Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 5, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Central Excise
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17/2023 - dated
3-4-2023
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CE
Prescribe rates of Special Additional Excise Duty for exports of petrol and diesel - Seeks to further amend No. 04/2022-Central Excise, dated the 30th June, 2022 , to reduce the Special Additional Excise Duty on Diesel.
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16/2023 - dated
3-4-2023
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CE
Special Additional Excise Duty on production of Petroleum Crude and export of Aviation Turbine Fuel - Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022 to reduce the Special Additional Excise Duty on production of Petroleum Crude.
Customs
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29/2023 - dated
3-4-2023
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Cus
Exemption for customs duty on cut and polished diamonds imported by specified agencies in FTP - Gemological Science International Pvt. Ltd., Mumbai, Maharashtra added in Name of laboratory/agency list - Seeks to amend Notification No. 40/2015-Customs, dated the 21st July, 2015
GST - States
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04/2023 - State Tax (Rate) - dated
23-3-2023
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Maharashtra SGST
Seeks to amend notification No 02/2017- State Tax (Rate) dated 29th June, 2017
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03/2023 - State Tax (Rate) - dated
23-3-2023
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Maharashtra SGST
Seeks to amend Notification No 01/2017- State Tax (Rate) dated 29th June, 2017
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02/2023-State Tax (Rate) - dated
23-3-2023
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Maharashtra SGST
Seeks to amend Notification No 13/2017- State Tax (Rate) dated 29th June, 2017
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01/2023-State Tax (Rate) - dated
23-3-2023
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Maharashtra SGST
Seeks to amend Notification No 12/2017- State Tax (Rate) dated 29th June, 2017
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F.12(11)FD/Tax/2023-07 - dated
1-4-2023
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Rajasthan SGST
Notification regarding extension of limitation under Section 168A of RGST Act
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F.12(11)FD/Tax/2023-06 - dated
1-4-2023
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Rajasthan SGST
Notification regarding Amnesty to GSTR-10 non-filers
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F.12(11)FD/Tax/2023-05 - dated
1-4-2023
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Rajasthan SGST
Notification regarding rationalisation of late fee for GSTR-9 and Amnesty to GSTR-9 non-filers
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F.12(11)FD/Tax/2023-04 - dated
1-4-2023
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Rajasthan SGST
Notification regarding Amnesty Scheme for deemed withdrawal of assessment orders issued under Section 62
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F.12(11)FD/Tax/2023-03 - dated
1-4-2023
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Rajasthan SGST
Rajasthan Goods and Services Tax (Amendment) Rules, 2023
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F.12(11)FD/Tax/2023-02 - dated
1-4-2023
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Rajasthan SGST
Notification regarding extension of time limit for application for revocation of cancellation of registration
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F.12(11)FD/Tax/2023-01 - dated
1-4-2023
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Rajasthan SGST
Amendment in Notification No. F.12(46)FD/TAX/2017-Pt-III-153, dated the 29th December, 2017
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Validity of Revision u/s 263 by CIT - As per PCIT AO omitted to examine the transaction of transfer of land held as “Stock-in-trade” in the light of the provision of Section 43CA - reading of the entire agreement would show that there was no transfer or sale of asset under the Joint Development Agreement rather the agreement was to develop the land making it saleable and in view of the construction of the same, the developer would take a part of the stock-in-trade. - ITAT rightly granted relief to assessee - HC
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Interest levied u/s. 234B - Liability of advance Tax - TDS was not deducted by the payer - The assessee was aware about the delay in deposit of tax and filing of return and therefore the onus cannot be shifted to the buyer. The action of the Ld. Revenue Authorities cannot be at fault and therefore the confirm the order of the Ld. CIT (A)-NFAC. - AT
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Late filing fee u/s. 234E - since the assessee has filed its TDS returns on 07/06/2016 whereas the due date is 15th May, 2016 which is after the date of insertion of specific provision for levy of late fee U/s. 234E ie., 01/06/2015. Therefore, the action taken by the Ld. AO in levying the late fee for default in furnishing the TDS statement beyond the stipulated time is in accordance with law. - AT
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Withholding Tax (TDS) u/s 195 - payment of distribution fees - treatment as Royalty / FTS - DAPE [Dependent Agent Permanent Establishment - the Assessee cannot be treated as DAPE of GIL. Accordingly the distribution fees paid by the assessee to GIL is not liable for TDS u/s. 195 of the Act and therefore no disallowance u/s.40(a)(i) is warranted. - AT
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Addition u/s 10AA - SEZ unit - assessee cannot be denied the benefit upon the conversion from the proprietorship concern to the partnership firm. Likewise, there was also no allegation of the AO that the present assessee came into existence after splitting up or the reconstruction of the existing business or undertaking. It is for the reason that there is no violation of the conditions applicable for claiming the deduction u/s 10AA - AT
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Double counting of the revenue - Additions on the basis of Form 26AS - the assessee itself has furnished copy of bank statements and summary reconciliation sheets before learned DRP, we do not see any reason, why they could not be furnished before the Assessing Officer. - AT
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Correct head of income - Business Income or capital gain - assessee decided to sale the agriculture land, due to compulsion, hence assessee cannot be treated as a trader in land and therefore his income cannot be assessed under the head “Business Income”. Hence, these above facts prove, that intention of the assessee is to hold the land as Capital Assets, therefore, we direct the assessing officer to assess the assessee`s transaction under the head capital gain. - AT
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Addition u/s 69A in respect of unexplained money - search and seizure u/s 132 - In the WhatsApp messages, it was never stated that the money belonged to the assessee but it was stated to be transactions between the concerns/parties of GPT Group and others. Addition cannot be sustained as it based on the SMS or WhatsApp messages without any corroborative evidences. - AT
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Penalty u/s 271(1)(c) - The prerequisites towards applicability of Explanation-5A has not been demonstrated by the Revenue either in the penalty order or the first appellate order thereon. Thus, the imposition of penalty under the shelter of Explanation 5A is clearly without sanction of law. - AT
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Revision u/s 263 - Unexplained cash deposits - Merely because documents, noted by the AO to be produced by the creditor of source of cash deposit in response to summons issued to him u/s. 131 were not found in the case records, that cannot be the reason for holding the assessment order to be in error for accepting the genuineness of the source of cash deposit. The fact of issuance of summons by the AO is not doubted or disputed by the Ld. PCIT. - Revision order set aside - AT
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Claiming interest u/s 244A on the excess tax deposited by the assessee under self-assessment - From the reading of the provisions of section 244A as were applicable to the AY under appeal it is unambiguous that minimum limit of 10% of refund would not be applicable on payment of interest on refund. - AT
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Disallowance of deduction u/s 35AD - leasing out of Godown for non agriculture purpose - skimmed milk does not constitute “agricultural produce” - the whole deduction claimed by the assessee could not be denied u/s. 35AD of the Act and in view of the provisions of section 35AD(7B) of the Income Tax Act as it stood at the relevant time, in our considered view, the CIT(A) had correctly restricted the disallowance only with respect to the godown leased out to Banas Dairy for the “non-agricultural” purposes - AT
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Disallowance of guarantee commission - in case the assessee has incurred expenses towards payment of guarantee commission as proposed pertaining to the relevant assessment years, the AO is required to allow the expenses - AT
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tion u/s. 56(2)(viib) - Issue of additional shares at premium while splitting the existing shares - As observed by the Tribunal in its aforesaid order, such allotment of additional shares would be akin to changing a one thousand rupee note for two five hundreds rupee notes. Accordingly, as stated by the Ld. AR, and, rightly so, the provisions of section 56(2)(viib) of the Act in the backdrop of the facts of the case before us could not have been triggered. - AT
Customs
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Validity of customs notification - anti-dumping duty - sunset review - If the contention of the appellant that the notification has to be issued during the life time of the existing anti-dumping duty under the first proviso to section 9A(5) is not accepted, then the notification dated 09.06.2020 would be a valid notification. If the contention of the appellant is not accepted, the notification dated 09.06.2020 would still be a valid notification because the time limit gets extended in view of the provisions of section 6 of the 2020 Act. - AT
Indian Laws
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FSSA - Restriction / Prohibition on the manufacture, storage, distribution or sale of Gutka, Pan Masala, flavoured/scented tobacco, Kharra and similar products - the COTPA is a comprehensive legislation dealing with the sale and distribution of scheduled tobacco products and therefore, occupies the entire field relating to tobacco products. Therefore, the COTPA, being a special law, occupies the entire field for tobacco and tobacco products and would prevail over the FSSA which is a general law. - HC
IBC
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CIRP proceedings and approval of resolution plan - judgement has been obtained by playing fraud with the Court or not - The applicant in the present application has admitted that the Management of the company is under Administrator. Once Administrator was there, in normal course having been satisfied that by committing fraud judgement was obtained, then in that event it was expected for applicant No.2 to request the Administrator to take appropriate steps. - AT
Central Excise
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Violation of principles of Natural Justice - case of petitioner is that prior to issuance of show cause notice a pre-show cause notice consultation is mandatory - the situation has been remedied by fixing the date for the pre-show cause notice consultation - Accordingly, the Petitioner will appear before the concerned Adjudicating Authority on specified date - HC
VAT
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Reasonable Period of time, for providing information - The question as to what is a reasonable period of time for providing information is necessarily required to be determined in the facts of each case. In the given facts of the present case, the question is required to be answered in the affirmative; that is, in favour of the appellant and against the Revenue. - HC
Case Laws:
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GST
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2023 (4) TMI 119
Cancellation of GST registration of petitioner - non-filing of GST and monthly returns for over 6 months - HELD THAT:- Reliance placed upon the decision of the Principal Bench of this Court in TVL. SUGUNA CUTPIECE CENTER VERSUS THE APPELLATE DEPUTY COMMISSIONER (ST) (GST) , THE ASSISTANT COMMISSIONER (CIRCLE) , SALEM BAZAAR [ 2022 (2) TMI 933 - MADRAS HIGH COURT ] , wherein, it was held that no useful purpose would be served by keeping the petitioners out of the Goods and Services Tax regime, as such assessee would still continue to do business and supply goods and services. Since the issue involved in this writ petition is similar, the writ petition is disposed of in terms of the guidelines provided in the order in Tvl.Suguna Cutpiece vs. Appellate Deputy Commissioner (ST) (GST) and others.
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Income Tax
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2023 (4) TMI 118
Revision u/s 263 - Addition u/s 68 - whether there was no enquiry conducted by the Assessing Officer warranting exercise of jurisdiction by the Principal Commissioner of Income Tax u/s 263 ? - HELD THAT:- Assessee having not proved the genuineness of the claim, the creditworthiness of the companies in which they had invested and the identity of the persons to whom the transactions were done, have to necessarily fail. In such factual scenario, the AO as well as the CIT(A) have adopted an inferential process which we find to be a process which would be followed by a reasonable and prudent person. AO and the CIT (A) have culled out proximate facts in each of the cases, took into consideration the surrounding circumstances which came to light after the investigation, assessed the conduct of the assessee, took note of the proximity of the time between the buy and sale operations and also the sudden and steep rise of the price of the shares of the companies when the general market trend was admittedly recessive and thereafter arrived at a conclusion which in our opinion is a proper conclusion and in the absence of any satisfactory explanation by the assessee, AO were bound to make addition u/s 68 - Decided in favour of the revenue.
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2023 (4) TMI 117
Validity of Revision u/s 263 by CIT - As per PCIT AO omitted to examine the transaction of transfer of land held as Stock-in-trade in the light of the provision of Section 43CA - ITAT holding that the very initiation of revisional proceedings u/s 263 taken against the assessee is void - whether the transaction under the Joint Development Agreement should be envisaged as transfer exigible to tax by reference under Section 4(47)(v) of the Act read with Section 53A of the Transfer of Property Act, 1882? HELD THAT:- Assessment was a re-assessment proceedings under Section 147 of the Act and from the reason furnished from reasons furnished by the Assessing Officer for re-opening the assessment, we find this very issue was the reason for re-opening and there was a proposal to tax the long term capital gains which, in the opinion of the AO, had escaped assessment. The assessee submitted detailed reply objecting to the re-opening proceedings. From the above clause in the Joint Development Agreement, it is crystal clear that the assessee continued to be the owner of the property throughout the development of the property and there is no transfer of ownership to the developer. This aspect, in our opinion, was rightly noted by the Tribunal - reading of the entire agreement would show that there was no transfer or sale of asset under the Joint Development Agreement rather the agreement was to develop the land making it saleable and in view of the construction of the same, the developer would take a part of the stock-in-trade. The facts of the case in Balbir Singh Maini [ 2017 (10) TMI 323 - SUPREME COURT] was more or less identical to the case on hand and after reading the Joint Development Agreement, the Hon ble Supreme Court found that the owner continues to be the owner throughout the agreement at any state purported to transfer rights akin to ownership to the developer. This is exactly the nature of transaction in the case on hand. The registering authorities have not treated the agreement as a deed of conveyance but have calculated the stamp duty by treating the same under Article 4, 5(f) of Schedule 1A of the Indian Stamp Act. The Explanation under Clause (vi) of Clause 5(f) states that the expression Agreement or Memorandum of an Agreement if relating to a sale shall include an agreement to sell or any memorandum or acknowledgement in relation to transfer or deliver of possession of immovable property with an intent to transfer right, interest in, or title to, such property at any future date. This expression was noted and the registering authorities have calculated the stamp duty on the said amount at the fixed rate and not treating it as a conveyance deed. Thus, we are of the considered view that the Tribunal took note of the factual position and applied the correct legal principle and granted relief to the assessee. Decided against the revenue.
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2023 (4) TMI 116
Delayed payment of employee s contribution to PF/ESI - addition u/s 36(1)(va) r.w.s. 43B - HELD THAT:- In view of the law emerging from the decision of the Supreme Court in Checkmate Services (P) Ltd.[ 2022 (10) TMI 617 - SUPREME COURT ] the contentions and the questions raised by the appellant could be said to be no longer res integra. The law as holding the field operates against the appellant.
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2023 (4) TMI 115
Reopening of assessment - Validity of notice u/s 148A - principal allegation levelled against the petitioner is, that it is a beneficiary of accommodation entries provider - HELD THAT:- GSTIN of the supplier is adverted to in the first column of the document placed before us. The GSTIN referred to therein matches with the GSTIN placed on the invoices issued by Balaji Enterprises and Dev Sales Corporation. The impugned order passed under Section 148A(d) of the Act does not deal with this aspect of the matter. AO primarily proceeds against the petitioner, based on the fact that Balaji Enterprises was not found at the given address. There could be several reasons, as to why Balaji Enterprises was not found at the given address. What the AO is required to prima facie establish, is that the stand of the petitioner, which is that it had obtained supply of the readymade garments from the aforementioned entities was false. AO has not done his due diligence in that behalf. Therefore, according to us, the best way forward would be to set aside the order dated 28.03.2022 passed under Section 148A(d), and the consequential notice of even date i.e., 28.03.2022 issued u/s 148A(b) of the Act concerning AY 2018-19.
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2023 (4) TMI 114
Characterization of receipt/income - Taxability of sales tax subsidy as already offered for taxation by the assessee in its return of income - CIT(A) admitting the grounds of appeal for the first time - HELD THAT:- This ground is squarely covered by the decision of this Court in the case of Principal Commissioner of Income Tax vs. Krishi Rasayan Exports [P] Ltd [ 2022 (9) TMI 840 - CALCUTTA HIGH COURT] as held the incentives would have to be held capital and not revenue - once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that the subsidy took a particular form and the fact that it was granted only after commencement of production would make no difference - Decided in favour of assessee.
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2023 (4) TMI 113
Addition u/s 68 - disallowance of interest - dubious existence of loan creditors and genuineness of related transaction - Facts brought on record by the assessing officer on physical non-existence of the companies extending loans - ITAT deleted the addition - HELD THAT:- Creditworthiness of the lenders of the respondent/assessee have been examined in depth the factual details have been noted and all the lenders of the respondent/assessee have directly submitted documents before the AO. AO proceeded to hold the Company under the control of Shri Raj Kumar Kothari to be sold company only by referring to certain answers given by the selected questions. The said answers have been recorded by the said Mr. Kothari and also specifically alleged that it was obtained under threat and coercion. Both the CIT[A] as well as the tribunal had independently assessed the factual position and arrived at a decision. CIT[A] had also noted the decision of this court in the case of CIT vs. M/s. Dataware Private Limited [ 2011 (9) TMI 175 - CALCUTTA HIGH COURT] and allowed the appeal filed by the assessee. Tribunal while affirming the said order has given elaborate reasons as to how the creditworthiness of the lenders have been established. No substantial question of law arising for consideration in this appeal.
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2023 (4) TMI 112
Interest levied u/s. 234B - Liability of advance Tax - TDS was not deducted by the payer - delay in deposit of tax and filing of return - whether for the purpose of working out Advance Tax payable, the Tax deductible has to be reduced and according to the said provision no Advance Tax need to be paid? - HELD THAT:- Assessee was aware of the fact that the tax has not been deducted U/s. 195 of the Act and he was required to deposit the Advance Tax by 31st March of the previous year. The assessee was aware about the delay in deposit of tax and filing of return and therefore the onus cannot be shifted to the buyer. The action of the Ld. Revenue Authorities cannot be at fault and therefore the confirm the order of the Ld. CIT (A)-NFAC. CIT(A)-NFAC has rightly appreciated the facts of the case as well as the provisions of the IT Act, 1961 before deciding the issue on hand against the assessee. Therefore, we are of the considered opinion that there is no infirmity in the order of the Ld. CIT(A)-NFAC and no interference is required in the order of the Ld. CIT (A) -NFAC on this issue. Appeal filed by the assessee is dismissed.
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2023 (4) TMI 111
Revision u/s 263 - treating the capital gains on sale of agricultural lands as short term capital gains - only contention of the Ld. Pr. CIT is that the assessee has purchased the land in Acres and sold the same in Square Yards within a span of one month for a huge consideration - HELD THAT:- Assessee has acted as a intermediary for the purchase and sale of agricultural lands during the impugned assessment year. CIT erred in appreciating the fact that the purchase and sale of land within a span of one month cannot alter the character of the land as established by the assessee. Certificate issued by the Village Revenue Officer, Devarapalli, dated 24/2/2023 has confirmed the land as an agricultural land. There is also no dispute by the Revenue on the consideration received by the assessee. In our considered opinion, since the said lands were entered into the Revenue Records as agricultural lands which was not disputed by the Revenue, the gain on sale of land cannot be considered as capital gains for the purpose of the Act. Pr. CIT has not brought on record that the assessee has sought any permission for conversion of the agricultural land to non-agricultural land. Since the character of the land remained as agricultural land both on the date of purchase and on the date of sale, it is a sale of agricultural land and no capital gains arise on the sale of such agricultural land and we therefore have no hesitation to quash the order of the Ld. Pr. CIT on this issue. Accordingly, the appeal of the assessee is allowed.
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2023 (4) TMI 110
Disallowance of foreign exchange fluctuation loss - HELD THAT:- The loss on foreign exchange fluctuation loss has to be added to the cost of the asset and depreciation has to be allowed on this but such foreign exchange fluctuation loss cannot be allowed as a revenue expenditure. The ground raised by the assessee is accordingly decided in the above terms. Addition of notional interest being interest free advance given to different persons - Disallowance of interest expenditure - addition being the interest @ 12% on advances given to various persons on the ground that interest bearing funds have been diverted for non-business purposes - HELD THAT:- Since the advance paid to Vijayawada Project is continuing in this year also and since the issue has already been decided by the Tribunal and the AO in the consequential order has allowed the same, therefore, no disallowance of interest on this amount issue is called for. Accordingly AO is directed to delete the disallowance of interest. So far as the balance amount we find an amount arises from the running account maintained with the holding company and the assessee company wherein funds were transferred as per the business requirement - no notional interest on such recurring transactions is called for. Accordingly, we direct the AO not to charge any notional interest. Rent deposit given to Kamineni Estates (P) Ltd., for the purpose of leasing a space to operate a Wellness Centre - No addition of notional interest on account of rental advance for lease of property in our opinion can be made since the same is for business purposes. Similarly, the disallowances of notional interest on the advances given to professionals who are doctors in our opinion cannot be made - we are of the considered opinion that the CIT (A) is not justified in sustaining the addition of proportionate notional interest on the advances to professionals made by the AO - The various other advances do not call for disallowance of notional interest. Accordingly, the same is directed to be deleted. The second issue raised by the assessee is accordingly allowed.
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2023 (4) TMI 109
Revision u/s 263 by CIT - disallowance of capital gains claimed u/s. 54F - main contention of the Ld. Pr. CIT is that the assessee has not complied with the conditions laid down u/s. 54F(4) where the assessee should deposit the net sale consideration on or before the due date of filing of return of income u/s.139(1) - HELD THAT:- Section 54F(4) of the Act mandates that in the intermediary period of buying the residential house, the assessee shall deposit the amount under Capital Gain Account Scheme to avail the benefit of deduction U/s. 54F of the Act. In the instant case, the assessee has not deposited the net sale consideration under the Capital Gain Account Scheme however, as stipulated by the time frame U/s. 54F(1) - assessee has utilized the entire net sale consideration for the purpose of buying the residential property. Section 54F is a beneficial provision and should be interpreted liberally and Revenue Authorities have to see the end utilization of the net sale consideration in the way prescribed in section 54F - no hesitation to quash the order of the Ld. Pr. CIT passed U/s. 263 of the Act. Appeal of the assessee is allowed.
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2023 (4) TMI 108
Additional ground of appeal raised by assessee for the first time before Tribunal - addition on account of cash deposit in bank account and other credit entry - HELD THAT:- Admittedly, the addition was not raised by assessee before NFAC/Ld. CIT(A). Though, the assessing officer completed assessment u/s 144, yet before passing the assessment no specific show cause notice was issued for making addition. Thus, additional ground of appeal raised by assessee for the first time before Tribunal. Therefore, this additional ground of appeal is admitted for adjudication and restored back to the file of Assessing Officer to consider it afresh, in accordance with law after providing reasonable opportunity of hearing to assessee. The assessee is directed to produce evidence before Assessing Officer as and when called for. This additional ground of appeal is allowed for statistical purposes in above terms. Assessee has not filed any confirmation from his fellow agriculturists in respect of borrowing - NFAC/Ld. CIT(A) neither verified / investigated nor called for remand report from the Assessing Officer. The assessee furnished complete details of agricultural land of such borrowers, though the NFAC/Ld. CIT(A) upheld the addition partly for the want of confirmation. Assessee has primarily discharged his onus by furnishing names and address of such borrowers to prove of identity and creditworthy of lender in the form of agricultural holding. Therefore, this ground of assessee is also restored back to the file of AO for considering the evidence furnished by assessee and to pass a speaking order in accordance with law. Appeal of the assessee is allowed for statistical purposes.
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2023 (4) TMI 107
Late filing fee u/s. 234E - intimation issued U/s. 200Ain respect of defaults before 01/06/2015 - HELD THAT:- As in the instant case since the period of default was before the said date ie., 01/06/2015, there is no merit in charging late filing fee U/s. 234E of the Act. Accordingly the Ld. AO is directed to delete the fee levied U/s. 234E in the order passed U/s. 200A - Since hold that the no late filing fee is to be charged, the consequential interest charged U/s. 220(2) of the also does not survive. Thus, the grounds raised by the assessee are allowed. Whether the return pertaining to the period prior to 01/06/2015 but filed after 01/06/2015 and processed after 01/06/2015 attract the amended provisions of section 200A r.w.s. 234E inserted w.e.f 01/06/2015 which is a specific provision for levy of fee for default in furnishing the TDS statements belatedly? - AO vide order passed U/s. 200A, dated 10/06/2016 imposed a late fees u/s. 234E of the Act. In this case since the assessee has filed its TDS returns on 07/06/2016 whereas the due date is 15th May, 2016 which is after the date of insertion of specific provision for levy of late fee U/s. 234E ie., 01/06/2015. Therefore, the action taken by the Ld. AO in levying the late fee for default in furnishing the TDS statement beyond the stipulated time is in accordance with law. As well, the Ld. CIT(A), NFAC without discussing the issue on merits, dismissed the assessee s appeal on the issue of condonation of delay. Therefore, have no hesitation to come to a conclusion that the orders of the Ld. Revenue Authorities invoking the provisions of section 234E in order to levy late fee for default in furnishing the TDS statement beyond the stipulated time is in accordance with law and accordingly the grounds raised by the assessee are hereby dismissed.
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2023 (4) TMI 106
Rejection of books of accounts - disallowance of deduction of the amount payable by the assessee towards distribution right of AdWord program - assessee has reflected the receipts towards AdWord Program from various customers net of the distribution fees payable to GIL though the TDS is claimed on the gross receipts distribution fee should be held to be royalty / fees for technical services ( FTS ) as per Article 12 of the DTAA - HELD THAT:- From the factual findings and given that there is no adverse finding with regard to the books of accounts, in our view the action of the AO by rejecting the books to recast the P L with an intention to disallow distribution fee paid by the Assessee to GIL is not tenable. The grounds 2 to 4 with regard to rejection of books of accounts are accordingly held in favour of the assessee. Disallowance of distribution fee u/s.40(a)(i) - payment of distribution fees - treatment as Royalty / FTS - whether the assessee is the DAPE [Dependent Agent Permanent Establishment] of GIL and whether the assessee is required to deduct tax at source u/s.195 on the impugned payments accordingly? - case of the revenue is that the assessee being the agent of GIL, the distribution fees is taxable in India i.e. assessee being the PE of GIL and therefore the payment is disallowed u/s.40(a)(i) in the hands of the assessee for failure on the part of the assessee to deduct tax at source - HELD THAT:- As pursuant to the terms of the Distribution Agreement the Assessee entered into contracts with advertisers in India called Google India Private Limited Advertising Program Terms and perusal of the sample invoice raised by the Assessee on an advertiser shows that the Assessee has raised the invoice and collected payments from the advertiser in its own name and right. Also noticed that the coordinate bench in assessee s own case found the Assessee to be the distributor of the Google AdWords Program and therefore, the characterization as a distributor would mean that the Assessee is not an agent as per the findings of the Hon ble Tribunal. Further the Distribution Agreement between the Assessee and GIL as well as Standard Contract entered into by the Assessee and advertisers in India do not contain any clauses that can lead to the conclusion that the Assessee has any authority to bind GIL. Considering discussion with respect to the clauses in the Distribution agreement between the assessee and GIL, the invoices raised on advertisers and the relevant Articles of DTAA between India and Ireland, we hold that the Assessee cannot be treated as DAPE of GIL. Accordingly the distribution fees paid by the assessee to GIL is not liable for TDS u/s.195 of the Act and therefore no disallowance u/s.40(a)(i) is warranted. Grounds 5 to 9 is held in favour of the assessee. Attribution of additional profits in the hands of the assessee - Stand of the revenue for making the addition is not tenable since each assessee has to be assessed in respect of income that accrues or is received by it, unless by a statutory enactment, the income of another is permitted to be assessed in the hands of a person. Therefore, the Assessee can only be assessed in respect of the amount it retains pursuant to the contract, which it has entered into with GIL and therefore the addition made by applying the notional rate of profit in the distribution fees is not sustainable. Appeal of assessee allowed.
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2023 (4) TMI 105
Addition u/s 10AA - such deduction was not claimed by the assessee in original return of income - Whether the deduction can be claimed under the provisions of section 10AA of the Act in the revised return of income? - Whether filing of return within due dale is not a pre-requisite condition for claim of deduction u/s 10AA of the act? - HELD THAT:- It is the admitted position that the assessee has claimed the exemption under the provisions of section 10AA of the Act wherein there is no mandate to file the return of income within the time specified under section 139(1) of the Act for claiming the deduction unlike the proviso under the provisions of section 10A(IA) requiring the assessee to file the return of income within the time specified under section 139(1) of the Act for claiming the deduction. Thus, in the absence of any specific provision under the provisions of section 10AA of the Act to file the return of income within the provisions of section 139(1) of the Act, the assessee cannot be deprived of the benefit granted under the statute for the deduction under the provisions of section 10AA of the Act in the given set facts and circumstances. The claim of the assessee was allowed in the case of CIT versus Mitesh Impex [ 2014 (4) TMI 484 - GUJARAT HIGH COURT] even such claim was not made in the Income Tax Return and it was raised 1st time before the learned CIT-A whereas the facts of the case of the assessee are on better footing than the case of the Hon ble Gujarat High Court cited above. In the case on hand, the claim was made in the revised return of income and therefore, we hold that the assessee cannot be deprived of the benefit granted under the statute merely on the reasoning that it was claimed in the revised return of income. Whether the assessee can be denied the benefit of deduction under section 10AA of the Act on account of furnishing the audit report in form 56F during the assessment proceedings? - The assessee cannot be deprived of the benefit provided under section 10AA merely on the reasoning that the audit report in form 56F was filed during the assessment proceedings. We hold so on the reasons as applicable to the 1st question discussed above that the deduction was claimed in the revised return of income. Thus, the revenue fails on this reasoning also. Whether the assessee can be denied the benefit of deduction under section 10AA of the Act upon the conversion of its status i.e. proprietorship conversion into partnership firm? - Admittedly, the conversion of proprietorship concern into partnership firm was duly approved by the SEZ authorities which is evident from the details placed - There is no prohibition under the provisions of section 10AA of the Act to deny the benefit of deduction upon the change of the status of the assessee i.e. conversion of proprietorship into the partnership firm. Thus assessee cannot be denied the benefit upon the conversion from the proprietorship concern to the partnership firm. Likewise, there was also no allegation of the AO that the present assessee came into existence after splitting up or the reconstruction of the existing business or undertaking. It is for the reason that there is no violation of the conditions applicable for claiming the deduction u/s 10AA Whether the assessee can be denied the benefit of deduction under section 10AA of the Act on the reasoning that the machineries were acquired on lease? - At the time of formation of the undertaking, there was no violation of the provisions of section 10AA of the Act. In holding so, we rely on the order of order of ITAT in the case of the CIT versus M/s Choice Sanitaryware Industries [ 2010 (12) TMI 286 - ITAT, RAJKOT] wherein the issue was in relation to claim of deduction under section 80IB of the Act but the principles of the same can also be imported to the case on the hand. Likewise, the order referred by the AO in the assessment is distinguishable from the facts of the case. In the case referred by the AO, the assessee has taken not only the premises but also the plant and machineries which were in excess of 20% of statutory limit. But there is no such allegation in the order of the AO in case on hand. Therefore, no credence to the finding of the order of the ITAT as referred by the AO can be given. Accordingly, we hold that the revenue on this allegation also fails. Whether the assessee can be denied the benefit of deduction u/s 10AA of the Act on account of non-remittance of convertible foreign exchange on account of the non-exports? - There is no dispute to the fact that the assessee has made the sale of ₹ 12,21,55000.00 to the parties who were the merchant exporters - the goods sold by the assessee to the parties were eventually exported by the merchant exporters and the foreign exchange was received by these merchant exporters and not by the assessee. As per SEZ rules 2006, the assessee cannot make local sales but allowed to make sales to the merchant exporters which will be treated as deemed export. Therefore, the assessee is eligible for deduction under section 10AA of the Act on such deemed exports even the assessee does not bring any foreign exchange on account of such sales. See case of Granite Mart Ltd [ 2020 (5) TMI 238 - KARNATAKA HIGH COURT] There was no condition applicable for the year under consideration to bring foreign exchange in India on account of the exports of sales. We hold that the assessee cannot be deprived of the benefit of the deduction granted under section 10AA of the Act merely on the reasoning that the assessee did not receive the convertible foreign exchange on the deemed exports. - Decided against revenue.
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2023 (4) TMI 104
Addition as royalty u/s 9(1)(vi) r.w.s.115A - Characterisation of receipts - receipts on giving on hire vessels for use or to be used in prospecting for, or exploration or production of mineral oils - whether the disputed receipts are taxable as business profits of the assessee under section 44BB of the Act or are in the nature of royalty as defined in Explanation 2 (iva) to section 9(1)(vi) ? - assessee is a non-resident corporate entity incorporated under the laws of Singapore and is a tax resident of Singapore - Whether the activities of seismic duties and transport of coated pipes would be covered under the provisions of section 44BB ? - HELD THAT:- The language employed in section 44BB is wide enough to encompass the aforesaid activities. In fact, the decisions relied upon by learned counsel for the assessee clearly support the aforesaid view. In case of Valentine Maritime (Gulf) LLC Vs. ADIT [ 2017 (1) TMI 1208 - ITAT MUMBAI] has held that receipt from giving on hire tugs and barges to be used in prospecting for, or extraction or production of mineral oils would come within section 44BB of the Act. The same view was expressed in case of Larson Toubro Ltd. [ 2022 (3) TMI 84 - BOMBAY HIGH COURT] Western Geco International Ltd. has expressed the view that the seismic data services and mining projects are inextricably linked to activities covered under section 44BB. Thus, we hold that the receipts are covered under section 44BB Since the assessee did not have any PE in India, section 44BB would not apply - On a careful reading of section 44BB of the Act, we do not find any such requirement as has been pointed out by learned DRP. Section 44BB applies to a non-resident entity carrying on business in connection with prospecting for, or extraction or production of mineral oils. The provision, unlike section 44DA, does not put any mandatory condition of existence of PE for the applicability of the provision. We do not agree with the view expressed by the AO and DRP. Accordingly, we direct the AO to tax the receipts under section 44BB of the Act. This ground is allowed. Double counting of the revenue - As alleged that the assessee failed to provide the bank statements and summary reconciliation sheets in terms with the direction of learned DRP - HELD THAT:- Considering the fact that the assessee itself has furnished copy of bank statements and summary reconciliation sheets before learned DRP, we do not see any reason, why they could not be furnished before the Assessing Officer. We direct the assessee to furnish requisite documents before the Assessing Officer, in which case, the Assessing Officer shall examine them and rectify the mistake of double addition, in case it is there. However, the assessee must be provided an opportunity of being heard before deciding the issue. Credit of TDS - HELD THAT:- As we direct the AO to factually verify assessee s claim and allow credit of TDS in accordance with law.
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2023 (4) TMI 103
Penalty u/s 271(1)(c) - undisclosed stock addition found during survey proceedings - addition made adopting different method of valuation by assessee and the government valued valuer - HELD THAT:- CIT(A) deleted the entire penalty on the basis of decision of Dilip Shroff Vs CIT [ 2007 (5) TMI 198 - SUPREME COURT] wherein it was held that addition, which is a result of difference in valuation cannot be held as concealment of income. Hon ble Bombay High Court in CIT Vs Aarkay Saree Musium [ 1990 (8) TMI 97 - BOMBAY HIGH COURT] held that when certain additions were made in trading account by the AO, it did not necessarily follow that the assessee had concealed the income. And held that Tribunal was right in cancelling the penalty order. No reason to differ with the finding of the CIT(A), which we affirm. In the result, the grounds of appeal raised by the revenue are dismissed. Addition on account of difference in method of valuation - Once the valuation of assessee was disturbed by the AO himself it was the duty of AO to correct the opening stock of subsequent year. We find that the CIT(A) after following the decision in V.K.J. Builders Contractors (P) Ltd. [ 2009 (8) TMI 101 - SUPREME COURT] directed the AO to correct the entry of opening stock. We do not find any illegality or infirmity in the order of ld. CIT(A) which we affirm. In the result, grounds raised by the revenue is dismissed.
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2023 (4) TMI 102
Revision u/s 263 - as per CIT AO has not verified properly the claim of deduction u/s. 80P - HELD THAT:- In this case, as discussed no enquiry has been made by the Assessing Officer during the assessment proceedings regarding the eligibility of the assessee for deduction under section 80P of the Act. Therefore, the assessment order is erroneous and prejudicial to the interest of the Revenue. Hence, we uphold the order under section 263 of the Act dated 29.03.2022. Accordingly, Ground No.1, 2 and 4 are dismissed. Claim of deduction under Chapter-VIA - HELD THAT:- AR has not produced any document to rebut the findings given by ld.Pr.CIT that the case of assessee was selected to verify assessee s claim of deduction under Chapter-VIA. Since the case of assessee was selected for verification of assessee s claim of deduction under Chapter-VIA, as observed by us, the AO had not carried out any enquiries and ld.AR has not submitted any document to prove that AO had verified Chapter-VIA deductions, the ld.Pr.CIT had jurisdiction to invoke powers under section 263 of the Act. Therefore, Ground No.1 and 3 raised by the assessee are dismissed. Applicability of the Hon ble Supreme Court s decisions - Assessee has referred to the Hon ble Supreme Court s decision in the case of Tolgar s Co-op Sale Society [ 2010 (2) TMI 3 - SUPREME COURT] ; Mavilayi Services Cooperative Credit Society Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] and Tumkur Merchants Suharda Credit Co-op Society Ltd [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] - HELD THAT:- As mentioned in earlier paragraphs no factual details have been brought on records by ld.AR, therefore in the absence of factual details the assessee cannot plead applicability of the Hon ble Supreme Court s decision as mentioned above. Therefore, Ground No.4, 5 and 6 are dismissed. Notice was not served on assessee - assessee has claimed that notice under section 263 was collected by him from the Income Tax Department - HELD THAT:- It is an admitted position by the assessee that notice under section 263 has been received by assessee. Whether the Department sends the notice by post or whether assessee collects the notice, in both the scenario the service of notice is complete, when assessee receives it and in this case it is an admitted fact that the assessee had received the notice u/s.263 of the Act. In these facts and circumstances of the case, once valid notice under section 263 has been served on the assessee, the proceedings under section 263 cannot be held to be without jurisdiction. Therefore, the Ground No.7 is dismissed.
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2023 (4) TMI 101
Correct head of income - Business Income or capital gain - Deduction u/s 54F denied - as per DR assessee`s income should be assessable under the head Business Income instead of under the head Capital Gain and consequently, the deduction claimed by the assessee under section 54F of the Act, should not be allowed - HELD THAT:- We note that assessee was farmer for six years and he sold the land due to compulsion and pressure since, government made a Road in the assessee`s land. The assessee was holding the land as an investment activity / portfolio. We observed that a Road was passed from the land, and the assessee was allotted two final plots being Final Plot No.61/A and Final Plot No.61/B. Since the government Road was passed from the assessee`s land and therefore assessee was allotted two final plots. So, assessee cannot do agricultural activities on different plots, as it was inconvenient for him, therefore assessee decided to sale the land, due to compulsion, hence assessee cannot be treated as a trader in land and therefore his income cannot be assessed under the head Business Income . Hence, these above facts prove, that intention of the assessee is to hold the land as Capital Assets, therefore, we direct the assessing officer to assess the assessee`s transaction under the head capital gain. Thus, ground No.1 raised by the assessee is allowed. Deduction u/s 54F - Since, we have allowed ground no.1 of the assessee, holding the assessee`s transaction falls under the head capital gain, therefore assessee is entitled to claim the deduction under section 54F - Since, all the conditions of section 54F of the Act are satisfied, the assessee is entitled for deduction under section 54F . Addition u/s 68 - unexplained cash credit - Onus to prove - HELD THAT:- Once the assessee had produced all documents establishing the identity and capacity of creditors and genuineness of transactions, the initial onus cast upon the assessee was discharged and the onus shifted to the assessing officer to bring material on record to the effect that in spite of identity and creditworthiness of the creditor being proved, the transaction was still not genuine. However, the Assessing Officer has not made any further inquiries and has not brought any material on record to controvert the documentary evidence submitted by the assessee. Therefore, considering the legal and factual matrix of the case, as stated above, we delete the addition. Decided in favour of assessee.
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2023 (4) TMI 100
Disallowance on account of interest payment on secured loans by the assessee firm to its partners - Addition made on non-deduction of TDS and non-authorisation of interest payment to partners by the deed of partnership - CIT-A deleted the addition - HELD THAT:- Instead of obtaining complete set of deed of partnership from the assessee during assessment proceedings, the Ld. AO chose to make the impugned disallowance on the basis of missing para 10 to 18 of the deed of partnership and the last page thereof. This is not fair. The assessee was clearly denied the opportunity of producing the complete set of deed of partnership during assessment proceedings. The assessee made an application under rule 46A of the Income Tax Rules, 1962 for filing complete set of deed of partnership which the Ld. CIT(A) rightly admitted as additional evidence. Para 10 thereof mentions that the partners shall be entitled to interest on their loan accounts with the firm at such rates as are prescribed under the Act. In this view of the matter, we hold that the Ld. CIT(A) was perfectly justified in deleting the impugned disallowance. Ground No. 1 of the Revenue being devoid of any legal substance is rejected. Addition u/s 68 - no authentic evidence/detail is produced - Whether impugned transaction is covered as short term capital gain in the hands of the assessee firm? - CIT(A) allowing the long term capital loss instead of short term capital gain as computed by AO in remand report - Whether assessee failed to substantiate the claim? - HELD THAT:- Perusal of assessment order reveals that it was explained by the assessee during assessment proceedings that the said amount represents profit on sale of land/building. Sale proceeds have been accepted through banking channels. TDS under section 194A has been deducted which is duly reflected in Form 26AS. The transaction is genuine yet the Ld. AO made the impugned addition for the only reason that no authentic evidence/detail is produced. CIT(A) under Rule 46A admitted purchase as also sale deed and confronted the Ld. AO who in his remand report admitted that addition under section 68 needs to be deleted and contended that the impugned transaction is covered as short term capital gain in the hands of the assessee firm. Sale deed/conveyance deed revealed that the land was allotted to the firm in the year 2008 i.e. beyond a period of 36 months. On appreciation of the entire evidence on record and remand report of the Ld. AO, the CBDT circular No. 471 dated 15.06.1986 and the decision of South India Corporation Ltd. vs. ACIT [ 2019 (7) TMI 27 - MADRAS HIGH COURT] CIT(A) reached the conclusion that the transaction of sale of industrial plot together with building constructed thereon is a long term capital asset. Land was allotted in the year 2008 relevant to AY 2009- 10 and building was constructed thereon. The department has been allowing depreciation year after year. Hence, possession of land cannot be disputed. The Ld. CIT(A) recorded the finding that the computation of capital gain as provided by the assessee is correct and in accordance with law. Nothing has been brought on record by the Revenue to dismantle the above finding of the fact recorded by the Ld. CIT(A) - Appeal of the Revenue stands dismissed.
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2023 (4) TMI 99
Addition u/s 69A in respect of unexplained money - search and seizure u/s 132 - During the course of search and seizure, mobile data was retrieved and printout of SMS were taken out from the mobile - As per the mobile messages, unaccounted cash transactions were carried out between concerns of GPT Group and others - HELD THAT:- We have perused the decisions of the Co-ordinate Benches of the Tribunal and found that the ratio of law laid down is that no addition can be made on the basis of messages from SMS or WhatsApp between two persons unless there is corroborative evidences on record. In the WhatsApp messages, it was never stated that the money belonged to the assessee but it was stated to be transactions between the concerns/parties of GPT Group and others. Addition cannot be sustained as it based on the SMS or WhatsApp messages without any corroborative evidences. We are inclined to set aside the order of the CIT(A) and direct the AO to delete the addition. Appeal of the assessee is allowed.
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2023 (4) TMI 98
Penalty u/s 271(1)(c) - satisfaction of the AO before initiating penalty proceddings - Defective notice u/s 274 - HELD THAT:- Both pre and post insertion of S. 271(1B), the position of law emerges is that for initiation of penalty proceedings, the assessment order must categorically record the specific charge or default alleged. Failing to do so or where the allegation of default committed is vague or non specific, the so called deemed satisfaction contemplated u/s 271(1B) can not be validated in law. The formation of satisfaction is not a mere formality or an empty ritual. In the present case, the so called satisfaction of the AO in the assessment proceedings has not been tied up with any positive finding towards the exact nature of default and hence, the so called satisfaction is mechanical illusory and thus cannot be countenanced in law. This apart, the notice issued to the Assessee under s. 274 r.w.s. 271(1)(c) also does not strike off the inappropriate part and a vague notice showing tentative nature of default in the form of either/or has been issued to the Assessee. The penalty proceedings sans strike off in the penalty notice and also in the assessment order thus is wholly unsustainable in law. We thus find apparent merit in the plea of the assessee - in the absence of satisfaction qua the nature of default committed, the initiation of penalty proceedings itself is a complete non-starter and consequent imposition of penalty is clearly vitiated in law. The imposition of penalty in question is thus liable to be quashed and set aside on this ground alone. Non fulfillment of prerequisites before invoking Explanation-5A to Section 271(1)(c) of the Act - In the present case, the penalty flows from a mere disclosure in the course of statement recorded under Section 132(4) of the Act at the time of search operation. No averments are found in the assessment order or in the penalty order to the effect that any asset as specified in Explanation 5A(i) has been found or income is based on entry in any books of account or other documents or transaction referred under clause (ii) to Explanation 5A which can be said to correspond with such declaration. On appraisal, we find force in the plea of the assessee for non applicability of Explanation-5A in the peculiar facts of the case. It is trite that the Explanation 5A being penal in nature requires strict construction. The prerequisites towards applicability of Explanation-5A has not been demonstrated by the Revenue either in the penalty order or the first appellate order thereon. Thus, the imposition of penalty under the shelter of Explanation 5A is clearly without sanction of law. We find merit in the plea of the assessee on both counts. Consequently, the order of the CIT(A) is set aside and the penalty order seeking to impose penalty in question stands quashed. Penalty u/s 271(1)(c) - assessee offered a disclosure toward undisclosed income in the statement recorded u/s 132(4) Assessment framed u/s 153A - Assessment Year 2009-10 - HELD THAT:- The nature of default being absent in the course of assessment proceedings, the initiation of penalty proceedings is bad in law. The penalty order passed by the Assessing Officer is liable to be cancelled on this score alone. On merits, it is yet again seen that the sole reason for imposition of penalty is that the disclosure would not have come in the absence of search proceedings. We are unable to find any substance in the approach adopted by the AO. The imposition of penalty under Section 271(1)(c) r.w. Explanation 5A thereon is dependent upon the conditions enjoined in Explanation-5A therein. The addition and consequent penalty appears to be on the basis of surrender made alone. It is true that Explanation-5A provides an exception and departure to the general rule that a concealment is committed vis- -vis the return filed and the Explanation 5A can be invoked towards undisclosed income found in the course of search despite its subsequent inclusion in ROI subject however to the fulfillment of specific conditions. The conditions provided in Explanation-5A are not shown to have been satisfied in any manner - The first appellate order is set aside and the Assessing Officer is directed to delete the penalty in question. Disallowance of deduction claimed u/s 35D and additions towards disallowance of speculative business loss claimed by the assessee - HELD THAT:- As apparent from the directions of the Assessing Officer towards deemed satisfaction of default against the assessee is totally vague and unintelligible qua the nature of default and thus totally unsustainable in law. To reiterate, it is not known whether the satisfaction is qua concealment of particulars or towards furnishing inaccurate particulars of income . While drawing the satisfaction, the charge against the assessee is not known. Coupled with this, similar to other appeals supra, the notice issued under Section 274 r.w. Section 271(1B) is vague and non-descript and does not meet the requirement of law. Addition towards wrong claim of speculative loss as business loss - HELD THAT:- AO has changed the character of the loss from business loss to speculative loss both of which are assessable under the same head of income, i.e., income from business / profession notwithstanding restrictive rules applicable for set off of speculative losses. While it is the case of the assessee that the loss has arisen from the activity of hedging and thus do not fall within the sweep of deeming fiction of S. 43(5) - AO disputed the claim of the Assessee on the ground that assessee is only a broker and does not require any hedging. On this point of difference, the loss has been reclassified from business to speculative loss. Thus, the loss arising on transaction of trading has not been disputed per se but the character of loss is subject matter of dispute. On such backdrop, the CIT(A) has applied the principles culled out from judicial pronouncements at the first appellate stage and found that the assessee is not exigible for penalty. We observe, that the judgment rendered in the case of CIT Vs. Auric Investment Securities Ltd [ 2007 (7) TMI 276 - DELHI HIGH COURT] is directly on the issue AND in CIT vs. Bhartesh Jain [ 2010 (4) TMI 142 - DELHI HIGH COURT] as held that penalty levied on account of additions made due to change of treatment of business loss as claimed by the assessee to speculative loss as determined by the Assessing Officer would not justify imposition of penalty under Section 271(1)(c) of the Act. Hence, in the light of judgment rendered in these cases, the penalty is not justified even on merits. The penalty action of AO is unsustainable in law on both counts, i.e., lack of satisfaction at the time of initiation of penalty proceedings as well as absence of any concealment on merits. Additions on account of disallowance of deduction u/s 35D - addition towards rent of guest hou se - HELD THAT:- Imposition of penalty on account of mere disallowance of expense is prima facie unjustified. Noticeably, in case B.B. Singhal [ 2011 (1) TMI 868 - PUNJAB AND HARYANA HIGH COURT] has held that bona fide mistakes could not be subject to penalty. In the instant case, it is undisputed fact that the assessee has disclosed all material facts and was under bona fide belief that it is entitled to deduction of share issue expenses under the provisions of Section 35D of the Act. The disallowance is only on the ground that the claim allegedly does not pass the test of S. 35D. In such circumstances, we see substantial merit on facts in the plea of the assessee towards inapplicability of Section 271(1)(c) of the Act on a highly debatable issue. Penalty has also been imposed towards rent expenses of guest houses on the ground that two houses are locked at the time of post search inquiry and have not been used as guest house - assessee submitted that the guest house has been actually found to be taken on rent by the AO and claim of the expenses is not dependent on actual usage of the guest house. The guest house is used occasionally as per need based requirements. All the relevant facts were placed on record in this regard. Thus, the penalty cannot be visited on the bona fide claim of the assessee. The disallowance in the assessment proceedings, we find merit in the plea. The penalty has been levied on the ground of disallowance of rent expenses due to non usage of such guest house. In the light of the decision rendered in Reliance Petro Products [ 2010 (3) TMI 80 - SUPREME COURT] penalty under Section 271(1)(c) on such alleged wrong claim is totally unjustified. The penalty is thus reversed and cancelled on merits. The exercise of power for initiating penalty under Section 271(1)(c) is dependent upon a categorical satisfaction of the AO in the course of the assessment proceedings towards the nature of alleged default which is clearly absent in the present case and consequently the penalty proceedings initiated without requisite satisfaction is a nullity. The consequent penalty order thus requires to be quashed at the threshold. 49. The action of the CIT(A) thus requires to be reversed and the penalty imposed in question is required to be quashed both on merits as well as on the legal ground.
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2023 (4) TMI 97
Assessment u/s 153A - Validity of approval granted by JCIT, Range-Central Raipur u/s.153D - HELD THAT:- On perusal of the approval given by the JCIT, Range-Central, Raipur, we found that the JCIT has given approval only on the basis of presumption that the AO after giving proper opportunity to the assessee, thoroughly verified the seized material and proposed for making addition, which in our opinion, without looking into the complex facts of the search assessment has been approved in a mechanical manner. Even the CIT(A) has also overlooked this technical error in the assessment order. Further, it is not clarified as to whether the assessment record in the case of the assessee has been seen by the JCIT or not - approval granted by the JCIT, Range-Central, Raipur in the case of the assessee is merely technical approval just to complete the formality and without application of mind as there was no examination of the seized documents, only on the presumption the approval cannot be granted. Thus, we hold the approval under section 153D of the Act has been granted in the case of the assessee was without application of mind, the same is invalid, bad in law and liable to be quashed. No reason to upheld the order of the authorities below, consequently we hold that the order of Ld CIT(A) in affirmation of the order of Ld AO u/s.153A r.w.s.143(3) of the Act is unsustainable and derives to be quashed and we do so. Appeal of assessee is allowed.
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2023 (4) TMI 96
Additions u/s 68 - opening balance in respect of unsecured loans taken by the assessee in earlier financial years - identity of the transactions, creditworthiness of the creditor and genuineness of the transaction not proved - CIT-A deleted the addition - HELD THAT:- It is a well settled law that addition u/s. 68 can be made only during the year in which such credit has been received and if the credit balance appearing in the account of the assessee is not pertaining to the year under consideration, the Assessing Officer cannot make addition u/s. 68 of the Act in the subsequent assessment year. It is a settled law that opening balance of unsecured loans coming from previous financial years cannot be added u/s. 68 of the Act to the income of the assessee. Even the PAN numbers as well as addresses of all such parities were duly furnished by the assessee to AO during the course of assessment proceedings. The copy of chart containing details of unsecured loans which were provided to the AO - CIT(A) also gave due consideration to the chart giving details of party wise break up of loans while giving relief to the assessee. Accordingly, so far as addition u/s. 68 on account of opening balance we find no infirmity in the order of ld. CIT(A) so as to call for any interference. Unsecured loans received during the year under consideration from Vinita Neshva Infrastructure Pvt. Ltd - As we observe that various documentary evidences were placed on record by the assessee in respect of such fresh credits received during the year under consideration viz. confirmation of the party, acknowledgement of ITR and statement of total income of the party, annual report of the lender, audit report of the party - Therefore assessee has been able to give satisfactory documentary evidences in support of the genuineness and creditworthiness of the aforesaid party. Fresh unsecured loan from Dharamdev Infrastructure Ltd. - As the assessee had furnished copy of the balance sheet of the said party before ld. CIT(A) in order to establish creditworthiness of such party and a copy of PAN and Income Tax Return of such party had been furnished by the assessee before the A.O. Accordingly, assessee has given satisfactory documentary evidences in respect of fresh unsecured loans taken during the year under consideration, which were also rightly appreciated by the ld. CIT(A) in the appellate order. Accordingly, in the light of the above observations, we find no infirmity in the order of ld. CIT(A) so as to call for interference - Appeal of the Department is dismissed.
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2023 (4) TMI 95
Revision u/s 263 - Unexplained cash deposits - as per CIT AO considering figures of cash deposited in the bank account of the assessee short by Rs. 1,00,000/- - AO accepting the genuineness of the cash deposits from one of the parties on the basis of certain documents filed, which as per the Ld. PCIT were found to be missing in the case records - HELD THAT:- CIT has not even cared to consider this contention/explanation of the assessee. He has simply taken all the material on record, and sent it to the AO for verification without himself applying his mind to it. We agree with assessee that this act of the ld. Pr. CIT goes against the very spirit of section 263 itself, which in very clear term states that in revisionary proceedings, the assessee is to be confronted with the error noted in the assessment order, given an opportunity of hearing, his contentions need to be considered and inquired into and only then, CIT has to arrive at his finding of error after considering all contentions and evidences furnished by the assessee. PCIT has given no finding as to why the assessment order was in error on the issue of cash deposit short considered by the AO. And with respect to the error relating to the issue of acceptance of source of cash deposit by the AO he has merely reiterated his earlier observation that no evidences proving the source as noted by the AO were found in the case record. Ignoring the explanation of the assessee, we find, the Ld. PCIT has simply reiterated his reason for assuming jurisdiction to revise the order of the AO, while finding the assessment order erroneous and causing prejudice to the Revenue. Merely because documents, noted by the AO to be produced by the creditor of source of cash deposit of Rs. 98.09 lacs in response to summons issued to him u/s. 131 were not found in the case records, that cannot be the reason for holding the assessment order to be in error for accepting the genuineness of the source of cash deposit. The fact of issuance of summons by the AO is not doubted or disputed by the Ld. PCIT. AO has also categorically noted relevant documents submitted by the depositor proving genuineness of the source of cash deposit. The Ld. PCIT has not found those documents in the case file. This cannot lead to the inference that no inquiry was conducted by the AO, as held by the Ld. PCIT. - Decided in favour of assessee.
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2023 (4) TMI 94
Validity of order framed u/s 143(3) r.w.s 144B - dismissal of appeal owing to settlement under VsV Act - Deduction of duties paid under protest - HELD THAT:- We find that the present appeal filed by the assessee is with respect to the order framed u/s 143(3) r.w.s 144B of the Act. Aggrieved by the aforesaid order of AO assessee had filed appeal before CIT(A). CIT(A) had dismissed the appeal of the assessee by holding that since the appeal has already been disposed of under VSV scheme therefore, it is not maintainable Before us, assessee has demonstrated the factual error in the findings of CIT(A). He has further pointed that the appeal that was disposed under VSV Scheme was with respect to appeal against the penalty order passed u/s 271DA and not the appeal against the order passed u/s 143(3) r.w.s 144B of the Act. In such a situation, since CIT(A) has not decided the issue on merits, we are of the view that the issue needs to be re-adjudicated by CIT(A). We accordingly restore the appeal back to the file of CIT(A) and direct him to decide the appeal in accordance with law. Appeal of the assessee is allowed for statistical purposes.
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2023 (4) TMI 93
Addition u/s 68 - Unexplained cash credit - Discharge of onus - HELD THAT:- Assessee has produced the details of the creditors before the AO, the creditors have independently confirmed the transaction before the AO and no evidence is found by the AO to disprove the confirmation given by the creditors. Assessee has discharged its burden of proving the identity, creditworthiness and genuineness of the transaction in respect of the loan from six creditors - The addition as made by the AO and confirmed by the CIT(A) stands deleted. Appeal filed by the assessee stands allowed.
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2023 (4) TMI 92
Exemption u/s 11 - denying Registration u/s 12AA - charitable activity u/s 2(15) - trust is created for the benefit of a particular community namely Amreli Modh Vanik - CIT(E) that is not satisfied with the genuineness of the activities of the trust - HELD THAT:- The assessee has not produced before us copies of the activities carried out by the assessee Trust, there is nothing on record before us that the activities carried out by the trust is open to Amreli Modh Vanik other than common public. In the absence of any details by the assessee before the Lower Authorities as well as before us to prove that the objects of the Trust is for General Public, and hit by section 13(1)(b) of the Act. No hesitation in confirming the order passed by Ld. CIT(E) denying registration under section 12AA - CIT(E) denied the benefit of registration u/s 12AA of the Act, which is legally justifiable and does not require any interference by the Tribunal. In the result, the grounds raised by the assessee are found devoid of merits and the same is hereby rejected. Appeal filed by the Assessee is dismissed.
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2023 (4) TMI 91
Revision u/s 263 - as per PCIT it is not clear what was the purpose for which interest bearing loan was taken and where the same was utilized - AO has not verified the aspect of the correct amount of interest expenditure which was claimed against interest income - interest bearing funds utilized by the assessee to earn interest income on loans and deposits to an extent and the remaining portion of interest bearing loan was not utilized for the purpose of earning interest by the assessee - HELD THAT:- Assessment of the assessee was taken up under limited scrutiny under CASS for verifying the following CASS reasons large deduction claimed under Section 57, higher turnover reported in Service Tax Return as compared to ITR . Accordingly, the very purpose of initiating assessment proceedings under limited scrutiny assessment was with a view to examine large deduction claimed u/s 57. Notice was issued by the AO on 04.03.2019 u/s 142(1) in which a specific query was put forth to the assessee regarding the claim of deduction u/s 57 asking for details of expenditure claimed u/s 57 against the head income from other sources . Assessee had filed reply in which he had given details of interest expenditure claimed by the assessee during the year under consideration. Therefore, it cannot be stated that there was any lack of enquiry or non-application of mind by the AO in respect of justification for expenses claimed by the assessee u/s 57 - Also in the immediate preceding year similar claim of interest deduction was allowed to the assessee under Section 36(1)(iii) and hence taking into consideration the above fact the AO did not make any addition on this aspect. We are of the considered view that there is neither any lack of enquiry by the A.O. during the course of assessment proceeding and nor there is any prejudice which has been caused to the Department looking into the instant set of facts. Accordingly we are directing that the 263 order passed by the Ld. PCIT is liable to be set-aside. Appeal of the assessee is allowed.
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2023 (4) TMI 90
Bogus purchase made u/s 68 - Whether bogus purchases should be treated as par with the unexplained cash credit under section 68? - HELD THAT:- Admittedly, in the given case, the explanation offered by the assessee about the sum found credited in the books of accounts i.e. received on account of bogus sale and immediately transferred against the bogus purchases after retaining commission, was not found unsatisfactory by the AO. The only source of the income was the commission from the bogus transactions of sales and purchases. Thus, to our understanding the provisions of section 68 of the Act cannot be attracted. See Alag Securities (P.) Ltd [ 2020 (6) TMI 304 - BOMBAY HIGH COURT] Assessee being engaged in the circular transactions/ one of conduit in accommodation entries can be made subject to tax based on real income theory. It is for the reason that the assessee was not the beneficiary of the amount received by it on the sales made to the KGN Industries Ltd. As such the amount of sales received by the assessee was utilized against the purchases from M/s Biotor Industries Ltd. There cannot be any addition under section 68 of the Act in the given facts and circumstances for the bogus purchases shown by the assessee. What best can be added in the given facts and circumstances is the real income which has been earned by the assessee. To determine the real income, there is no standard formula prescribed under the provisions of law. We direct the AO to delete the addition made by him. Hence, the ground of appeal of the revenue is hereby dismissed.
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2023 (4) TMI 89
Claiming interest u/s 244A on the excess tax deposited by the assessee under self-assessment in the impugned assessment year - AO withdrawing the benefit of interest u/s 244A allowed to the assessee u/s 154 - Scope of amended provisions of section 244A inter alia inserting clause (aa) - HELD THAT:- Amendment by the Finance Act, 2016 was effective from 01/06/2016. In the instant case, the assessment order u/s 143(3) of the Act was passed on 10/03/2015 and the rectification order u/s 154 of the Act granting interest u/s 244A of the Act was passed on 12/05/2015, that is much prior to the amendment. Hence, the amended provisions would have no application. From the reading of the provisions of section 244A as were applicable to the AY under appeal it is unambiguous that minimum limit of 10% of refund would not be applicable on payment of interest on refund. Thus, in facts of the case, the relevant provisions of section 244A of the Act as were applicable to the assessee we find that the AO has erred in withdrawing the benefit of interest u/s 244A allowed to the assessee vide order u/s 154 of the Act. The impugned order is set aside and appeal of the assessee is allowed.
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2023 (4) TMI 88
TDS credit on sale of software patches and modules - credit of Tax Deducted at Source claimed during the year under consideration in respect of Tax Deduction at Source pertaining to earlier years which were denied during the assessments of the respective years - HELD THAT:- As per provisions of section 199 of the Act, tax deducted at source and paid to government exchequer is treated as payment of tax on behalf of the person for whom TDS was made. Rule 37BA(3) further clarifies that credit for TDS shall be given for assessment year for which such income is assessable. In the case of Supreme Renewable Energy Vs. ITO [ 2008 (8) TMI 432 - ITAT MADRAS-C] the Tribunal following the decision in the case of CIT vs. Karnal Co-Op Sugar Mills Ltd. [ 1999 (4) TMI 7 - SC ORDER] held that when the interest income is incidental to the acquisition and installation of an asset and not directly liable for tax, assessee is entitled for the credit of the TDS from the interest income which has been duly received by the Government. Thus we are of the considered view that the assessee is eligible for TDS credit earlier not allowed to the assessee - Decided in favour of assessee.
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2023 (4) TMI 87
Disallowance of deduction u/s 35AD - leasing out of Godown for non agriculture purpose - skimmed milk does not constitute agricultural produce - four out of the five go-downs were leased out for specified purposes as mentioned in the Act viz. storage of agricultural produce - As per assessee skimmed milk constituted agricultural produce and secondly, even if deduction were to be disallowed u/s. 35AD, then, it has to be only in proportionate to the go-down leased to Banas Dairy and the entire deduction cannot be disallowed, since there is no allegation that the balance four go-downs were not leased out for agricultural purposes - HELD THAT:- Since the assessee had undisputably leased four out of the five properties/go-downs for the purpose of storage of agricultural produce and there was discrepancy only with respect to one leased out go-down to Banas Dairy, the whole deduction claimed by the assessee could not be denied u/s. 35AD of the Act and in view of the provisions of section 35AD(7B) of the Income Tax Act as it stood at the relevant time, in our considered view, the CIT(A) had correctly restricted the disallowance only with respect to the godown leased out to Banas Dairy for the non-agricultural purposes. Appeal of the Department is dismissed.
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2023 (4) TMI 86
Revision u/s 263 by CIT - lack of enquiry/no enquiry v/s inadequate enquiry - cash deposit arising from the return and the reason for CASS selection have been examined from the reply of the assessee's representative - HELD THAT:- We have to understand that lack of enquiry/no enquiry is different from inadequate enquiry and it is only in case of no enquiry by the AO, Pr. CIT/C1T can exercise jurisdiction u/s 263 and not in case where the AO has made enquiries as seems appropriate in the facts and circumstances of the case. In the instance case inquiry on relevant issue has been made by AO, hence no action invited u/s 263. Under the facts and circumstances, the provisions as contained in clause (a) of Explanation 2 to sub section (1) of Section 263 of the Income- Tax Act, 1961 is not applicable in the present case. Since, the A.O. has made all enquiries regarding the cash flow statement from the State Bank of India as well as from the Punjab National Bank and the deposit was also confirmed from the certificate issued by M/s Amar Nath Kashmiri Lai and the status of the farmer earning Rs. 30.00 Lacs per annum and the payments for expenses thereof and hence, the assessment order cannot be deemed to be erroneous in so far as it is prejudice to the interest of the revenue. We hold that the impugned order passed by the PCIT is perverse to facts on record in holding assessment order erroneous and prejudice to the interest of revenue on account of lack of enquiry. Accordingly, the order passed by the PCIT -1, Jalandhar u/s 263, is cancelled being bad in law. Decided in favour of assessee.
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2023 (4) TMI 85
Penalty u/s 271(1)(c) - Validity of notice u/s 274 - validity of Notice issued u/s 274 of the Act, without specifying particular limb of penalty leviable u/s 271(1)(c)of the Act - HELD THAT:- The Hon'ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the AO proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court also held that the standard proforma of notice u/s 274 of the Act without striking of the irrelevant clause would lead to an inference of non-application of mind by the Assessing Officer and levy of penalty would suffers from non-application of mind. It is imperative for the AO to specify the relevant limb so as to make the Assessee aware as to what is the charge made against him so that he can respond accordingly - we have no hesitation to delete the penalty levied by the AO and affirmed by the Ld. Commissioner. Appeal filed by the Assessee stands allowed.
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2023 (4) TMI 84
Disallowance of administrative expenses - 20% of Other Administrative Expenses was disallowed and added to the total income since the assessee did not furnish the supporting details like bills/vouchers during the course of assessment proceedings - HELD THAT:- Since personal element involved in these expenses cannot be denied, the AO disallowed 20% of the expenses claimed under the head Other Administrative Expenses . On perusal of the orders of authorities below, we find that both the AO as well as CIT(A) has not doubted about incurring of administrative expenses. Disallowance of 10% of these expenses would relevant and to meet the ends of natural justice. Accordingly, we sustain the disallowance under the head Other Administrative Expenses only to the extent of 10% of the total expenses claimed by the assessee. Disallowance of prior period depreciation claimed - HELD THAT:- After considering the submissions of the assessee and as per the principle laid down in the case of M/s. Tipco Industries Ltd. [ 2012 (8) TMI 996 - ITAT MUMBAI] wherein, it was held that the expenditure relating to one year cannot be claimed in any other year, the ld. CIT(A) dismissed the ground raised by the assessee. The depreciation has to be claimed in the year under consideration only and thus, we find no reason to interfere with order passed by the ld. CIT(A) on this issue. Accordingly, the ground raised by the assessee is dismissed. Disallowance of excess depreciation claimed on Robotix Kits - assessee has claimed depreciation on Robotix kits @ 60% - Rate was reduced to 15% by the AO in the assessment order citing the ITAT [ 2018 (9) TMI 2116 - ITAT CHENNAI] order dated 12.09.2018 in assessee s own case - CIT(A) confirmed the disallowance made by the AO - HELD THAT:- By following the above decision of the Tribunal, AO has reduced the claim of depreciation on Robotix kits @ 15%, which was rightly confirmed by the ld. CIT(A). We find no infirmity in the order passed by the ld. CIT(A) on this issue. The case law relied on by the ld. Counsel for the assessee in the case of Financial Software and Systems Private Limited [ 2019 (6) TMI 1454 - ITAT CHENNAI] has no application to the facts of the present case for the reason that the computer or software attached is used for operation of robotix kits and therefore, it cannot be construed as if the robotix kits itself is a computer. Thus, the ground raised by the assessee is dismissed.
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2023 (4) TMI 83
Deduction claim as selling expenses while computing the long term capital gain on transfer/sale of shares - CIT-DR vehemently argued that the CIT(A)'s herein has erred in deleting the impugned addition despite the fact that it is a clearcut instance of the assessee having availed/given accommodation entries of bogus compensation to the foregoing twin entities - HELD THAT:- It emerges from the CIT(A)'s detailed discussion that he has given much a weightage to the search action involving the recipient entities followed by the post-search enquiries and assessment in their respective cases to observe that the same had not yielded any incriminating material so far as the impugned claim is concerned. All this constrains us to observe that the CIT(A) ought to have independently examined the genuineness of the assessee's impugned claim in light of the above prima facie suspicious circumstances rather than discussing the search action in case of the twin recipient companies wherein the instant issue neither emanated from the alleged incriminating material nor there was any dispute to the said limited extent. Faced with this situation, we deem it appropriate that the CIT(A) needs to re-examine this sole issue independently vis- -vis genuineness of the assessee's claim in the given facts and circumstances afresh - Revenue's sole substantive ground succeeds for statistical purposes.
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2023 (4) TMI 79
TP adjustment - ALP determination - Comparable selection - Exclusion of Nihilent Anaytics Ltd. - HELD THAT:- Company having huge asset base would be able to command a better margin on the prices of goods or services rendered based on huge economies of scale and volume of operations. Hence, based on one of the parameters of FAR analysis i.e. assets employed, we hold that this comparable would not be a good comparable with that of the assessee company. Hence, the ld. TPO / AO is directed to exclude the same from the final set of comparables while re-working the ALP of the international transaction. Inclusion of Sasken Communications and Technologies Ltd. and TVS Infotech Ltd. - We find from the perusal of the financial statements of Sasken Communications and Technologies Ltd, its export turnover contributed 70.27% of its total turnover. TPO was justified in rejecting the same as a good comparable with that of the assessee company based on export filter application. Similarly, from the perusal of the financial statements of TVS Infotech Ltd as on 31/03/2016, its export turnover of Rs.1316,67,746/- worked out to 56.84% of total turnover of Rs.2316,46,376/-. Yet another argument advanced that there is no sanctity of applying 75% is concerned, we find that the Hon ble High Court in the case of Pr. Commissioner of Income Tax vs. Convergys India Services Pvt. Ltd., in 142 taxmann.com 276 (Delhi) has already approved the applicability of 75% export filter. Apparently this is done primarily to exclude predominantly domestic companies which cannot be compared with the companies having major earning from exports. This is because economic circumstances of such companies would be different which is also recognised by Rule 10B(2) of the Income Tax Rules 1962. Thus we hold that the ld.TPO /ld. AO was justified in excluding TVS Infotech Ltd. from the list of comparables chosen by the assessee. TPO is directed to re-work the arm s length price of international transaction in view of the aforesaid observations. Accordingly, the ground No. 1 raised by the assessee is partly allowed for statistical purposes.
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2023 (4) TMI 78
Understatement of income - undisclosed lease rental income - Addition of prior period expenses - HELD THAT:- As we find that the ld. CIT(A) has not called for remand report upon various detailed submissions of the assessee, before deciding the issues, appears to be in violation of Rule 46A of the Income Tax Rules, 1962. Accordingly, we set aside the order of the CIT(A) on the above issues and remit the matter back to the file of the Assessing officer for fresh adjudication after detailed verification of claims of the assessee in accordance with law by affording sufficient opportunities of being heard to the assessee. Disallowance of guarantee commission - AO has noticed from the schedules annexed to the Profit and Loss account that the assessee-company has claimed guarantee commission to State under the Head INEREST AND FINANCE CHARGES - HELD THAT:- Admittedly, the assessee has proposed for payment of outstanding guarantee commission in 15 equal monthly instalments. Assessee has not produced any evidences towards approval of the Government for the above proposal of the assessee or payment of guarantee commission as proposed by the assessee - in case the assessee has incurred expenses towards payment of guarantee commission as proposed pertaining to the relevant assessment years, the AO is required to allow the expenses. We direct the assessee to produce necessary evidences before the AO and the AO is also directed to consider and decide the issue afresh after verification of the evidences as may be filed by the assessee in accordance with law by affording an opportunity of being heard to the assessee. Disallowance of contribution to recognised provident fund - assessee has debited contributions to recognised provident fund and claimed. Since the amounts payable to statutory authorities have not been paid, the AO disallowed the same and brought to tax, which was confirmed by the ld. CIT(A) - HELD THAT:- We find that the expenses are eligible to be claimed as a revenue expenditure only on the remittance of the same to PFRDI approved CPS fund. In case, the assessee made any remittance and incurred the expenses for the relevant assessment years, the AO is directed to allow the same. Thus, the ground raised by the assessee is allowed for statistical purposes. Disallowance of over statement of expenditure - AO has disallowed the over statement of expenditures for both the assessment years, which was confirmed by the ld. CIT(A) - assessee has submitted that the overstatement of expenses were corrected through rectification journal vouchers in the ensuing financial year and alternatively it was submitted that the amount is disallowed in the assessment year 2015-16, the same may be directed to be allowed in the assessment year 2016-17 - HELD THAT:- We direct the Assessing Officer to examine and decide the issue afresh in accordance with law for both the assessment years by considering the explanations as may be submitted by the assessee. Appeals filed by the Revenue as well as assessee are allowed for statistical purposes.
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2023 (4) TMI 77
TP Adjustment - comparable selection - HELD THAT:- We direct the AO/TPO to exclude the comparables with high turnover of more than Rs.200 crores Infobean Technologies Ltd. should be excluded from the list of comparables as this company is rendering services to non-AE customers also, whereas the assessee before us is a captive service provider only catering to the requirements of its AE. Aptuse Software Labs P. Ltd. - DRP while concluding has stated that the objection of the assessee with regard to exclusion is rejected. Since there seems to be a disconnect between the justification given by the DRP and the final conclusion, we are of the considered view that this issue should be remitted back to the DRP for reconsideration of the conclusion. Akshay Software Technologies Ltd. and Evoke Technologies - As relying on Radisys India Ltd [ 2023 (3) TMI 598 - ITAT BANGALORE] we remit the issue of inclusion of Akshay Software and Evoke Technologies back to the AO/TPO with similar directions. Insummation Technologies Ltd - Tribunal has allowed the inclusion of the company in the AY 2016-17 based on the fact that the DRP in AY 2017-18 has accepted the inclusion of the company. Accordingly, respectfully following the decision of the coordinate Bench, we hold that the company be included for AY 2017-18 in assessee s case. Working capital adjustment - As relying on case of Huawei Technologies India Pvt. Ltd [ 2018 (10) TMI 1796 - ITAT BANGALORE] we direct the AO/TPO to allow working capital adjustment claimed by the assessee. Adjustment made Towards notional interest on loans advanced to AE - TPO treated the loan as a separate international transaction by stating that the assessee has provided benefit to its AE by way of advancement of interest free loan and accordingly proposed a TP adjustment by computing a notional interest of Rs.7,31,76,246 at the rate of 6 months LIBOR + 400 basis points - HELD THAT:- There cannot be an adjustment towards interest on loan when the loan amount itself is NIL during the year under consideration. Accordingly we hold that the notional interest charged on the loan given by the assessee to its AE which is written off and reflected as NIL in financials is to be deleted. Before parting, we would like to make a mention that the provision created towards the loan which is routed through the profit and loss account in the first year of creation i.e. during FY 2010-11 should have been part of the operating cost whereby the same should have been considered for the purpose ALP in that year.
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2023 (4) TMI 76
TP Adjustment - Comparable selection - Assessee is engaged in the business of providing Information Technology ( IT ) support services / software development services and IT Enabled services ( ITES ) to its AEs - HELD THAT:- Exclusion of M/s Genesys International Corporation Ltd, M/s Infosys Ltd. as functionally dissimilar. ICRA Techno Analytics Limited - As the method as to how that RPT filter is considered by the TPO / CIT(A) needs factual verification we remit the issue of exclusion of M/s. ICRA Techno Analytics Ltd back to the TPO/AO for examining afresh. Spry Resources India Private Limited - As TPO and the CIT(A) has not given any clear finding with regard to the factual aspects, we remit the issue of exclusion of M/s Spry Resources P Ltd back to the TPO/AO for fresh examination. Comparables for ITeS Segement - Exclusion of Excel Infoways Ltd ( Excel ) - We notice that the coordinate bench of the Tribunal in the case of Micro Focus Software India Private Limited [ 2020 (3) TMI 1442 - ITAT BANGALORE] has considered the issue and held that Excel be excluded. The relevant part of the decision of the Tribunal is extracted in the later part of this order. Respectfully following the said decision we uphold the decision of CIT(A) to exclude Excel from the list of comparables. Exclusion of M/s Infosys BPO Ltd, TCS E-serve Ltd., M/s BNR Udyog Ltd and M/s Excel Infoway Ltd., from the list of comparable companies and the issue of exclusion Universal Print Systems Ltd is restored to the file of AO/TPO for examining it afresh. Exclusion of Jindal Intellicom Limited - In assessee s case, the CIT(A) has suomoto excluded company on the ground that there is no reliable segmental information with respect to the ITES segment. Considering the facts of the case and the decision of the coordinate bench in the case of CGI Information Systems Management Consultants (P.) Ltd. [ 2018 (4) TMI 1755 - ITAT BANGALORE ] we remit the issue back to the TPO/AO. The TPO/AO directed to verify the segmental details and consider the issue in the light of the decision of the coordinate bench. Negative working capital adjustment - HELD THAT:- As decided in Tivo Tech Private Limited [ 2020 (6) TMI 708 - ITAT BANGALORE ] where it has been held that negative working capital adjustment shall not be made in case of a captive service provider as there is no risk and it is compensated on a total cost plus basis. Thus we direct the TPO not to make negative working capital adjustment. TPO is further directed to recomputed the ALP of the ITeS segment in accordance with the directions given in this order. Deduction u/s 10AA - Non-submission of the endorsed softex forms - HELD THAT:- From the definition it is clear that for the purpose claiming the deduction u/s.10AA, the proceeds of the export turnover should have been brought into India. We notice that the Hon ble Tribunal in the case of Microsemi India (P.) Ltd [ 2015 (10) TMI 2103 - ITAT HYDERABAD ] has held that the furnishing of the SOFTEX Form and certification of the said form by STPI is a postfacto procedure prescribed by the Reserve Bank of India to ensure timely and appropriate collection of export proceeds and that the deduction u/s.10A is to be granted based on the receipt of export proceeds into India in convertible foreign exchange. AO has denied the deduction, based on the findings of AY 2010-11 by stating that some of the SOFTEX forms are not certified and that the Bank of America has not sent any reply. However there was no adverse finding recorded by the AO with regard to the SOFTEX forms and there is no discussion of the documents submitted by the assessee for the year under consideration. Further, copies of the invoices and softex forms submitted to the authorities and the letters addressed to them requesting endorsement are furnished by the assessee before is in the additional evidence. In view of this we remit the issue to the AO to verify the evidences submitted. Chennai unit was formed by splitting up of the existing units - The test is to be performed on the first year of commencement of business. It is noticed that the coordinate bench of the Tribunal in the case of IBM India (P.) Ltd [ 2020 (8) TMI 196 - ITAT BANGALORE ] has considered a similar issue and held that that the satisfaction of conditions in section 10AA(4) regarding formation are required to be established only in the year of formation. In assessee s case the Chennai unit is formed in the year 2009 and the first year of claiming the deduction u/s.10AA is AY 2010-11. We therefore direct the AO to keep in mind in the remand proceedings that conditions in section 10AA(4) regarding formation are required to be established only in the year of formation. No evidence for data transmission or export of software - We notice that the issue is settled now by the decision of the Hon ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT ] which is affirmed by .HCL Technologies case [ 2018 (5) TMI 357 - Supreme Cour ] that any adjustment made to the export turnover ought to be correspondingly made to the total turnover as parity is to be maintained between the two. We therefore direct the AO accordingly to make the adjustment, if any, towards telecommunication charges in foreign currency from the export turnover and the total turnover in the remanded proceedings. Disallowance of Marked to Market losses - AO made disallowance holding it to be a notional and contingent and treated the same as a speculative loss in terms of Section 43(5) - HELD THAT:- We notice that similar issue is considered by the coordinate bench of the Tribunal in assessee own case AY 2009-10 [ 2022 (4) TMI 1468 - ITAT BANGALORE ] , wherein AO as directed to delete the disallowance of loss for the reason that loss on account of foreign exchange fluctuations is allowable as a deduction under Section 37(1) - For the year under consideration, AO did not dispute the fact that the loss incurred by the Assessee is in the ordinary course of its business. Therefore we hold that no disallowance is warranted for MTM loss incurred and the AO is directed to delete the addition. Disallowance of Advances written off - reason quoted by the AO and the CIT(A) for not allowing the deduction is that the efforts made by the assessee to recover the money from the employees is not clearly demonstrated - HELD THAT:- We notice that a similar issue is considered by the coordinate bench of the Tribunal in the case of M/s.Xchanging Solutions Limited [ 2022 (6) TMI 1232 - ITAT BANGALORE ] AR prayed for admission of additional evidences before the Tribunal as these evidences when considered would substantiate the claim of the assessee. The additional evidences now produced go the root of the issue and the core reason for not allowing the claim of the assessee. For a proper adjudication of the issue and for substantial cause, the additional evidence is admitted and taken on record. Thus we remit the issue to the AO for a de novo consideration based on the evidences and supporting furnished by the assessee after giving a reasonable opportunity of being heard to the assessee. It is ordered accordingly. Interest on delayed remittance of TDS - Addition on the ground that it is not an allowable expenditure under the Act - HELD THAT:- The coordinate Bench of this Tribunal in Velankani Information Systems Ltd. [ 2018 (10) TMI 68 - ITAT BANGALORE ] dealt with this issue and held that interest on delayed payment of TDS cannot be allowed as deduction. Thus we hold that interest on delayed payment of TDS is not an allowable deduction and dismiss the ground raised by the assessee. Disallowance of Gratuity payment claimed - AR submitted that during the year under consideration, the Assessee was undergoing a transition phase on account of the merger and thus, certain employees were not covered under the gratuity scheme of the merged entity - HELD THAT:- AR during the course of hearing submitted additional evidence (pages 1-87 of the additional evidence compilation (Vol II)) with regard to details of the pay register extracts and the payslips evidencing payment of more than 90% of the gratuity. We admit the additional evidence and since the same goes to the root of the issue and remit the issue to the AO with a direction to examine the additional evidence and allow the claim accordingly. Credit of TDS and advance tax - HELD THAT:- We direct the AO to verify and allow the claim in accordance with law.
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2023 (4) TMI 75
TP Adjustment - comparable selection - Turnover filter - HELD THAT:- Tribunal consistently holding that turnover filter is very important and the companies having turnover of Rs.1 crore to Rs.20 crores have to be taken as a particular range and the assessee is in that range having turnover of Rs.29.91 crores. The companies which also have turnover of Rs.1 crore to Rs.200 crores only should be taken into consideration for the purpose of making TP study. This view of ours was fortified by the order of the coordinate bench of the Bangalore Tribunal in the case of Autodesk India Pvt. Ltd. [ 2018 (7) TMI 1862 - ITAT BANGALORE] . Thus we direct the AO to exclude the 6 companies from the list of comparables whose turnover is more than Rs.200 crores in the assessment year under consideration since the turnover of the assessee company in Rs.9,91 crores in AY 2006-07. Comparables on the basis of RPT filter - Where the RPT exceeds 15%, such companies should not be taken as comparable companies. See FCG Software Services India Ltd. [ 2016 (1) TMI 1359 - ITAT BANGALORE] Functional dissimilarity - Companies functionally dissimilar with that of assessee need to be deselected. Provision for obsolescence of inventory - submission of the assessee in this regard is that there is no distinction between provision and write off when it comes to treatment in the books of accounts and the issue of obsolescence of stock - HELD THAT:- The disallowance has been deleted by the Tribunal in Assessee's own case for AY 2004-05. The Revenue appeal before High Court of Karnataka [ 2016 (6) TMI 1463 - KARNATAKA HIGH COURT] in on this issue is answered in favour of the assessee - we are inclined to decide the above issue in favour of assessee. Loss on exchange fluctuation - HELD THAT:- Currency cannot be treated as stock or shares because inherently they have different characteristic. In the case of the assessees, the foreign exchange exposure for the relevant period specified by R.B.I regulations is quiet substantial in order to justify the forex derivative transactions made by the assessee through Government recognized channel, otherwise the RBI would not have entertained these transactions and would have restrained the banks from entering into such transaction with its clients. Decided in favour of assessee. Provision for sales tax and customs duty - HELD THAT:- We set aside the issue to the file of AO to pass fresh order in conformity with the decision of coordinate Bench of Delhi in case of NHPC Ltd [ 2014 (12) TMI 214 - ITAT DELHI] . Disallowance of Legal and Professional fees - AO has made the disallowance for documentary evidence - HELD THAT:- We are of the opinion that assessee has to establish the genuineness of the expenditure by filing the requisite details. In the present case, assessee produced the recipient s details along with details of TDS and other evidence supporting the claim. Had the AO have any doubt, he should have made further enquiry by summoning the respective party, which he failed to do so. Hence, in our opinion, the expenditure cannot be disallowed only on surmises and conjectures. Accordingly, we allow the ground taken by the assessee. Provision for expenses (disallowed as Contingent Liability) - AO has made the disallowance under the premise that assessee was not able to furnish the kind of litigation expenses and nature of litigation - HELD THAT:- We are of the opinion that assessee has to establish the genuineness of the expenditure/provisions by filing the requisite details and details of TDS. If the assessee furnishes these details, the claim of assessee to be allowed. In the present case, it is not the case of revenue that this expenditure is bogus. The assessee has furnished the details called for by AO u/s 142(1) of the Act. There is no failure on the part of the assessee to substantiate the claim, we allow the ground taken by the assessee. Dealer Commission - Addition made for want of documentary evidence - HELD THAT:- In this case assessee has filed all the details called for by AO and Ld. D.R. is not able to point out the lapse on the part of the assessee, hence, this ground of appeal is allowed by placing reliance on the earlier order of the Tribunal for the assessment year 2005-06 [ 2017 (4) TMI 1527 - ITAT BANGALORE] as noted that in the case of receipt of this commission by those parties, the department has accepted it. However, in the hands of assessee it was treated as not incurred by the assessee, which is incorrect. Books of accounts of the assessee is not rejected by challenging the entries in the books of accounts. On this point also, we are of the opinion that the claim of assessee is to be allowed as genuine - thus allow the ground taken by the assessee. Miscellaneous expenses - AO has made the disallowance for want of documentary evidence - HELD THAT:- We are of the opinion that assessee has to establish the genuineness of the expenditure by filing the requisite details. In the present case, assessee produced the recipient s details along with details of TDS. Had the AO have any doubt, he should have made further enquiry by summoning the respective party, which he failed to do so. Hence, in our opinion, the expenditure cannot be disallowed only on surmises and conjectures. Accordingly, we allow the ground taken by the assessee.
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2023 (4) TMI 74
Addition u/s 68 - unexplained cash credit - Unexplained share application money received - HELD THAT:- Except for raising allegations in the thin air the department had failed to lead any iota of evidence which would persuade us to conclude that it was the unaccounted money of the assessee company which was routed back to its coffers in the garb of share application money through the investor company. Onus cast upon the assessee company for proving the nature and source of the share application money a/w the additional burden cast upon it as per the first proviso to section 68 stands duly discharged. Accordingly, not being able to persuade ourselves to subscribe to the view taken by the lower authorities who had dubbed the share application money received by the assessee company as an unexplained cash credit u/s.68 we herein set- aside the order of the CIT(Appeals) and vacate the said addition. Thus, the Ground of appeal No.1 raised by the assessee is allowed in terms of our aforesaid observations. Addition u/s. 56(2)(viib) - Issue of additional shares at premium while splitting the existing shares - AO assessed the excess amount of Rs.15/- per share so received by the assessee as its income u/s. 56(2)(viib) - HELD THAT:- As the provisions of Sec. 56(2)(vii) were introduced as an antiabuse measure to prevent laundering of unaccounted money in the garb of gifts after abolition of Gift Tax Act, therefore, there is no justifiable reason to depart from the understanding that the said provisions were in the nature of counter evasion mechanism to prevent laundering of unaccounted money. What in effect transpires is that a share gets split (in the same proportion for all the shareholders). As observed by the Tribunal in its aforesaid order, such allotment of additional shares would be akin to changing a one thousand rupee note for two five hundreds rupee notes. Accordingly, as stated by the Ld. AR, and, rightly so, the provisions of section 56(2)(viib) of the Act in the backdrop of the facts of the case before us could not have been triggered. Though the aforesaid issue was specifically raised by the assesee before the CIT(Appeals) however, the latter had failed to adjudicate the same. In all fairness, instead of restoring the issue to the file of the CIT(Appeals) for fresh adjudication which would only add to the pending litigation, we have taken a call and adjudicated the aforesaid issue - vacate the disallowance made by the A.O u/s. 56(2)(viib) - Thus, the Ground of appeal No.2 raised in appeal by the assessee is allowed.
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Customs
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2023 (4) TMI 73
Validity of customs notification dated 09.06.2020 issued by the Central Government for imposition of anti-dumping duty on the subject goods for a period of five years from the date of publication of the notification on the basis of the sunset review final findings dated 17.03.2020 of the designated authority recommending continuation of definitive anti-dumping duty - time limit specified under the Tariff Act for issuance of a notification - whether the Central Government could have issued the customs notification on 09.06.2020, as the period for which the existing antidumping duty had earlier been imposed by notification dated 07.04.2015 expired on 06.04.2020? - whether because of the provisions of section 6 of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 relating to Relaxation of the Time Limit under certain Indirect Tax Laws , the period for issue of the notification by the Central Government under the first proviso to section 9A of the Customs Tariff Act, 1975, stood extended upto 31.12.2020? HELD THAT:- Under section 6 of the 2020 Act, the time limit specified under the Tariff Act for issuance of a notification falling during the period from 20.03.2020 to 29.09.2020 shall stand extended to 30.09.2020. It is the contention of the appellant that under the first proviso to section 9A(5) of the Tariff Act, the notification for imposition of anti-dumping duty, in a review, has to be issued before the date on which the anti-dumping duty earlier imposed by a notification comes to an end. In other words, according to the appellant, there is time limit within which the notification has to be issued. Thus, section 6 of the 2020 Act would extend the time limit to 30.09.2020 since in the present case, the imposition of the anti-dumping duty by an earlier notification came to an end on 06.04.2020 and this date is between the two dates, namely 20.03.2020 and 29.09.2020. The appellant cannot be permitted to contend that in the context of the first proviso to section 9A(5) of the Tariff Act, the time limit for issuing the notification for imposition of anti-dumping duty is before the last date on which the existing antidumping duty comes to an end and also contend, when it comes to the provisions of section 6 of the 2020 Act, that there is no such time limit which can be extended in terms of section 6 of the 2020 Act. If the contention of the appellant that the notification has to be issued during the life time of the existing anti-dumping duty under the first proviso to section 9A(5) is not accepted, then the notification dated 09.06.2020 would be a valid notification. If the contention of the appellant is not accepted, the notification dated 09.06.2020 would still be a valid notification because the time limit gets extended in view of the provisions of section 6 of the 2020 Act. Learned counsel for the appellant is not justified in contending that the notification has to be issued during the life time of the existing duty because of a precondition and not because of time limit. As the only contention raised by the learned counsel for the appellant for setting aside the notification dated 09.06.2020 has no merit, the appeal deserves to be dismissed and is dismissed.
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Corporate Laws
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2023 (4) TMI 82
Delay in filing of CHG-4 form - due to the death of the Founder-Director, there was a delay, in filing form - sufficient cause for delay present or not - Sections 82 of Companies Act read with Rule 8(1) of the Companies (Registration of Charges) Rules 2014 - HELD THAT:- Under Sections 82 of the Act read with Rule 8(1) of the Companies (Registration of Charges) Rules 2014, there exists an obligation on the Company to record satisfaction of charge within a period of 30 days from the date of such payment - A perusal of the order of the Hon ble Supreme Court in In Re Suo Motu [ 2022 (1) TMI 385 - SC ORDER ] clearly shows that the entire period between 15th March, 2020 till 28th February, 2022 was excluded from computation of limitation. In the present case, the usual period of limitation is thirty days. Thus, a period of thirty days would be added from 28th February 2022, meaning thereby that the limitation would have expired only on 28th March 2022 - The filing of the Form in the present case has been made on 28th November, 2022 which would be a total delay of eight months. The observations of the Madhya Pradesh High Court in M/S. SHALINI PLASTIC PRIVATE LIMITED THROUGH SHRI KAPIL ATLASIYA VERSUS UNION OF INDIA, REGISTRAR OF COMPANIES MADHYA PRADESH [ 2018 (7) TMI 2301 - MADHYA PRADESH HIGH COURT] are also relevant in the present case, wherein the Court observed that In the present case the petitioner has disclosed that delay had taken place because there was change in entire management of the company, therefore, the default had taken place for the bonafide reason. Keeping in mind orders passed by the ld. Supreme Court as also the order of the ld. Single Judge of Madhya Pradesh, the delay cannot be held to be deliberate. The demise of the Founder-Director due to COVID-19 is a genuine cause for the delay. The costs are accordingly reduced to 25,000/- qua each of the charges. Thus, the total costs payable by the Petitioner would be Rs.50,000/-. Petition allowed in part.
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Insolvency & Bankruptcy
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2023 (4) TMI 72
Doctrine of Merger - suppression of fact or not - CIRP proceedings and approval of resolution plan - judgement has been obtained by playing fraud with the Court or not - allegation of fraud committed in a proceeding in which a judgement is passed and if the said judgement has merged with the order of Hon ble Supreme Court, applying the doctrine of merger no one is entitled to approach the Court/Tribunal whose judgement/order has been merged with the judgement of the Hon ble Supreme Court - locus standi in the case - HELD THAT:- In the present case there is neither any FIR nor any order passed under Section 340 of the Code of Criminal Procedure, 1973 and as such in this situation it would be impermissible to accede to the prayer for recall of a judgement of this Tribunal, which has long back merged with judgement of Hon ble Supreme Court. In so far as doctrine of merger is concerned, a Three Judges Bench of Hon ble Supreme Court in [ 2019 (11) TMI 731 - SUPREME COURT ] has already given finality to the law in this regard. To justify the locus of the applicant No.2 and showing entitlement to file application on behalf of the applicant No.1 company Mr Deepak Khosla, learned counsel for the applicant has placed heavy reliance on a judgement of Federal Court reported in Dr Satya Charan Law and others Vs Rameshwar Prasad Bajoria and others [ 1949 (12) TMI 40 - FEDERAL COURT ]. The applicant may not get any benefit from this judgement in view of the fact that the Hon ble Federal Court also had considered that it is cardinal principle that in respect of any dispute, case is to be filed by the company itself to protect the right and interest of the company. However, exception has been noticed that the majority of the shareholders are also entitled to take steps to redress the wrong. The applicant in the present application has admitted that the Management of the company is under Administrator. Once Administrator was there, in normal course having been satisfied that by committing fraud judgement was obtained, then in that event it was expected for applicant No.2 to request the Administrator to take appropriate steps. Moreover in the present case the applicant was not a party in the earlier proceeding before this Tribunal and as such besides having no locus and also no order passed under Section 340 of the Cr PC it would not be appropriate for us to accede to the prayer for recall of the judgement which was passed long back in 2019 and finally merged with the order of Hon ble Supreme Court on 15.11.2019. The present application can be dismissed primarily on the point of its maintainability.
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Service Tax
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2023 (4) TMI 81
Seeking Mandamus directing the first respondent to consider his representation to accept the payment in terms of SABKA VISHWAS (Legacy Dispute Resolution) Scheme, 2019 towards Full and Final Settlement of tax dues, within the time stipulated - seeking to revoke the proceedings of the Central Revenue Authorities - HELD THAT:- It is no doubt true that the scheme in question has a shelf life and it is not within the jurisdiction of the respondent to extend the time. However, it is also seen that the Court exercises its jurisdiction to give directions to the taxing authorities to consider receiving the payment belatedly to ensure that the assessee abides by the duty caused upon him to make the payment of taxes. Taking a cue from this earlier precedence and with the idea of bringing about the via media, the Writ Petition is disposed of with the following directions:- The respondents are directed to consider the representation of the petitioner dated 22.02.2023 and pass appropriate orders on merits and in accordance with law within a period of one month from the date of receipt of a copy of this order. While considering the representation of the petitioner, the respondents shall bear in mind the fact that the entire amount had been paid by the petitioner on 30.07.2020 through RTGS. Petition disposed off.
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2023 (4) TMI 80
Refund or adjustment of Service Tax - levy of GST (Service Tax) on collection of the market fee of Thirupathur Town Panchayat, or not - It is the case of the petitioner that he is not liable to pay GST in the light of entry No.39 of the Notification No.25/2012, Service Tax, dated 20.06.2012 issued by the Ministry of Finance, Government of India - HELD THAT:- The Notification No.25/2012, Service Tax, dated 20.06.2012 and the subsequent circular amending the notification would indicate that the market fee is exempted from GST. Both the parties admitted that the above issue is pending adjudication. Therefore, considering the submission, the Writ Petition is disposed of with a direction that in the event of the adjudication coming in favour of the petitioner, i.e; if the market fee is exempted from GST, then the amount collected should be adjusted towards future payments. The representation of the petitioner shall be considered and disposed of by the respondents within a period of one month from the date of receipt of a copy of this order, in the light of the Notification No. 25/2012, Service Tax, dated 20.06.2012 and the circular No.13052/2016/D2 dated 03.05.2017 - Petition disposed off.
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2023 (4) TMI 71
Rejection of application filed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - the pre-deposit could not be verified, and therefore, the claim of the pre-deposit was denied - whether the rejection of the Petitioners' application was completely arbitrary? - HELD THAT:- The Respondents did not dispute the Petitioners' argument based on the Circular issued on 12 December 2019, which states that deposits made after the show cause notice but before adjudication should be considered under the Scheme. The Central Board of Indirect Taxes and Customs has answered affirmatively to the Frequently Asked Question No.26 as to whether pre-deposit made at any stage should be taken into account. The Respondents did not deny the applicability of the Circular or the interpretation given by the Petitioners. The Respondents have cast doubt on the payment made on 10 March 2012, arguing that the challans cannot be considered as a pre-deposit against the show cause notice. However, the reply does not provide any other reason for this doubt, and it is only based on the fact that the payment was made after the issuance of the show cause notice. The Respondents did not comment on the letter dated 30 December 2019, where the Petitioners submitted the challans to the Principal Commissioner, CGST, in support of their claim. This letter was submitted following the hearing on 27 December 2019, but it was not mentioned in the impugned order or in the reply. There is no valid reason to deny the Rs. 23,07,200/- deposited by the Petitioners on 10 March 2012 through challans as pre-deposit for the purpose of the Scheme. The Central Government introduced the Scheme to resolve past disputes, ensure compliance and increase revenue. When interpreting the statute and circular, the aim of the Scheme must be kept in mind. The authorities' approach should not be excessively technical but instead geared towards achieving the Scheme's objectives - the Respondents' objections were unnecessary and went against the spirit of the Scheme, as well as the factual situation. The impugned order dated 13 February 2020 issued by Respondent No.3- Designated Committee is quashed and set aside - the Respondents are directed to examine the material placed on record by the Petitioners and to decide as regards the aspect of section 124(2) in respect of the amount of Rs.23,07,200/- - petition allowed.
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Central Excise
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2023 (4) TMI 70
Violation of principles of Natural Justice - case of petitioner is that prior to issuance of show cause notice a pre-show cause notice consultation is mandatory as per the provisions of Master Circular No.1053/02/2017-CX dated 10 March 2017 issued by Central Board - Petitioner contended that though the notice was issued to the Petitioner to attend for pre-show cause notice consultation, though time was given, it was not possible for the Petitioner to attend the pre-show cause notice consultation - HELD THAT:- Admittedly pre-show cause notice consultation has been facilitated to the Petitioner in this case. Considering the object behind the pre-show cause notice consultation which is beneficial to the assessee as well as revenue, it is opined that the situation has been remedied by fixing the date for the pre-show cause notice consultation. The learned counsel for the parties leave it to the court to fix the date for pre-show cause notice consultation. Accordingly, the Petitioner will appear before the concerned Adjudicating Authority on 10 April 2023. Concerned Adjudicating authority will thereafter fix a suitable date for pre-show cause notice consultation. If in the pre-show cause notice consultation the Adjudicating Authority is of the opinion that there exists the liability of the Petitioner and show cause notice is to be pursued then it is open to the Petitioner to take necessary steps as may be warranted in law and fact to challenge the show cause notice - Till the pre-show cause notice consultation process is over, the impugned show cause notice shall not be given effect to. Writ Petition is accordingly disposed of.
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CST, VAT & Sales Tax
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2023 (4) TMI 69
Refund of Input Tax Credit (ITC) on Export of Goods and Services without payment of Integrated tax - rejection on account of difference in turnover - typographical error - invoices mentioning Lowa State in the United States of America - HELD THAT:- The learned Counsel for the Respondents submitted that considering the magnitude of the refund sought, the Deputy Commissioner was careful in scrutinizing of the documents and having found that the typographical error had to be corrected by the Petitioner and not by the Deputy Commissioner, rejected the refund application and there is no error in the same. The learned Counsel for the Respondents states that there are other grounds on which the Petitioner is not entitled to refund. Invoices mentioning Lowa State in the United States of America - HELD THAT:- There is an obvious typographical error as there is no such State in the United States. The corresponding name to that place is Iowa State, and therefore, the explanation of the Petitioner is plausible and should have been considered by the Deputy Commissioner. Therefore, it is opined that with this finding / correction the Deputy Commissioner needs to examine the Refund Application made by the Petitioner afresh, also examine the evidence that is produced by the Petitioner in addition to the invoices and take a decision. The impugned order dated 22 April 2022 passed by the Respondent no.2 Deputy Commissioner of Sales Tax, Pune, is quashed and set aside. The application of the Petitioner for refund is restored to the file of the Deputy Commissioner - It is open to the Petitioner to supply additional documents in support of its claim for refund. During the hearing the Petitioner would also keep the originals of the documents to enable the Deputy Commissioner to scrutinize and ascertain the veracity thereof. The Writ Petition is allowed.
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2023 (4) TMI 68
Owner of goods - sale in Delhi or not - failure to furnish information regarding the receipts of the goods found at its godown - whether the Tribunal has erred in upholding the order of the Appellate Authority on the ground that the appellant had not produced necessary information in his possession in respect of the goods stored at the godown? - order of default assessment passed - rebuttal of presumption. HELD THAT:- The plain reading of Sub-section (9) of the Section 3 of the DVAT Act indicates that if a person who transports or holds goods in custody fails to furnish any information in respect of the goods in his possession, on being required to do so by the Commissioner, it would be presumed that he is the owner of the goods - Undisputedly, the presumption under Section 3(9) is a rebuttable presumption. Further, the said presumption would arise only if a person who is in custody of the goods fails to produce the information in his possession in respect of the goods. It is the appellant s case that it had, in fact, produced relevant documents to show the ownership of the goods in question and therefore, no such presumption could be drawn - Admittedly, there is no dispute that at the time of inspection of the godown, the appellant s Manager had not produced the relevant documents. However, the record indicates that the appellant had produced the relevant documents at a subsequent stage prior to the order of default assessment. There appears to be no real dispute that the appellant had done so. The appellant has produced photocopies of the documents that were filed before the VATO Enforcement at the time of the default assessment or prior, thereto. These were also produced before the Appellate Tribunal. It is material to note that Section 3(9) of the DVAT Act does not specifically provide a time-frame for submission of documents. It merely contemplates a presumption as to the ownership of the goods if the person in custody of goods fails to furnish any information in possession in respect of the goods on being required to do so by the Commissioner - It is also not disputed that the appellant s godown and its office were located at different places and the respondents do not dispute that it was permissible for the appellant to keep the documents at its office instead of at the godown. It would be open for a person found in custody of goods to produce the relevant information in its possession in respect of the goods within a reasonable time on being required to do so by the Commissioner. The question as to what is a reasonable period of time for providing information is necessarily required to be determined in the facts of each case. In the given facts of the present case, the question is required to be answered in the affirmative; that is, in favour of the appellant and against the Revenue. The appellant s appeal is restored to the Appellate Tribunal. The Appellate Tribunal shall consider the documents as produced by the appellant and take an informed decision on the appellant s appeal - Appeal disposed off.
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Indian Laws
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2023 (4) TMI 67
FSSA - Restriction / Prohibition on the manufacture, storage, distribution or sale of Gutka, Pan Masala, flavoured/scented tobacco, Kharra and similar products - Constitutional Validity of Notification issued by the Commissioner of Food Safety, Government of National Capital Territory of Delhi (NCT of Delhi) in view of Regulation 2.3.4 of the Food Safety and Standards (Prohibition and Restriction on Sales) Regulations, 2011 (Regulation 2.3.4) in purported exercise of power under Section 30(2)(a) of Food Safety and Standards Act, 2006 - violation of the fundamental and other legal rights of the Petitioners - power to prohibit the sale of chewing tobacco - food within the ambit of Section 3(1)(j) of the FSSA or not. Legality of imposition of such ban by issuance of a Notification or an order by an administrative body. HELD THAT:- One of the main grounds on which the impugned Notifications have been challenged by the Petitioners is them being arbitrary and ultra vires the FSSA as Respondent No.1 is not empowered under the provisions of the FSSA, or the rules and regulations made thereunder to impose such a prohibition on manufacture, storage, distribution or sale of chewing tobacco since the same is a scheduled product under the COTPA and cannot in any manner be construed as food within the ambit of the FSSA. The Respondents, on the contrary, have argued that Respondent No.1 was well within his rights to issue the impugned Notifications under Regulation 2.3.4, who has been mandated with power under Section 30(2)(a) of the FSSA to prohibit the manufacture, storage, distribution and sale of any article of food, such as chewing tobacco, in the interest of public health and welfare. The FSSA is an Act to consolidate all laws relating to food and to establish the FSSAI for laying down science-based standards for articles of food. As per the Preamble of the FSSA, the purpose of the FSSA is to provide safe, wholesome and unadulterated food to consumers. The Statement of Objects and Reasons of COTPA states that it is an Act for regulation of trade and commerce in, and production, supply and distribution of, cigarettes and other tobacco products and for matters connected therewith - The power to establish standards of quality for goods under the FSSA would not include within its purview the power to prohibit the manufacture, sale, storage and distribution of any goods, moreover, when the goods sought to be prohibited pertain to the scheduled tobacco products under the COTPA. The Hon ble Supreme Court in the case of Himat Lal K. Shah [[ 1972 (9) TMI 149 - SUPREME COURT] ] has explicitly held that the power to regulate does not normally include the power to prohibit. A power to regulate implies the continued existence of that which is to be regulated. In view of ratio laid down by Himat Lal and bare perusal of the entire scheme of the FSSA, it is apparent that power to frame Regulations does not include the power to prohibit manufacture, distribution, storage and sale of a product. On the bare perusal of Regulation 2.3.4, it is apparent that the intention is not to prohibit but restrict the use of tobacco or nicotine as ingredients in any food product. In the considered view of this Court, the language of Regulation 2.3.4 does not suggest regulating manufacture, distribution, storage or sale of tobacco or nicotine but amounts to regulating standards of food within the purview of the FSSA. Therefore, what has to be regulated under Regulation 2.3.4 is food without tobacco and not tobacco itself which is a scheduled item under the COTPA, which has to accordingly be regulated under the provisions of COTPA - the impugned Notifications passed by the Commissioner of Food Safety in view of Regulation 2.3.4 in exercise of powers under Section 30(2)(a), in so far as they prohibit the use of tobacco and nicotine with respect to scheduled tobacco products covered under the COTPA, are beyond the scope of powers conferred by the FSSA. The COTPA was enacted by the Parliament under Entry 52 of List I to Schedule VII of the Constitution and once the Parliament chooses to exercise its competence in terms of Entry 33 of List III, it may take over the entire gamut of activities. The power of State Legislatures to enact laws relating to Trade and Commerce within the State‟ and Production, supply and distribution of goods‟ under Entry 26 and Entry 27 of List II is subject to Entry 33 of List III, which enables the Parliament to legislate with respect to the aforesaid matters in relation to the tobacco industry amongst others - once the Parliament has exercised power under Entry 52 of List I in order to take the entire tobacco industry under its control, the State Legislatures are not competent to enact laws on the said subject. The Hon ble Supreme Court, in the case of Godawat Pan Masala [[ 2004 (8) TMI 692 - SUPREME COURT] ], observed that the legislation enacted to deal with tobacco does not suggest that the Parliament has ever treated tobacco as res extra commercium nor has the Parliament ever attempted to ban its use absolutely. Merely licensing regulation, duties and taxes have been imposed on tobacco products. The Hon ble Supreme Court further examined whether tobacco can be treated as res extra commercium‟, and held that In any event, whether an article is to be prohibited as res extra commercium is a matter of legislative policy and must arise out of an Act of legislature and not by a mere notification issued by an executive authority. The FSSA is an Act to consolidate the laws relating to food and for laying down sciencebased standards for articles of food and to regulate their manufacture, storage, distribution, sale and import to ensure safe and wholesome food for human consumption and incidental matters. Whereas the COTPA is a comprehensive legislation which deals with advertisement, trade, sale and distribution of tobacco and tobacco products. The Union Government assumed control to legislate with regard to both the food industry and the tobacco industry, therefore, it is certain that at the time of enactment of the FSSA, the Legislature was not only aware and conscious of the existence of the COTPA, which was enacted in 2003 but made various rules under the COTPA and carried out multiple amendments in provisions and rules framed thereunder even after the enactment of the FSSA in 2006 - it can be observed that the COTPA, being a special law‟, occupies the field for tobacco and tobacco products and would prevail over the FSSA which is a general law . Whether the enactment of the FSSA impliedly repeals the COTPA? - HELD THAT:- It is a settled position of law that there is a presumption against repeal by implication. Thus, when a new Act contains a repealing section mentioning the Acts which it expressly repeals, then there is a presumption against implied repeal of other laws which are not specifically mentioned therein. In such cases, the burden to show that there has been repeal by implication lies on the party asserting the same - the doctrine of implied repeal has no application to the present case because both the aforementioned Acts i.e., FSSA and COTPA occupy different fields i.e., the former applies to the food industry while the latter applies to the tobacco industry. Hence, in the considered view of this Court, the FSSA does not impliedly repeal the provisions of the COTPA. Admittedly, the object sought to be achieved by the said prohibitory order(s) in the nature of the impugned Notifications, is public health . However, there is no justification whatsoever for making such a differentiation in smokeless and smoking tobacco, which may be different in their forms but are no different in terms of their impact on public health. It is worthwhile to note that the COTPA, which is the Central Act governing the tobacco industry, does not make any such distinction between smokeless and smoking tobacco under its Schedule - it is apparent that the said classification/distinction between smokeless and smoking tobacco has no connection with the object sought to be achieved by the impugned Notifications. In fact, the said discrimination which is being promoted by the impugned Notifications encourages smoking tobacco over smokeless tobacco, thereby being not only clearly discriminatory but in violation of Article 14 of the Constitution. This Court is of the considered view that the classification sought to be created between smokeless and smoking tobacco is clearly violative of Article 14 of the Constitution - this Court is conscious of the harmful effects and various diseases caused by the use of tobacco, both smokeless and smoking. In addition to the ill-effects of smokeless tobacco pointed by the Respondents, this Court is of the view that tobacco, in any form, not only smokeless but also smoking, is injurious to public health and this Court accordingly condemns and discourages the use of any form of tobacco. Public health is one of the most important part of the society and country and therefore, it is necessary to take all steps to preserve the same in all possible manners. This Court is of the considered view that the impugned Notifications passed by the Commissioner of Food Safety in view of Regulation 2.3.4 in exercise of powers under Section 30(2)(a), is beyond the scope of powers conferred upon him by the FSSA - the COTPA is a comprehensive legislation dealing with the sale and distribution of scheduled tobacco products and therefore, occupies the entire field relating to tobacco products. Therefore, the COTPA, being a special law, occupies the entire field for tobacco and tobacco products and would prevail over the FSSA which is a general law. This Court is of the considered view that while issuing the impugned Notifications, the Respondent No.1/Commissioner of Food safety exceeded its power and authority in contravention of the powers vested in him under the FSSA and therefore, the said impugned Notifications are hereby quashed and set aside. The present Writ Petitions are allowed.
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