissed. 2021 (4) TMI 118 Condonation of delay in filing appeal - time limitation - dismissed for the reason that the appeal had been filed even beyond the permissible time limit contemplated under section 128 of the Customs Act 1962 - HELD THAT:- Section 35B of the Central Excise Act 1944, on which reliance has been placed in the aforesaid decision by the learned Member deals with Appeals to the Appellate Tribunal. It is true that section 35B does not contain a provision similar to section 35, wherein it is provided that an appeal has to be filed within 60 days from the date of the communication of the order but the Commissioner (Appeals) may, if he is satisfied that the appellant is provided by sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be presented within a further period of sixty days. Section 35 of the Excise Act would apply to Appeals before the Commissioner (Appeals), whereas section 35B would apply to Appeals before the Appellate Tribunal. Power under section 35B dealing with Appeals to the Appellate Tribunal cannot enable the Appellate Tribunal to condone any delay in filing the appeal before the Commissioner (Appeals) beyond the extended period of thirty days, after the expiry of the normal period of sixty days. The Supreme Court in SINGH ENTERPRISES VERSUS COMMISSIONER OF C. EX., JAMSHEDPUR [ 2007 (12) TMI 11 - SUPREME COURT] categorically held that any delay beyond the extended period of thirty days after expiry of normal period of sixty days, cannot be condoned since the Statue does not permit and the provisions of section 5 of the Limitation Act would not apply. The decision of the Supreme Court in Singh Enterprises is binding. The decision of the Tribunal in Jagdish Ispat, therefore, does not lay down good law. The Tribunal does not have any power, much less discretionary power, to condone any delay beyond the extended period of thirty days after the expiry of the normal period of sixty days. Such being the position, it is not possible to accept the contentions of learned counsel for the appellant that the provisions of section 5 of the Limitation Act should be invoked even if the delay is beyond the extended period of thirty days or that the Tribunal has a discretionary power to condone any delay in filing the appeal even after the expiry of the extended period of thirty days - Commissioner (Appeals), therefore, committed no illegality is dismissing the appeal for the reason that any delay beyond ninety days could not be condoned. Appeal dismissed. 2021 (4) TMI 97 Maintainability of pre-deposit - Section 129E of the Customs Act, 1962 - HELD THAT:- During the course of investigation, the appellant has already deposited ₹ 3,65,641/- against the total demand of ₹ 13,63,402/-, which in our view is sufficient to hear the appeal. Since the learned Commissioner (Appeals) has not heard the matter on merit, we remand the matter to the learned Commissioner (Appeals) to decide the issue on merit without insisting any further pre-deposit in the matter. All issues are kept open. A reasonable opportunity of hearing be extended to the appellant before deciding the appeal on merit. Appeals are allowed by way of remand. Insolvency & Bankruptcy 2021 (4) TMI 100 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and default or not - HELD THAT:- The instant Application is filed in accordance with law and a qualified Insolvency Professional is also suggested to appoint him as IRP, who is prima facie eligible to be appointed as such. Therefore, it is a fit case to admit by initiating CIRP by appointing IRP, and declaring moratorium etc., in respect of the Corporate Debtor. Application admitted - moratorium declared. 2021 (4) TMI 98 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors or not - existence of debt and default or not - HELD THAT:- The Petitioner issued a Demand Notice dated 17.01.2018 under the provisions of the Code demanding payment in respect of an unpaid operational debt due from Respondent for an amount of ₹ 10,99,39,128/-. In pursuant to the above notice, the Respondent has given a reply dated 03.02.2018 by proposing to settle the issue. Since no settlement has been reached between the Parties, the Petitioner has earlier filed petition before this Adjudicating Authority, under Section 9 of the Code, by seeking to initiate CIRP for the same amount of amount as claimed in the instant Petition. The contention of the Petitioner that the Petitioner is fully entitled to invoke provisions of the Code once again by changing the Section of Code from Section 9 to Section 7 is not tenable and it is liable to be rejected. The Adjudicating Authority has given a clear finding that liberty granted to the Petitioner is to invoke any other remedy available under any Law , do not mean to invoke provisions of the Code again by changing Section. Since the judgment has become final, the Petitioner is estopped from invoking the provisions of the Code for the same set of facts. There is no correlation to various documents filed by the Parties with reference to the debt and default in question, and unless debt and default in question prima facie proved/established, CIRP cannot be initiated. There are no legally valid agreements produced in support of case of Petitioner, only one letter dated 10th April, 2014 started cause of action. And the Petitioner has not produced any legally valid agreement/contract executed between the Parties except by way of mere exchanging letters. Therefore, disputed question of fact and law on letters exchanged cannot be adjudicated in summary proceedings as contemplated under the provisions of Code, to decide question of debt and default. It is also not in dispute that the Petitioner has initiated suit before the Commercial Court, Bangalore, by way of Pre Institution Mediation in PIM No. 244/2019. Report has been issued by Bengaluru District Legal Services Authority, Bengaluru. The Petition is filed with an intention to recover the alleged outstanding amount after receiving part-payment which is against the object of Code - the Petitioner has filed the instant Petition on misconceived facts and law, and also failed to make out any prima facie case with regard to debt and default, so as to initiate CIRP against the Corporate Debtor. Petition dismissed. Service Tax 2021 (4) TMI 127 Maintainability of petition - SCN was issued without Jurisdiction - Section 73(1) of the Finance Act, 1994 - dispute on question of facts - HELD THAT:- The petitioner has submitted that no services were being provided from the State of Rajasthan, whereas, a perusal of the show cause notice reveals that it has been averred therein that office of the petitioner was situated in the State of Rajasthan and the services were also being provided from the State of Rajasthan. Thus, the present case involves disputed questions of facts. Hence, the present case cannot be said to be a case where prima facie it is established that the show cause notice has been issued without jurisdiction. There are no ground for interference by this Court - petition dismissed. 2021 (4) TMI 121 CENVAT credit - input services - renting of premises for business purposes - premises being leased out by M/s. GSPL to the appellants for being used as a godown / storage space for the inputs - inputs has been used exclusively by the appellant or by its subsidiary and associated companies as well - requirement of mandatory permission from Deputy/Assistant Commissioner of Central Excise in terms of Rule 8 of the Cenvat Credit Rules - HELD THAT:- The service in question i.e. renting of immovable property is very well covered in means as well as includes clause of the definition of the input service as given under Rule 2 (I) of Cenvat Credit Rule, 2004. This Rule allows Cenvat Credit of all such services that are used in or in relation to the manufacture of finished goods. There is no denial on part of the Department that the premises taken on lease were used for the storage of raw-material required for the manufacture of tyres, the finished goods of the appellant. The service availed is definitely a service in relation to the manufacture of tyres. Also the Cenvat Credit of input services used for storage upto the place of removal and for procurement of inputs are admissible for Cenvat Credit - There is no apparent role of any subsidiary or associated company of the appellant nor there is anything on record which may prove the availment of the impugned service by the said subsidiary/associated companies of the appellants as well - the issue stands decided in favour of the appellant. Requirement of mandatory permission from Deputy/Assistant Commissioner of Central Excise in terms of Rule 8 of the Cenvat Credit Rules - HELD THAT:- Rule 8 makes it abundantly clear that scope of this rule is for reversal of credit of Cenvatable inputs. It is also clear that the permission is required only in cae of the storage of excisable raw-material. It is not the fact for the present appeal. Appellant has submitted that the input stored in the premises was non-excisable. There is no denial by the Department nor there is allegation in the Show Cause Notice about the inputs to be excisable - Rule 8 has wrongly been invoked by the Department while denying the admissibility of Cenvat Credit to the appellants for his raw-material to have been stored in the impugned leased premises taken on lease by the appellant exclusively from M/s. GSPL and being in use by the appellant exclusively - This issue is also held decided in favour of the appellant. Extended period of limitation - HELD THAT:- It is observed that admittedly appellant was regularly filing its return and was discharging the duty liability. There is nothing on record to prove the alleged concealment of any material information by the appellant from the Department. Admittedly there had been a routine audit of the appellants conducted by the Department. The question of concealment or suppression of any relevant information does not at all arise on part of the appellant. Thus extended period cannot be invoked. Penalty - HELD THAT:- As there are no suppression or fraud, there arises no question of imposition of penalty upon the appellant. Appeal allowed - decided in favor of appellant. 2021 (4) TMI 119 Failure to pay Service Tax - Man-power Recruitment or Supply Agency - argument of the appellant is that they being a welfare organisation working upon no profit fundamental may be exempted from Service Tax liability for providing the manpower services is not sustainable in the eyes of the laws - penalty on office bearers - extended period of limitation - HELD THAT:- The bare perusal of the provisions of Rule 2 (g) of Service Tax Rules, 1994 make it abundantly clear that there is no exclusion for any category of service providers from the ambit of the tax liability with respect to manpower recruitment and supply agency service the use of word any person in the afore mentioned definitions is sufficient to form the above opinion. Hence, the argument of the appellant that they being a welfare organisation working upon no profit fundamental may be exempted from Service Tax liability for providing the manpower services is not sustainable in the eyes of the laws. No benefit in terms of said argument can be extended in favour of the appellants. Extended period of limitation - HELD THAT:- There is nothing brought on record by the appellants to falsify the said presumption. It is also apparent from record that the appellants Society has received gross value amounting to ₹ 110410414/- for various service receivers against the impugned service provided by them. Accordingly their tax liability was ₹ 12617613/-. However, from the documents resumed, it was observed by the Department that liability only for an amount of ₹ 1100940 has been discharged by the appellants Society and they are still liable to pay an amount of ₹ 11516673/-. These observations which have nowhere been denied by the appellant corroborate the appellants knowledge about their liability but suppression of discharge thereof. Resultantly, the circumstances of present case are held to have an element of wilful concealment or suppression of liability which under Section 77 entitles the Department to have a period of 5 years instead of one year to serve a show cause notice. There is no denial of the Department for Kendriya Vidhyalays also to be the service recipient of the appellants and that such services are exempted under Notification No.6/2014. Notification No.6/2014 dated 11 July, 2014 amends Notification No.25/2012-ST dated 20th June, 2012. Services provided to an educational Institution by way of security or cleaning or house keeping services performed in such educational institutions have been exempted from the Service Tax liability - the demand to the extent of service tax liability qua the services rendered by the appellant Society to Kendriya Vidhyalayas is not sustainable and same is liable to be set aside. Penalty on the office bearers - HELD THAT:- In view of the definition of company in Section 3 of Companies Act that the appellants Society is not a Company but a Co-operative Society whose affairs are to be handled by a committee of office bearers having a life span of five years. It is also apparent from the record that the impugned period of demand has two different set of office bearers. Seen from any stretch of imagination the penalty cannot be imposed upon all of them - once the penalty is imposed upon the appellants Society, none other can be burdened with the penalty for the same omission as is alleged against the Society. Appeal allowed in part. Central Excise 2021 (4) TMI 138 Revising the order of Rejection of refund claims - the appeals filed by Revenue (against grant of refund) were earlier dismissed on the grounds of monetary limit - benefits in terms of Notification No. 20/2007 CE dated 25.04.2007 - area based exemption - substantial expansion - HELD THAT:- In the recital of the impugned order the respondent No. 3 refused to accept that the petitioner complied with the requirement of the Notification No. 20/2007 dated 25.04.2007 regarding investments of fixed assets more than 25% towards expansion of the manufacturing unit. Although, the order of the Commissioner (Appeals) is referred to, however, the respondent No. 3 did not elaborate as to why it disagreed with the findings of the Commissioner (Appeals) although, the petitioners submitted their objections in response to the said show cause notice and had also referred to the findings of the Commissioner (Appeals) therein. The respondent No. 3 in its order held that although the appeals before the CESTAT have been withdrawn on the basis of monetary limits for pursuing litigation as prescribed by the Central Board of Excise and Customs, the respondent No. 3 was of the opinion that the CESTAT orders have not binding effect on the adjudication authority to take an particular stand in the matter. There is no discussion in the impugned order as to the effect of the findings of the fact which is reflected in the Commissioner (Appeals) order. Although, the Principle of Res Judicata is strictly not applicable to revenue matters, however, a finding of fact by a higher authority like the Commissioner (Appeals) cannot be ignored. The importance of the requirement of maintaining the judicial discipline by Quasi Judicial Authority like the respondent No. 3, as time and again been stressed upon by the Apex Court in catena of Judgments - In the case of Union of India and Ors Vs- Kamlakshi Finance Corporation Limited reported in [ 1991 (9) TMI 72 - SUPREME COURT ] held that the order of the Appellate Collector is pending on the Assistance Collector and the working within his jurisdiction order of the Tribunal is binding upon the Assistant Collector and the Appellate Collector who function under the jurisdiction of the Tribunal. The Principles of judicial discipline require that the orders of the higher appellate authority should be followed unreservedly by the Subordinate Authority. Sri Reddy is perhaps right in saying that the officers were not actuated by any mala fides in passing the impugned orders. They perhaps genuinely felt that the claim of the assessee was not tenable and that, if it was accepted, the Revenue would suffer. But what Sri Reddy overlooks is that we are not concerned here with the correctness or otherwise of their conclusion or of any factual mala fides but with the fact that the officers, in reaching their conclusion, by-passed two appellate orders in regard to the same issue which were placed before them, one of the Collector (Appeals) and the other of the Tribunal - The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. The finding of fact recorded by the Commissioner of Appeals in respect of the fulfillment of the requirement under Notification No. 20/2007 dated 25.04.2007 by the petitioner, in view of the dismissal of the Revenue appeals by the CESTAT has attained finality. Such findings of fact cannot be unilaterally disregarded by the Departmental Officer merely because it was not agreeable to them. It was incumbent upon the respondent No. 3 to reflect in its order, impugned in the present proceedings, the grounds and reasons for disregarding the said finding of fact by the Commissioner (Appeals) - In the absence of any clear finding by the respondent No. 3 to support its disagreement with the finding of fact by the Commissioner of Appeals, mere disagreement with the order of the Higher Authority, namely, Commissioner (Appeals) will be opposed to the Principle of judicial discipline required to be maintained by Quasi Judicial Officers exercising Quasi Judicial functioning. Such, actions of the respondent No. 3 cannot be countenanced in view of the law laid down by the Apex Court. Considering the fact that the disagreement by the respondent No. 3 with the findings of the Higher Appellate Authority, namely, the Commissioner (Appeals) is on factual aspect, records of which are available in the Department, the matter is remanded back to the authorities and the respondent authority is directed to pass appropriate orders afresh in the matter after giving adequate opportunities to the petitioner within a period of 3(three) months from today - Petition allowed by way of remand. 2021 (4) TMI 137 CENVAT Credit - input services - nexus with the output goods - expenses incurred in relation to after sales service - Has not the Hon'ble Tribunal committed an error in including within the ambit of Input Services, the services rendered by a third party, contrary to the confined meaning assigned to input services defined in Rule 2(I) of CENVAT Credit Rules, 2004? - HELD THAT:- The facts clearly show that there is direct nexus between the activity of TVSFS with that of the activity of the assessee. It is clear from the exclusive arrangement between the assessee and TVSFS. The expansive definition requires to be applied in this case and as noted, the Memorandum of Understanding provides for exclusive retail financing of two wheelers manufactured by the assessee, which results in promotion and expansion of sale of two wheelers manufactured by the assessee and payments are received by TVSFS from the assessee and as the services are taxable under Business Auxiliary Services, TVSFS has obtained registration under the Act, as provided under Rule 4 of the Service Tax Rules, 1994. Thus, as long as services of TVSFS in relation to financing of the vehicles manufactured by the assessee promotes the sale of vehicles manufactured by the assessee, such service is taxable under Business Auxiliary Services. The Tribunal had rightly allowed the assessee's appeal - Revenue has not made out any grounds to interfere with the impugned order - Appeal dismissed. 2021 (4) TMI 122 CENVAT Credit - sale of discarded scrap, i.e. used empty drums and empty bags - applicability of Rule 6 (3) of Cenvat Credit Rules, 2004 - HELD THAT:- The perusal of Rule 6(3) makes it abundantly clear that Rule 6(3) is applicable only to the manufacturers that too those who manufacture two classes of the goods i.e. non-exempted and exempted goods. Apparently and admittedly the appellant herein is manufacturing only one kind of goods which is PP woven fabric. Admittedly the empty polythene bags of raw-material and the empty drums of power oil as have been cleared by the appellant, irrespective for consideration, are not the goods manufactured by the appellants. There has been an amendment in the Rule w.e.f. 01.03.2015 by virtue of Notification 06/2015 and the following explanation has been inserted - irrespective of the said amendment, scope of Rule 6 is still with respect to the inputs/inputs services used in or in relation to the manufacture of exempted goods along with manufacture of non-exempted goods. Hence, irrespective, exempted goods include non-excisable goods in view of the amendment in terms of Notification No. 6/2015 dated 01.03.2015 unless and until such exempted goods are manufactured that too alongwith the non-exempted goods by the assessee, applicability of Rule 6 does not at all arise. Thus, the said Rule has wrongly been invoked in case of the appellant for demanding the reversal of Cenvat Credit availed by him at the rate of 6% of the value of empty packets of raw-material and empty drums of the oils used by the appellant in manufacture of PP woven fabric when cleared for consideration - appeal allowed - decided in favor of appellant. 2021 (4) TMI 117 100% EOU - Refund of unutilized Cenvat credit availed on inputs/input services - export of goods - appellant had not physically exported their goods but cleared the same to another EOU - physical export or not - HELD THAT:- In the present case, the appellant is a 100% EOU, which has admittedly supplied the goods to another EOU and filed refund claims under Rule 5 read with Notification No.27/2012 dt. 18/06/2012. Further it is found that the goods were supplied by the appellant to another EOU after coming into force of the amendment in Rule 5. Further I find that with the insertion of clause (1A) in Explanation 1 to Rule 5 came into force vide Notification No.6/2015-CE(NT) dt. 01/03/2015 whereby export goods means any goods which are to be taken out of India to a place outside India, which means that there has to be a physical export and therefore deemed exports are not entitled for cash refunds. This Tribunal in the case of M/S. WAVE MECHANICS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX, BANGALORE NORTH [ 2019 (8) TMI 758 - CESTAT BANGALORE] has held that cash refund is not admissible under rule 5 of CENVAT Credit Rules read with Notification No.27/2012-CE dt. 18/06/2012 in respect of clearances made by one EOU to another EOU on IUT basis. It was also held that the amounts in respect of cash refund has been claimed were debited in the cenvat credit account at the time of filing the refund claim as required under the said Notification and the appellant was entitled to take recredit of the cenvat credit. Further after going through the sub-section 3 of Section 142 of CGST Act, it is found that as per the said sub-section, every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944. The impugned order denying the cash refund is not sustainable in law and the appellant is entitled to cash refund as per sub-section 3 and sub-section 6(a) of Section 142 of CGST Act - Appeal allowed. CST, VAT & Sales Tax 2021 (4) TMI 139 Disallowance of discount from the taxable turnover - discount was not actually deducted from the sale bill/voucher - non-fulfilment of conditions of Rule 19 (a) (i) of J K General Sales Tax Rules, 1962 - HELD THAT:- In the cases at hand, the documents on record reveal that every voucher provides for 1% turnover discount, meaning thereby that the discount has been actually allowed as per the agreement/understanding of the parties. The said discount stand deducted as a credit note in respect thereof is issued simultaneously to be adjusted later on or by re-imbursement. It is not the case of anyone that the dealer has paid the actual price of the goods mentioned in the voucher and not the lesser amount by way of discount. In fact, upon re-imbursement as per credit note, the actual price paid by the dealer stand reduced. There is no evidence that the dealer paid to the assessee the original value of the goods and not the discounted price - the authorities below have adopted a too technical an approach in disallowing the deduction of discount from the taxable turnover of the assessee. The Tribunal is not justified in disallowing 1% discount from the taxable turnover of the assessee and the findings that the assessee does not fulfil the conditions of Rule 19 of the Rules are perverse and not tenable - Reference allowed. 2021 (4) TMI 136 Violation of principles of natural justice - specific personal hearing notice to the assessee not issued by assessing authority - reversal of Input Tax Credit (ITC) on furnace oil and LSHS oil - HELD THAT:- The impugned order will have to be set aside for the simple reason that the assessing authority did not give specific personal hearing notice to the assessee. Of course, in the impugned order, it has been mentioned that the authorised signatories were allowed to discuss the issue many times and no additional details were adduced. Of course, there was informal interaction between the assessee on the one hand and the authority on the other. When Section 27 of the TNVAT Act, 2006 contemplates grant of personal hearing to the assessee, it will have to be fulfilled only by issuing personal hearing notice. In the case on hand, no personal hearing notice was issued - non-issuance of independent personal hearing notice had indeed vitiated the impugned proceedings. Input Tax Credit (ITC) - HELD THAT:- The Hon'ble Division Bench of the Orissa High Court in the case of Reliance Industries Ltd. vs Asst. Commissioner Of Sales Tax [ 2008 (5) TMI 620 - ORISSA HIGH COURT ] held that the furnace oil was used in the process of manufacturing of the final product and it has to be treated only as an input tax credit and that therefore, the input tax paid on the purchase of furnace oil can be claimed as input tax credit - assessee has been contending right from the inception that the furnace oil is being utilised only for maintaining the heat for the purpose of smelting copper and that it was not used for production of electricity. This issue could have been resolved only by holding proper study and conducting spot inspection and verifying the manufacturing process of the assessee. This exercise was not undertaken. It is for this reason, the learned counsel for the petitioner submitted that the matter will have to be revisited by the authority - the matter is remitted to the file of the assessing authority to pass orders afresh in accordance with law - Petition allowed by way of remand. 2021 (4) TMI 133 Restriction on Input tax credit - job-work - purchase of capital goods which are wholly or partially used in the business of the taxable goods - non-differentiation of difference between the trading goods and capital goods in case of utilizing them for other purposes other than trade - Rule 131 of the KVAT Rules - HELD THAT:- From Sections 12 and 17 of the KVAT Act, it is crystal clear that when the goods are partly used in their business of taxable goods and partly used for any other purpose (other than sale, manufacturing, processing, packing or storing of goods), then the apportionment has to be done keeping in view the formula prescribed under Rule 131 of the KVAT Rules. In the present case, the petitioner has purchased capital goods from local Registered Dealers and claimed the benefit of input tax credit on such purchase. It is an admitted fact that the petitioner has not only used the capital goods for the purpose of manufacturing or processing the taxable goods but also for non taxable transactions, like job work - The procedure to claim the benefit of input tax rebate in respect of local Registered Dealer purchases of capital goods is laid down under Rule 133 of the KVAT Rules. The amended Rule 133 came into force w.e.f., 1.4.2006 and provides that where a registered dealer carries on the business in taxable as well as exempted goods or exempted transactions and taxable transactions, the input tax deduction on capital goods be allowed proportionately, keeping in view the formula laid down under Rule 131 of the KVAT Rules. Rule 133(c) of the KVAT Rules clearly specifies that where the use of capital goods relates, to both the sale of goods in the course of export out of the territory of India or sale of taxable and exempt goods and also to taxable goods that are disposed otherwise than by way of sale or non taxable transactions, the non deductiable element of input tax shall be calculated on the basis of the formula specified under Rule 131 of the KVAT Rules. The orders passed by the authorities and the Tribunal do not warrant any interference as apportionment was rightly done keeping in view the formula provided under Rule 131 of the KVAT Rules - substantial questions of law are answered against the petitioner and in favour of the Revenue - Petition dismissed. 2021 (4) TMI 128 Violation of principles of natural justice - failure to to produce the order till despatch of the order - Penalty imposed on suppressed turnover - HELD THAT:- This Court had issued notice before admission and granted stay in respect of the proceedings pertaining to the alleged defect No.10 pointed out in the revised notice under Section 25(1) of the KVAT Act which is placed on record at Ext.P3. The impugned order at Ext.P1 is quashed and set aside and the matter of assessment is remitted to the concerned officer for deciding the same afresh after hearing the petitioner and after considering the effect of the orders passed by this Court - petition allowed by way of remand. 2021 (4) TMI 125 Omission to report purchase value - wrong availment of input tax credit - assessment of tax on deemed assessment basis under Section 22(2) of the TNVAT Act, 2006 - contention of the department is that the petitioner who is a dealer in cements and who availed trade discount from the manufacturer, did not adhere to the parameters laid down in Section 19(20) of TNVAT Act, 2006 r/w Rule 10(6)(b)(ii)(c) of TNVAT Rules, 2006 - HELD THAT:- The respondent without any basis had concluded that the petitioner has disturbed the tax component. It is certainly open to the manufacturer to reward the petitioner with trade discount and by no stretch of imagination, that can be added to the taxable turnover of the petitioner for the purpose of coming to the conclusion that the petitioner had wrongly availed ITC. Petition allowed.
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