Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 13, 2022
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
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India considering a Preferential Trade Agreement (PTA) with Oman- Shri Piyush Goyal
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Government to send trade delegations to Morocco, Tunisia, Indonesia, Philippines, Thailand, Vietnam, Turkey, Algeria and Lebanon for exploring possibilities of boosting wheat exports from India
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DRI seizes 61.5 kg gold concealed in Triangle Valves imported at Air Cargo Complex, IGI Airport, New Delhi
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UAE Minister of Economy, H.E. Abdulla Bin Touq Al Marri meets Union Finance and Corporate Affairs Minister Smt. Nirmala Sitharaman
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Oman to fast-track approval of Indian pharma products registered by USFDA, UKMHRA and EMA
Notifications
Highlights / Catch Notes
GST
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Classification of goods - rate of GST - sale of solar energy products as Solar Water pumping system as a whole - the supply of solar energy based bore well water pumping systems as . a whole. alongwith installation and commissioning of such systems involves both supply of goods and services - the effective rate of GST for the composite supply will work out to 8.9% [(5% x 70%) plus (18% x 30%)]. However, with the amendments effected vide Notification No. 06/2021-Central Tax (rate) dated 30.09.2021 and Notification No. 08/2021-Central Tax (rate) dated. 30.09.2021, the rate of tax on goods portion stands increased from 5% to 12% and accordingly, the effective rate of GST for the-period post 30.09.20121 will stand increased to that extent. - AAAR
Income Tax
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Requirement of quoting PAN or AADHAR - Transactions for the purposes of sub-section (6A) of section 139A and prescribed person for the purposes of clause (ab) of Explanation to section 139A - Rule 114BB of the Income-tax Rules, 1962
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Mandatory requirement of PAN - deposit or withdrawal of amount exceeding Rs. 20 Lacs from bank account / post office account - opening a crrent account or cash credit account with bank or post office - Transactions for the purposes of clause (vii) of sub-section (1) of section 139A - Rule 114BA of the Income-tax Rules, 1962
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Application for seeking PAN should be filed at least 7 days prior to enter into specified transaction as referred to in section 139A(3)(vii) read with rule 114BA - Deposit or withdrawal of cash in the bank account beyond specified limits or opening of current account with bank or post office account - Rule 114 of the Income-tax Rules, 1962
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Exemption u/s 11 - Charitable activity u/s 2(15) - charging annual maintenance fees from members - When the assessee’s main dominant and prime objective was to promote the sports was not desire to earn profits but, object of promoting sports for Nation, it was clearly a charitable purpose. The important elements of application of proviso are that the assessee should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, which is clearly missing in the present case. - AT
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Nature of expenditure - expenses of loss on account of fire - revenue or capital expenditure - The assessee incurred the expenses to bring the building in the same form and no new asset came into existence rather the old building and electrical fitting were brought into workable condition, therefore, the expenses incurred by the assessee were revenue in nature and not capital in nature. - AT
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Reopening of assessment u/s 147 - Even for a moment we assume that the observations of the Tribunal could be stated to be a finding or a direction as contemplated by Section 150 of the Act, still in view of the proviso to Section 147 of the Act, the reopening cannot be stated to be valid. There is nothing in the reasons for reopening to indicate that there was any escapement of income due to failure on the part of the assessee to truly and fully disclose material fact. - HC
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Reopening of assessment u/s 147 - Scope of new regime of Section 148A - The principle of law, as explained by the Supreme Court, in the case of GKN Driveshaft (India) Ltd [2002 (11) TMI 7 - SUPREME COURT], is now a statutory provision in the form of new Section 148A of the Act. - We are of the view that we should quash and set aside the order passed under clause (d) of Section 148A as well as the notice issued under Section 148 of the Act, 1961 and remit the matter to the Assessing Officer for fresh consideration of the objections filed by the writ applicant. - HC
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Addition towards donation given by the assessee - though the Ld. CIT(A) noted that the assessee has not claimed any deduction as expenditure in the profit and loss account but confirmed the addition by giving contradictory findings. - Additions deleted - AT
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Powers of CIT(A) u/s 251 - Enhancement of assessment - New source of income introduced by CIT(A) while deciding the appeal and enhancement of income - Deemed dividend u/s.2(22)(e) - The issue of deemed dividend u/s.2(22)(e) of the Act, were never subject matter of assessment order - enhancement made by CIT(A) on altogether new issues is without authority of law - AT
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Penalty u/s 271(1)(c) - There was the need for the AO to record the clear satisfaction with respect to each addition/disallowances made during the assessment proceedings for initiating the penalty. Accordingly, in the absence of necessary satisfaction of the AO, we hold that the penalty order is not sustainable. - AT
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Deduction u/s.80IC on the profits - gross total income - Going with the prescription of section 80A(2) of the Act, if the gross total income is more than the aggregate amount of deductions under Chapter VI-A, then such total amount of deductions is reduced from it to find out the total income. If however, the aggregate amount of deductions under this Chapter happens to be more than the gross total income, then such aggregate amount of deductions gets restricted to the amount of the gross total income with the effect that the total income is reduced to Nil and is not converted into loss so as to allow carry forward of the amount of deductions under this Chapter to the next year. - AT
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Payment of expenses in cash - Addition being cash payment in contravention to the provisions of section 40A(3) - if separate invoices have been raised in respect of each payment by various parties and payment on a single day to a party does not exceed Rs. 20,000/- then there is no reason to disturb the findings of the Ld. CIT(A). - AT
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Disallowance of expenses - Self made vouchers - cash expenditure - The reason given by the assessee that the loss is due to depreciation on trucks, the same could have been explained before the lower authorities which has not been done by the assessee but the expenses incurred is not proved with proper evidences and mostly done by cash mode. After going through the order of the learned CIT(A), we are not in agreement with the order of the learned CIT(A) in estimating the profit at 0.60% on the net profit when the assessee has not produced any evidences on the claim of expenses. In the above circumstances, we are of the considered opinion that it would serve the interest of justice, if we restrict the disallowance to 1% of the total turnover - AT
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Validity of reopening of assessment u/s 147 - Addition u/s 68 - learned CIT(A) is correct in holding that when the assessee has been found to be engaged in bogus accommodation entry by investigation wing and assessee simply denies the same without submitting complete details of bank statement assessee's plea has no legs to stand. - AT
Customs
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Revocation of the anti-dumping duty imposed on ‘Amoxycillin’ also known as ‘Amoxycillin Trihydrate’ originating in or exported from China PR - Seeks to rescind Notification No. 21/2017-Customs(ADD) dated the 16th May, 2017 - Notification
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Validity of order of settlement commission - Demand of differential duty - undervaluation - If the Settlement Commission was of the view that the writ applicant failed to make “full and true’ disclosure of the duty liability, it should have rejected the settlement application. The writ applicant should have been relegated to suffer and undergo the adjudication mechanism and procedure as per the provisions of the Act. - HC
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Revocation of Courier License - The appellant Courier was mandated to work within legal framework of the Customs Act, 1962, Rules and Regulations made thereunder. The appellant failed to do so. The appellant did not exercise due diligence in submitting the correct and complete information to the assessing officer with reference to the impugned goods. By violating the Regulations, it had given scope for massive misuse of the facility given in addition to loss of Revenue. - the revocation of License is justified and any leniency shown in the misconduct of this nature would send wrong signals. - AT
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Valuation of imported goods - inclusion of the miscellaneous charges which were indicated in the invoices - Learned Counsel has demonstrated before us that they were indeed included in the values in the Bill of Entry. However, these charges were included under a different column and the figure “0” was indicated against the column “Miscellaneous Charges”. The net effect of the valuation insofar as these charges is concerned is that the miscellaneous charges were included by the appellant in the Bill of Entry. Therefore, there are no reason or justification to add them again to the assessable value. - AT
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Classification of import goods - Multimedia Speakers - though the “Multimedia Speakers” under consideration have additional features, the main and principal function of the product is as a Speaker and therefore, the goods in question are classifiable under CTH 8518 2200. - AT
Indian Laws
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Dishonor of Cheque - impleadment of a company before vicarious liability - There is no pleading which suggests that the Company had committed any offence. When no offence is attributable to the Company, it is not possible to attach liability on the Managing Director by the deeming provisions of Section 141 of the N.I. Act. Amendments of simple technical infirmities alone can be allowed but not the filing of a fresh complaint with improved pleadings, in the garb of amendment. - HC
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Rights of the contesting Appellants working as Anganwadi workers/helpers to claim gratuity under the provisions of Payment of Gratuity Act, 1972 - the Anganwadi centres established under ICDS have been given statutory status under the 2013 Act. Moreover, Under Sections 4, 5 and 6 of the 2013 Act, the Anganwadi centres perform statutory duties under the 2013 Act. - There exists no manner of doubt that the 1972 Act will apply to Anganwadi centres and in turn to AWWs and AWHs - SC
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Dishonor of Cheque - Section 320 Cr.P.C. enumerates the manner in which the offences are to be compounded whereas Section 147 of the Act makes the offences under the Act compoundable without explaining the manner in which the compounding is to take place. - This payment of Rs.4,00,000/- after ten years of the issuance of the cheques, in the opinion of this Court, is grossly inadequate and is not sufficient to compensate the complainant so as to enable this Court to exercise its discretion to close the proceedings, particularly, in the circumstances, when the complainant is not willing to consent to compounding. - HC
IBC
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Seeking refund of money equivalent to the Bank Guarantees invoked - What does not belong to the ‘Corporate Debtor’ cannot be sought to be refunded back to the ‘Corporate Debtor’. In the instant case, the ‘Corporate Debtor’ was unable to execute the work with the given advance and the ‘Mobilisation Advance Bank Guarantee’, which is generally issued at the commencement of the contract, viewed from any angle, cannot be said to be ‘an Asset belonging to the Corporate Debtor’ - AT
SEBI
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Major amendments - Securities and Exchange Board of India (Collective Investment Schemes) (Amendment) Regulations, 2022 - Notification
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Changes to the Framework to Enable Verification of Upfront Collection of Margins from Clients in Cash and Derivatives segments - Circular
Service Tax
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Levy of Service Tax - Club and association services - appellant is an association of its members - Although the milk unions (district cooperative societies) and the appellant (apex society) are registered under the Cooperative Societies Act of the State and are, therefore, distinct legal entities, the nature of relationship between the appellant and the milk unions continues to that of club to its members. Therefore, no service tax is payable on the services rendered by the appellant to the milk unions. - AT
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Refund of CENVAT credit - Its rejection by the Commissioner (Appeals) solely on the ground that GST was payable and no evidence of payment of GST was available is also not tenable and is erroneous to the extent that under GST Act recovery provisions are also available which can be resorted to by the competent authority instead of making a pre-condition of payment of GST to facilitate the refund process that was instituted under the erstwhile Central Excise Act in borrowing force from the new GST Act itself. - AT
Central Excise
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Benefit of exemption - Bulker mounted on chassis fitted with engine - it is not in dispute that the appellant has not availed any Cenvat Credit on any of the inputs which have been used in the manufacture of either the bulkers or the duty paid on the chassis and therefore, the appellant would be entitled for the benefit of exemption under the said Notification vide Serial No. 39. - AT
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Denial of CENVAT Credit availed on goods which were used in the erection of transmission towers installed from the power plant to the factory for bringing in the electricity - In the present matter impugned goods were used in the erection of transmission towers installed from the power plant to the factory of appellant for bringing the electricity, the said electricity undisputedly used in the factory premises of the Appellant for manufacturing their final product which has been cleared on payment of duty - the appellant has correctly availed the credit on disputed goods. - AT
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Clandestine Removal - Since the sole challenge to the order is its reliance upon third party evidence, it is necessary to check the evidentiary value of the third party evidence - there is no cogent evidence on record to proceed against the appellant so as to penalise them. Hence, it is held that the authority below has wrongly confirmed the demand. Question of imposition of penalty on the present appellants in the given circumstances does not at all arise. - AT
Case Laws:
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GST
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2022 (5) TMI 547
Maintainability of petition - availability of alternative remedy of appeal - Section 129(1)(b) of the Tamil Nadu Goods and Services Tax Act, 2017 and Central Goods and Services Tax Act, 2017 - HELD THAT:- It is seen that, as against the impugned order, dated 17.03.2022, there is an appeal remedy available before the appropriate authority. It is clear from the records that the petitioner has still not filed any appeal as against the impugned order. This Court directs the petitioner to file appeal under the provisions of the TNGST Act, 2017, as against the impugned order, dated 17.03.2022. On receipt of such appeal, the appellate authority is directed to dispose of the same, on merits and in accordance with law - Petition disposed off.
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2022 (5) TMI 533
Levy of GST - grant of mining lease/royalty - ex-parte order or not - Section 73 of the U.P. GST Act, 2017 - HELD THAT:- Matter requires consideration, both on the issue of liability to pay GST and royalty as also as to jurisdictional error in the second proceeding for the same tax period. List on 07.09.2022.
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2022 (5) TMI 532
Refund of tax - It is the contention of the petitioner that while the excess premium was returned by the DMRC, it refused to refund the amount deposited by it towards tax as the amount lay with the respondents - HELD THAT:- DMRC ought to have been arrayed as a party in the matter, since, even if it is not a necessary party, in view of the observations made in the impugned order, it surely is a proper party. List the matter on 03.08.2022.
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2022 (5) TMI 531
Classification of goods - rate of GST - sale of solar energy products as Solar Water pumping system as a whole - sale of one of the products on standalone basis - sale of the products under various combinations to be undertaken by them and supply of parts of the system along with installation - HELD THAT:- There are clear provisions in the GST Act itself as regards composite supply as defined under Section 2(30) and mixed supply under Section 2 (74) of CGST Act, 2017 which deal with situations where supply consisting of two or more taxable goods or services or both is involved. In this regard, the appellant s primary contention is agreed to the effect that without applying and refuting the applicability of composite supply , conclusion regarding mixed supply cannot be reached. Accordingly, it is found appropriate to examine the matter with reference to the concept of composite supply in order to reach a logical conclusion. As per Section 2(30) of the CGST Act, 2017 composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. An illustration provided under the said definition provides that where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply - it is obvious that the supply of packing material, supply of service of insurance or transport is not independent of the supply of goods. Hence, the transportation of goods, supply of packing material and insurance are covered by the definition of composite supply with the supply of goods which is a principal supply in the illustration. The supply of different type of items such as Solar Panel, Controller, Solar Pump or Structure in different possible combinations, if any, without anyone of the goods being supplied as principal supply would be covered by the definition of mixed supply of different type of goods - In the instant case the appellant is obliged to supply a complete solar water pumping system alongwith the service of its installation and commissioning and, therefore, it would be appropriate to analyze the relevant notifications. On careful consideration of the relevant entries of the notifications, we find that Solar Energy based bore well water pumping system as a whole (hereinafter also referred to as the System ) as proposed to be supplied by the appellant qualifies as Solar Power based devices mentioned under entry No. 234 of Notification No. 01/2017-Central Tax (Rate), dated 28.06.2017 as the same is a device based on solar power used for pumping, water. Further, services by way of installation and commissioning of solar power based devices are governed by entry No. 38 of Notification No. 11/2017-Central Tax. (Rate), dated 28.06.2017. The effective rate of GST on supply of Goods and Services in relation to the Solar Power Based Devices upto 30.09.2021 is as follows:- (a) 5% on value of goods where the value of goods is to be taken as 70% of the gross consideration arid (b) 18% on the value of services where the value of services is to be taken as 30% of the gross consideration. Hence, the effective rate of GST for the composite supply will work out to 8.9% [(5% x 70%) plus (18% x 30%)]. However, with the amendments effected vide Notification No. 06/2021-Central Tax (rate) dated 30.09.2021 and Notification No. 08/2021-Central Tax (rate) dated. 30.09.2021, the rate of tax on goods portion stands increased from 5% to 12% and accordingly, the effective rate of GST for the-period post 30.09.20121 will stand increased to that extent.
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Income Tax
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2022 (5) TMI 551
Reopening of assessment u/s 147 - Capital gain on land sold - petitioner submits that the two land in question were jointly owned by seven persons. The petitioner herein and the aforesaid Dushyant Bhati both were also co-owners of the aforesaid agricultural land which was sold by two separate registered sale deeds. For the same set of reasons proceedings under Section 148 of the Act, 1961, were initiated against the petitioner and the aforesaid Dushyant Bhati who is the son of the petitioner - HELD THAT:- Assessment Order under Section 147 read with Section 144 B of the Act, 1961, in respect of Dushyant Bhati has been passed by the National Faceless Assessment Centre, Delhi, accepting his claim that the land in question was accepted to be an agricultural land situate beyond 8 km. of municipal limits. Thus the disclosed income in the returns for the Assessment Year 2013-14 has been accepted and no tax has been imposed in respect of the sale of the land in question. On the other hand totally contrary view has been taken in the matter of the petitioner vide reassessment order dated 28.03.2022, under Section 147 read with Section 144 B of the Act, 1961, passed by the National Faceless Assessment Centre, Delhi, whereby 1/7th of the consideration in respect of the land in question, belonging to the petitioner, has been assessed as a long term capital gain on the finding that the land in question is not an agricultural land. Thus, on the same set of facts while the respondents have accepted the claim of petitioner's son in respect of the same land and on the other hand in respect of the same land the stand taken by the petitioner has been rejected and the sale proceeds of the agricultural land has been assessed as a long term capital gain. As two conflicting reassessment orders have been passed by the National Faceless Assessment Centre in respect of two co-owners of the same land, we direct the newly impleaded respondent no.4 to look into the matter and file his personal affidavit explaining the state of affairs and the steps being taken by the Government. Put up as a fresh case for further hearing on 04.05.2022
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2022 (5) TMI 550
Reopening of assessment u/s 147 - Notice under Section 148 issued on the basis of information that the petitioner has deposited a sum in bank account during the assessment year 2017-18 - objection of the petitioner was rejected by the National Faceless Assessment Centre, Delhi observing that the petitioner-assessee has deposited cash in his bank account which has not been disclosed by him in his return of income and thus, reasons recorded by the assessing officer are crystal clear in the light of the strong evidences which came to the notice of the assessing officer - HELD THAT:- The entire proceeding under Section 148 of the Act, 1961 have been initiated by the respondents on the basis of an anonymous letter in which also the petitioner has not been named and instead one Vishwanath Singh Katiyar @ Munnu Bhaiya owner of M/S S.R. Cold Storage has been named. Even in his verification report, the respondents have found that the information relates to M/S S.R. Cold Storage. There was absolutely no evidence that the petitioner has deposited cash of Rs. 12,50,14,500/- in his bank account during the assessment year 2017-18. Perusal of the impugned re-assessment order dated 29.3.2022 passed by the National Faceless Assessment Centre, Delhi also completely affirms that position that there was absolutely no information against the petitioner regarding cash deposit by him in his bank account. The petitioner is a cold storage company in which business dealings are mainly with farmers who usually transact in cash. The total cash deposit as has been taken in the impugned reassessment order, was fully disclosed by the petitioner-assessee in his books of account and in the audited balance sheet filed along with the return. Thus, there was absolutely no material before the assessing authority for initiating proceedings under Section 148 of the Act, 1961 and the reasons to believe recorded by the respondents were totally unfounded. The manner in which the proceedings under Section 148 of the Act, 1961 has been initiated against the petitioner, prima facie, reflects illegal and arbitrary approach of the respondents on one hand and on the other hand to cause harassment to the petitioner/assessee. - Decided in favour of assessee.
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2022 (5) TMI 548
Deduction u/s 80P claimed on the interest received from the cooperative banks - granting of deduction u/s 80P(2)(d) of the Act to the Cooperative Society - AO was not satisfied with the claim made by the assessee and observed that the cooperative bank is an urban commercial bank and does not fall under the purview of cooperative society referred in the Sec. 80P(2)(d) of the Act and therefore the interest income from cooperative banks has to be taxed under income from other sources and assessed the total income - HELD THAT:- As in M/S PETIT TOWERS CO-OP. HOUSING SOCIETY LTD. VERSUS INCOME TAX OFFICER, 19 (2) (5) MUMBAI [ 2021 (9) TMI 232 - ITAT MUMBAI] Tribunal has passed the order in the context of the revision order U/sec263 of the Act and relied on the catena of Hon ble High court and Tribunal decisions were the cooperative society receives/earns interest on deposits with the co-operative bank is eligible for claim of deduction under section 80(2)(d) of the Act. The Ld.AR emphatically substantiated the submissions with the facts, evidences and judicial decisions filed before the lower authorities and find merits in the arguments of the Ld.AR. Accordingly, we set aside the order of the CIT(A) and direct the Assessing officer to allow the claim of deduction u/sec 80P(2)(d) of the Act on the interest income received /earned from the co-operative banks and allow the appeal filed by the assessee.
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2022 (5) TMI 546
Condonation of delay - delayed filing of appeal by the Revenue - filing of wrong affidavite by the representative of the assesee - whether the application filed by the appellant/department seeking condonation of delay of 535 days in filing the appeal deserves to be considered and allowed or otherwise? - HELD THAT:- The affidavit seeks to cast aspersion on the standing counsel for the appellant/department and the deponent has used the words wholly false, untenable and mala fide. Further the deponent would state that the statements made by the Deputy Commissioner of Customs, who had affirmed the affidavit in support of the application under Section 5 of the Limitation Act is totally corroborated . It should be not corroborated and which mistake has also not been noted by the deponent. Further, he would state that the statement is false, misleading as the incorrect dates have been mentioned in sub-paragraph (k) to subparagraph (m) of paragraph 4 of the condonation of delay petition. Further, the deponent would state that he denies and disputes that the junior standing counsel has prepared the brief by October 10, 2019 and had sent the same for approval. In more than two places, the deponent has used the expression mala fide , sheer mala fide etc. As noted by us, we do not appreciate the tenor, language adopted by the deponent in the affidavit-in-opposition. After noting the same, we expressed to the learned Advocate appearing for the respondent/assessee that we proposed to initiate action against the deponent, Mr. Deepak Kumar Pathre and may also be inclined to impose exemplary costs on him. Learned Advocate appearing for the respondent would submit that on his part, he would be able to advise his client to withdraw the affidavit and also tender apology in an appropriate manner. Accepting the submission of the learned Advocate appearing for the respondent we defer taking any stringent action against the deponent who appears to be a paid employee of the respondent/assessee and, therefore, for the present, we also do not propose to take any action against the respondent/assessee, as well, but we shall await the stand that would be taken by the respondent/assessee and Mr. Deepak Kumar Pathre in the affidavit which they propose to file as submitted by the learned Advocate for the respondent.
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2022 (5) TMI 545
Exemption u/s 54 - assessee purchases of two flats for exemption - scope of amendment u/s 54 - whether exemption under section 54 of the Act is available for two flats (houses) in case registration of sale deed is done in AY 2015-16, whereas the amendment in section 54 of the Act was announced in July, 2015 and the sale deed of the property purchased was done in Month of May, 2015, before amendment in section 54 - HELD THAT:- We note that flats were purchased by the assessee in assessment year 2014-15 however the sale deed was executed in assessment year 2015-16. Since the assessee has purchased these two flats in assessment year 2014-15 therefore, as per the provisions of section 54 of the Act, the assessee is entitled to claim the deduction. Before amendment in section 54 of the Act, even though section 54 mentions that proceeds should be invested in a residential house , it being a beneficial provision, it should be construed liberally and the deduction cannot be restricted to only one residential house and it should be extended to the purchase of two adjacent residential flats. Therefore, the term a residential house used to interpret prior to assessment year 2015-16, as more than one residential house . In the assessee`s case under consideration we note that assessee purchased two flats (house) in A.Y. 2014-15 when the amendment was not in force, therefore assessee is eligible for deduction under section 54 of the Act, for second house also. We note that above section 54 clearly says: the assessee has within a period of one year before can purchase the house. In the instant case the amendment in section 54 of the Act was announced in July, 2015 whereas sale deed of the property purchased was done in Month of May, 2015, that is, before amendment in section 54 of the Act. Hence, based on this factual position, the assessee is eligible to claim deduction under section 54 of the Act, on two flats (two houses). Thus assessee is eligible for deduction u/s 54 of the Act, when a residential property is purchased one year before or two years after the date of transfer so the amendment is not applicable, as the assessee purchased two flats in assessment year 2014-15 when the amendment was not in force. - Decided in favour of assessee.
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2022 (5) TMI 544
Reopening of assessment u/s 147 - addition u/s 68 - HELD THAT:- As information was received from the Assessing Officer in another case, wherein during the course of the search it was found that said person was engaged in providing accommodation entries and the assessee before us also received loan from one of such party. In our opinion, the information was received from reliable sources and there was relevant material on which a reasonable person could make a requisit belief that income escaped Assessment, and therefore the Assessing Officer is justified in reopening the assessment. CIT(A) has also rejected the contention of the assessee that there was no failure on the part of the assessee in making full and true disclosure, as false claim was made by the assessee regarding the loan. In absence of any rebuttal by the assessee before us, we concur with the finding of the CIT(A) on the issue in dispute and uphold the finding of the Ld. CIT(A). The grounds raised by the assessee challenging the legality of the reassessment are accordingly dismissed. Addition u/s 68 - We find that assessee failed to discharge its onus under section 68 of the Act and therefore the Ld. CIT(A) is justified in upholding the addition. We do not find any error in the order of the Ld. CIT(A) on the issue-indispute and accordingly we uphold the same. The grounds, pertaining to merit of the additions are also dismissed. - Decided against assessee. Penalty u/s 271D - Revenue has treated the credit of the loan as unexplained and levied the penalty treating that loan was received otherwise than by account payee cheque - CIT(A) has cancelled the penalty stating as we upheld the addition made u/s. 68 the penalty order passed u/s 271D is not sustainable - HELD THAT:- The finding of the Ld. CIT(A) is justified as the Revenue cannot have held the loan as unexplained and simultaneously treat that the loan was received otherwise than by account payee cheque and levy penalty. We do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same. The grounds of the appeal of the Revenue accordingly, dismissed.
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2022 (5) TMI 543
Addition u/s 68 - share application money invested by the share applicants are unexplained cash credit - CIT-A deleted the addition - HELD THAT:- AO rightly found that, assessee has not discharged the burden of proving the genuineness and creditworthiness of the source of the cash credit of the 4 share applicants worth Rs. 4.5 crores. Beside the same, the addition has been made by the Assessing Officer based on the Report of the Investigation wing and other materials. But the learned CIT (Appeals) has neither discussed the said facts and nor even mentioned regarding the full exercise and investigation done by the Assessing Officer and the findings made thereon. The CIT (A) has not even discussed how the judgment of Hon ble Supreme Court in the case of CIT Vs. Stellar Investment Ltd. [ 1991 (4) TMI 100 - DELHI HIGH COURT] and the judgment of Delhi High Court in the case of Sophia Investment Ltd [ 1993 (8) TMI 62 - DELHI HIGH COURT] are applicable to the facts and circumstances of the case apart from mentioning the same in his order. Therefore, in our considered opinion, if the matter is restored to the file of CIT (Appeals) for fresh adjudication after verifying the materials on record with a direction to pass speaking order, the substantial justice would be rendered. - Decided in favour of revenue for statistical purposes.
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2022 (5) TMI 542
Revision u/s 263 - PCIT setting aside the assessment order framed u/s 143(3) - prerequisite to exercise of jurisdiction u/s 263 of the Act by Commissioner - AO has failed to examine the documents(profit and loss account) SKAPL-1 which showed the business loss as on 31.03.2015 and another profit and loss account which showed profit - HELD THAT:- We have perused the notices issued by the AO u/s 142(1) and replies/written submissions filed before the AO in response thereto and observe that issues as proposed by the ld PCIT in the orders passed u/s 263 of the Act were examined and enquired and only then the assessment was framed. The notice issued u/s 142(1) of the Act, questionnaire and reply with evidences are part of the assessment records and were also filed before the tribunal in the paper books as discussed above. We note that the assessee has produced the audited books of accounts before the AO and duly explained as to how the issues raised by the ld PCIT were not warranted in view of the explanation given by the assessee In our considered view, since the AO has examined all the issues raised by the PCIT in the revisionary order during assessment proceedings and only thereafter framed the assessments u/s 143(3) of the Act, the jurisdiction u/s 263 of the Act is not maintainable as the AO has taken a possible view or taken one of the two possible views to which the PCIT does not agree or is of the opinion that the AO has taken one view whereas according to PCIT the second view should have been taken by the AO. It is settled law that in order to invoke the jurisdiction u/s 263 of the Act by the PCIT, the twin conditions i.e. the order has to be erroneous and prejudicial to the interest of the revenue, have to be satisfied. In case one of the condition is satisfied out of the two, even then the PCIT cannot invoke the jurisdiction u/s 263 of the Act to revise the assessment. Similarly the powers of revision u/s 263 of the Act cannot be exercised arbitrarily in order to make roving enquiries and initiate fresh enquiries . In our considered view , the jurisdiction u/s 263 can be exercised to revise the assessment where no enquiry at all has been conducted by the AO which is a case of lack of enquiry but not in a case where the AO has conducted an enquiry which in the opinion of PCIT is inadequate /insufficient without showing as to how the order framed by the AO after appreciating the evidences filed by the assessee is contrary to facts or not in accordance with law - Appeal of assessee allowed
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2022 (5) TMI 541
Revision u/s 263 by CIT - non-examination of CSR expenses which according to the PCIT has wrongly been claimed as deduction unit-II, Byrnihat - HELD THAT:- We note that the issue of CSR expenses has specifically been examined by the AO during the course of assessment proceedings by issuing notice u/s 142(1) dated 25.06.2015 which was replied by the assessee by submitting complete and comprehensive details of miscellaneous expenses which contained CSR expenses also. On the basis of this, we are of the view that the AO has examined the issue and has taken a plausible view and therefore the conclusion of PCIT that issue has not been examined by the AO at the time of scrutiny assessment is not tenable and accordingly cannot be sustained Interest earned by the assessee from late payment from the sundry debtors and VAT remission shown as miscellaneous income are not the part of the eligible profit u/s 80IE and therefore deduction u/s 80IE has been allowed in excess resulting into the mistake in the assessment order which has caused prejudice to the revenue - We find that the same is arising from business activity of the assessee and has been treated as part of the profit for the purpose of deduction u/s 80IE of the Act as the interest earned from the sundry debtors who has not made the payment during the credit period allowed them. Similarly the VAT remission is also part of and arising because the business activity of the assessee. The assessee has collected sales on the applicable rates on the sales made by it availed 99% of VAT remission under the scheme of Meghalaya State Government in pursuance of Meghalaya Industries (Tax Remission) Scheme, 2006 and paid only 1% to the tax to the Govt. In our view, the said remission has direct nexus with the business of the assessee and therefore has to form a part of eligible unit and deduction u/s 80IE of the Act has to be allowed. The case of the assessee is squarely covered by the decision of case of CIT vs. Meghalaya Steel Ltd. [ 2016 (3) TMI 375 - SUPREME COURT] wherein the similar issue was laid down in the said case. The Hon ble Supreme Court held that the transport subsidy, interest subsidy, power subsidy and insurance subsidy has direct nexus with the business of assessee and therefore has to be treated as the part of the eligible profit for the business of deduction u/s 80IB read with Section 80IC of the Act. We therefore following the same, hold that the exercise of revisionary jurisdiction is not valid. In view of the above facts and circumstances we are inclined to quash the order passed u/s 263 of the Act. - Appeal of assessee allowed.
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2022 (5) TMI 540
Exemption u/s 11 - Charitable activity u/s 2(15) - District Cricket Association - charging annual maintenance fees from members - Denial of deduction as receipt received by the assessee during the relevant period under consideration viz; being the receipt income under the head income from other sources - HELD THAT:- There is no dispute that the assessee is registered society having object of promotion of cricket and other sports in State as well as at national level. The assessee is also having valid registration under section 12A(a) of Income tax Act. The registration under section 12A was granted way back in 1987. It is also settled legal position that the registration of institution or trust under section 12 is the foundation for seeking exemption of section 11 though not conclusive. Registration under section 12A is sine qua non for eligibility of benefit of section 11. It is also settled position under law that the eligibility of benefit is to be determined on year to year basis depending on the actual activities undertaken by the assessee. Thus, the assessing officer is entitled to determine the eligibility of exemption under section 11 on the basis of activities carried out by the assessee during the relevant financial year. The bone of contention on the eligibility between the assessee and the assessing officer are certain receipt received by the assessee during the relevant period under consideration viz; being the receipt income under the head income from other sources . .We find that the predominant object of promotion of Cricket and other sports are not doubted by the assessing officer. There is no allegation of the assessing officer that the receipt shown under the head income from other sources was not utilised on the promotion of sports. Or no activities for promotions of sports were undertaken by the assessee. Rather on careful examination of those disputed receipt we find that those receipt were generated from various by activities undertaken in furtherance of various sports. It is also matter of fact that prior to the impugned assessment year the assessee was granted exemption under section 11 of the Act. The assessing officer for the first time on the basis of certain receipt took his view that the activities undertook by the assessee are commercial in nature. When the assessee s main dominant and prime objective was to promote the sports was not desire to earn profits but, object of promoting sports for Nation, it was clearly a charitable purpose. The important elements of application of proviso are that the assessee should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, which is clearly missing in the present case. Thus, we affirms the order of ld CIT(A), with these additional findings. In the result, the grounds of appeal raised by the revenue are dismissed.
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2022 (5) TMI 539
Nature of expenditure - expenses of loss on account of fire - revenue or capital expenditure - HELD THAT:- In the present case it is not in dispute that the assessee was not the owner of the building in which fire took place rather he is the lessee and the building premises was taken on lease. Assessee was responsible for any wear and tear, maintenance and other repairs of the building. Since the building was destroyed by the fire, so, it was the responsibility of the assessee to bring the building in the same position, therefore, the expenses incurred were revenue in nature as far as the assessee was concerned and in case any claim is received from the insurance company the same is to be reduced from these expenses or in case it will be received on later date then it is to be shown as an income at the time of receipt. For the year under consideration the assessee has incurred the expenses on account of repairs of building and electrical fittings to bring the old asset in the working condition and the other expenses which were capital in nature had already been capitalized as has been explained by the assessee to the Ld. CIT(A) vide reply dt. 13/12/2019 which has been incorporated at page no. 3 to 5 of the impugned order and has also been reproduced in former part of this order. The total expenses incurred by the assessee were amounting to Rs. 33,54,993/- against which the insurance claim settled to be received was amounting to Rs. 4,88,424/- which had been reduced by the assessee from the total expenses and net amount of Rs. 28,66,569/- was claimed as revenue expenses. In the present case the assessee is not the owner of the building and it was its duty to maintain building in the same position in which it was occupied. The assessee incurred the expenses to bring the building in the same form and no new asset came into existence rather the old building and electrical fitting were brought into workable condition, therefore, the expenses incurred by the assessee were revenue in nature and not capital in nature. We, therefore, by considering the totality of the facts set aside the impugned order and direct the AO to treat the expenses under consideration as revenue in nature. - Decided in favour of assessee.
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2022 (5) TMI 538
Disallowance of bad debts - CIT- allowed bad debts claim - DR submitted that the CIT(A) has erred in allowing the bad debts claim irrespective of the fact that the assessee could not establish the debt has become bad and doubtful - HELD THAT:- AR explained that the actual bad debts written off are Rs. 17,86,898/-, whereas the net bad debts written off in the profit and loss account is Rs. 10,56,082/-, whereas the A.O has not considered the sundry balances written off. The Ld.A substantiated with the party wise details of the bad debts written off at page 77 to 92 of the paper book. We find that the CIT(A) has relied on the Hon ble Supreme Court decision [ 2010 (2) TMI 211 - SUPREME COURT] and the factual findings in the books of account and allowed the deduction Disallowance of Foreign exchange loss - A.O has made adequate enquiry with respect to mark to market basis while making the addition - CIT-A deleted the addition - HELD THAT:- CIT(A) has considered the foreign exchange rate difference and the fact of calculation of net foreign exchange loss in the books of accounts and relied on the Hon ble Supreme Court decision in the case of Woodward Governor India Pvt Ltd [ 2009 (4) TMI 4 - SUPREME COURT] TDS u/s 194A - interest paid to others . - Addition u/s 40(a)(ia) - CIT(A) has allowed the claim of the assessee - HELD THAT:- Appellant during the course of appellate proceedings have provided the details of interest paid. The same was provided during the scrutiny proceedings. AO is directed to delete the addition made on account of interest paid to others. The ground of appeal filed on this issue is hereby allowed. Disallowance of commission and brokerage paid to resident and foreign agents - A.O has made an addition irrespective of the fact that the provisions of Sec. 194A of the Act are not applicable to the foreign agents - CIT-A deleted the addition - HELD THAT:- Assessee has made two types of payments were the commission payment was paid to the agents in India for procuring the sales order and TDS has been deducted u/s 194H of the Act. The assessee has submitted the party wise details along with the ledger accounts, sample invoice, TDS certificate before the A.O. Whereas in respect of the foreign party transactions towards export commission paid to foreign agent, the agents are not the citizens and they are the residents of foreign country and they do not have permanent establishment(PE) in India and the commission income of the foreign agent cannot be taxed in India, since the operations are from their own country and the no TDS has been deducted u/s 194A CIT(A) has considered the factual aspects and judicial decisions in respect of all the disputed issues raised in the revenue appeal and passed a reasoned and speaking order.The Ld.DR could not controvert the observations of the CIT(A) with any new cogent material or information and relied on the order of the Assessing officer - Revenue appeal dismissed.
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2022 (5) TMI 530
Reopening of assessment u/s 147 - Validity of order u/s 148A(d) - Petitioner states that despite the Petitioner having moved an application for extension of time and the portal being kept open for the said purpose, the submission filed by the assessee within the extended time was not taken into account by the Respondents - HELD THAT:- As stated petitioner has not placed on record either the Show Cause Notice or the correspondence exchanged with the Department. He, however, states that respondents have no objection if the Assessing Officer is directed to consider the reply/representation of the petitioner a copy of which has been placed at page 64 of the paper book. Consequently, the impugned order dated 25th March, 2022 as well as the notice dated 26th March, 2022 are set aside and the Assessing Officer is directed to pass a fresh raeasoned order in accordance with law within six weeks, after considering the reply/representation dated 26th March, 2022 placed at pages 64 and 65 of the paper book along with annexure enclosed therewith. With the aforesaid direction, the present writ petition and application stand disposed of.
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2022 (5) TMI 529
Reopening of assessment u/s 147 - Notice beyond period of limitation prescribed u/s 149 - HELD THAT:- The observations of the Tribunal in its order dated 24th November, 2010 that there appears to be some confusion with respect to the fact that the project was completed in Assessment Year 2003-2004 was the same project which was shown as work in progress in Assessment Year 2000-2001 and thereafter, restoring the matter to Respondent No.1 for the limited purpose of ascertaining whether the two projects referred to in the assessment order of Assessment Year 2000-2001 was part of the project completed in Assessment Year 2003-2004 and offered for taxation in that year, cannot be stated to be either a finding or a direction as contemplated by Section 150 of the Act. There is no specific finding that income chargeable to tax has escaped assessment for the Assessment Years in question nor there is a direction to Respondent No.1 to initiate reassessment proceedings by issuing notices under Section 148 of the Act. On the contrary, the Tribunal recorded specific findings that following the project completion method the assessee offered income in respect of these project in Assessment Year 2003-2004 which has been accepted by the Revenue. Once income is taxed in Assessment Year 2003-2004 on the completion of the project, there cannot be any question of taxing the same amount in the earlier years by applying a particular percentage on the amount of work in progress shown in the balance-sheet. Even for a moment we assume that the observations of the Tribunal could be stated to be a finding or a direction as contemplated by Section 150 of the Act, still in view of the proviso to Section 147 of the Act, the reopening cannot be stated to be valid. There is nothing in the reasons for reopening to indicate that there was any escapement of income due to failure on the part of the assessee to truly and fully disclose material fact. We would say that even in the reasons recorded, there is not even a finding that there was any such failure. Even otherwise after the order of the Tribunal dated 24th November, 2010, the Assessment Officer had passed the fresh Assessment Order dated 29th December, 2011 making certain additions. Appeal was filed against the said order, which came to be allowed during the pendency of present Petition on 12th March, 2014.
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2022 (5) TMI 528
Reopening of assessment u/s 147 - Scope of new regime of Section 148A - Conducting inquiry, providing opportunity before issue of notice under section 148 - Non consideration of objection against reopening - AO wants to reopen the assessment for the relevant year 2018-19 is that the writ applicant assessee had not shown the transactions with respect to the Social Cooperative Bank Limited - HELD THAT:-Nothing of what was pointed by the writ applicant assessee in his objections could be said to have been taken into consideration by the Assessing Officer in its true sense. When the assessee offers his reply by way of objections, then there is a staturoy obligation on the part of the Assessing Officer to consider the objections and deal with those in accordance with the true spirit and intent of the provisions of Section 148A The plain reading of clause (d) of Section 148A referred to above would indicate that the Assessing Officer is obliged in law to decide on the basis of the materials available on record including the reply of the assessee, whether or not it is a fit case to issue a notice under Section 148 by passing an order with the prior approval of the specified authority within one month from the end of the month in which the reply is received by him. Thus, there is an obligation cast upon the Assessing Officer in accordance with clause (d) of Section 148A of the Act, 1961 to consider the case not only on the basis of the materials available on record, but also the reply of the assessee. If the reply of the assessee has not been considered, then passing of the order under clause (d) of Section 148A could be said to be an empty formality. The new regime of Section 148A should be strictly followed so as to make it meaningful. The principle of law, as explained by the Supreme Court, in the case of GKN Driveshaft (India) Ltd [ 2002 (11) TMI 7 - SUPREME COURT] , is now a statutory provision in the form of new Section 148A of the Act. We are of the view that we should quash and set aside the order passed under clause (d) of Section 148A as well as the notice issued under Section 148 of the Act, 1961 and remit the matter to the Assessing Officer for fresh consideration of the objections filed by the writ applicant. This writ application succeeds in part. The impugned order dated 7th April 2022 passed by the Assessing Officer and the notice issued under Section 148 of the Act, 1961 are hereby quashed and set aside. The matter is remitted to the Assessing Officer for fresh consideration of all the objections raised by the writ applicant. This time the Assessing Officer shall apply his mind and pass an appropriate order under clause (d) of Section 148A dealing with all the objections in its true sense.
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2022 (5) TMI 527
Validity of Faceless Assessment Scheme - Request made by the petitioner for physical hearing not provided - HELD THAT:- Apparently, an opportunity in accordance with law was provided to the petitioner, and the petitioner was well advised by respondents to take recourse to virtual mode of hearing through the guidelines relating to Faceless Assessment Scheme, which the petitioner did not opt for. During course of arguments, the petitioner has provided the screenshots of the assessment home page,which shows that though video conferencing option was available, but the petitioner did not opt for it, and still kept on insisting for physical hearing. In our considered view, the request so made by the petitioner for physical hearing was misconceived and Section 144B(7)(vii) of the Act does not postulate physical hearing. A method for opportunity of hearing was well advised to the petitioner, however, he did not opt for the same. Therefore, at this stage, the petitioner cannot challenge the order impugned as well as subsequent notices, which are impugned in the instant petition and the same deserves to be dismissed.
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2022 (5) TMI 526
Validity of reopening of assessment u/s 147 - argument of non serving of SCN - violation of principles of natural justice - HELD THAT:- Insofar as the show cause notice issued by the Revenue dated 03.03.2022 is concerned, according to the petitioner's counsel, the same has not been served on him and that notice as well as the subsequent assessment order since has been uploaded in the website, which the petitioner was able to retrieve only on 22.03.2022, the petitioner's counsel contended that, there was no chance for the petitioner to reply to the show cause notice. Therefore, if one chance is given to him, certainly the petitioner assessee would reply to the show cause notice and face the assessment. As this Court feels that the impugned order can be set aside and the matter can be remitted back to the respondents with a direction to the respondents to give one more opportunity to respond to the show cause notice dated 03.03.202 - The impugned order dated 11.03.2022 is set aside and the matter is remitted back to the respondents for reconsideration.
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2022 (5) TMI 525
Penalty u/s 271(1)(c) - Violation of principle of natural justice - non considering of replies to notices - HELD THAT:- This court finds that the petitioner had filed his replies to the notices issued to him by the respondents. Despite filing of the said replies, the same were not considered while passing the impugned order. In fact the impugned order states that despite giving several opportunities the petitioner had not filed any reply/response. This Court in Bharat Aluminium Company Ltd. vs. Union of India Ors. [ 2022 (1) TMI 658 - DELHI HIGH COURT] has laid down that an assessee has a vested right to personal hearing and the same has to be given if such a request is made by the assessee. Consequently, the impugned order is set aside on the ground that it is violative of the principle of natural justice and the matter is remanded back to the respondent no.2 for fresh adjudication. The respondent no.2 shall grant a hearing to the petitioner before passing an order. The respondent no.2 is directed to decide the matter in accordance with law within twelve weeks
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2022 (5) TMI 524
Rectification of application u/s 154 - Period of limitation - Petitioner states the Respondents have committed certain errors in granting credit and calculating interest under Section 234B and Section 244A of the Act in its remand Order - HELD THAT:- CBDT instruction No.2/2013 [F. No. 225/76/2013/ITA.II] dated 5th July, 2013 and Letter [F. No.225/148/2015-ITA-II], dated 5th July, 2015 stipulates that the Assessing Officers must strictly follow the time limit of six months provided under Section 154(8) of the Act in disposing of the rectification applications. Further, this Court in Nortel Networks India International Inc. [ 2022 (3) TMI 155 - DELHI HIGH COURT] and Cheil India Private Limited [ 2021 (10) TMI 1324 - DELHI HIGH COURT] has given directions to the respondents to dispose of similar rectification applications in a time-bound manner. Consequently, this Court disposes of the present writ petition and application with a direction to the concerned respondent to decide the petitioner s rectification application dated 8th July, 2021 filed under Section 154 of the Act in accordance with law by way of a reasoned order within six weeks. In the event of refund, if any, the same shall be granted to the petitioner with applicable interest within the aforesaid period.
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2022 (5) TMI 523
Addition towards donation given by the assessee - assessee has not claimed the said expenditure in the profit and loss account but claimed deduction u/s 80G(5) - CIT(A) has given a finding that the assessee has failed to furnish the necessary documents in support of its claim and finally confirmed the addition justifying the order of AO - HELD THAT:- We note that the authorities below have miserably failed to appreciate the facts of the case correctly that the donation given by the assessee of Rs. 5,00,000/- was never claimed as expenditure by the assessee in the profit and loss account and therefore there is no question of making addition of the same as expenditure on donation as has been done by the AO and confirmed by the Ld. CIT(A). We note that though the Ld. CIT(A) noted that the assessee has not claimed any deduction as expenditure in the profit and loss account but confirmed the addition by giving contradictory findings. Under these circumstances, we are not in a position to concur with the conclusion reached by the Ld. CIT(A) and accordingly we set aside the order of Ld. CIT(A) by directing the AO to delete the disallowance - Decided in favour of assessee.
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2022 (5) TMI 522
Penalty u/s 271(1)(c) - disallowance of deduction u/s 54F of the Act - denial of deduction u/s 54F is that the purchase of the property i.e. new asset was beyond the period of one year vis- -vis sale of the old asset in this regard - It is the case of the assessee that although the purchase of new asset is beyond one year vis- -vis sale of the old asset, the security deposit for sale of old asset was taken within a period of one year, and therefore, the action for sale of old asset started rolling within the stipulated period. It is the case of the assessee that the provisions of Section 54F are beneficial in nature and the Courts have always accorded liberal interpretation and a small delay of few days have been condoned for the eligibility purposes - HELD THAT:- We find merit in the plea of the assessee for cancellation of penalty. While the admissibility of deduction under Section 54F in the circumstances may be somewhat debatable due to non compliance of strict letter of law. However, this by itself, would not result in imposition of penalty as a consequential measure. The case of the assessee is fully supportable by the decision of the Hon ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt . Ltd. [ 2010 (3) TMI 19 - SUPREME COURT] Admittedly, no inaccuracy was found in the particulars of deduction claimed as such. The assessee also has a basis for claim of deduction in the light of the fact that security deposit was accepted from the brokers against the sale of property which ultimately materialized 20-25 days later resulting in slight delay in actual execution of sale agreement of old asset. In such circumstances, small breach in the stipulated period of one year between purchase and sale of assets would not justify imposition of onerous penalty. - Decided in favour of assessee.
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2022 (5) TMI 521
Disallowance under the head distribution expenses - AO made the addition on the ground that the expenses debited in the corresponding previous assessment year was Nil - HELD THAT:- We find that CIT(A) after considering the assessee s submissions, remand report of the AO and assessee s submissions to the remand report has given a finding that the expenditure was grouped by the auditors and in fact the corresponding expenditure in the immediate preceding assessment year was more than the aggregate expenditure incurred by the assessee in the year under consideration. He has further given a finding that in the remand report, the AO had not rebutted any of the submissions made by the assessee. He thereafter concluded that the AO was legally and factually incorrect in making the addition. Before us, no fallacy in the findings of CIT(A) has been pointed out by Revenue. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the Ground of Revenue is dismissed. Addition u/s 68 - CIT-A deleted the addition given a finding that he has examined the bank account of the share subscribers and on its examination he did not find any cash deposits in the account of the subscriber prior to the issue of cheque for share capital to the assessee - HELD THAT:- CIT(A) on considering the remand report along with the order sheet entry has given a finding that order sheet entry reveals that assessee had filed letter dated 13.03.2013 after which the case was adjourned on 15.03.2013 for filing certain information and after entry dated 13.03.2013 there is no further entry either on 15.03.2013 or 22.03.2013 indicating of any proceedings being conducted after 13.03.2013. He has further noted that though in assessment order AO has referred to the notice dated 22.03.2013 but the order sheet record does not prove the service of the notice to the assessee. He has thus accepted the contention of the assessee that the report of the DDIT (Investigation), Kolkata was never confronted to the assessee. He has further given a finding that assessee had furnished certain details before the AO vide letter dated 11.03.2013 13.03.2013 but AO has not rebutted the contention of the assessee. He has further given a finding that the evidences furnished by the assessee not been rebutted by the AO even during the course of remand proceedings. Considering the totality of the aforesaid facts, we find the CIT(A) after considering the material on record has deleted the addition. In the absence of any fallacy in the findings of CIT(A), we find no reason to interfere with the order of CIT(A) and thus the grounds of Revenue are dismissed.
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2022 (5) TMI 520
Disallowance of discounts offered to doctors - allowable expenditure u/s.37 or not? - HELD THAT:- It is the case of the assessee that the trade discounts given to the doctors are similar to the discounts given to the distributors and other dealers which is an allowable expenditure under section 37 of the Act. This view is confirmed by the Coordinate Bench of the Tribunal in assessee s own case for the Asstt.Year 2009-10 [ 2019 (4) TMI 414 - ITAT AHMEDABAD ] Respectfully following the decision, we set aside the orders of the CIT(A) and AO and direct the AO to allow trade discount paid to the Doctors as ordinary business expenditure. Thus, we allow ground no.1 in favour of the assessee. Disallowance u/s. 14A read with rule 8D - HELD THAT:- We do not find any infirmity in the order of the ld.CIT(A) so far as deletion representing interest expenses. However, upholding of disallowance being administrative expenses was not based on logical parameters. We find similar issue came up for hearing before the Tribunal for the Asstt.Year 2013-14 in assessee s own case [ 2019 (7) TMI 537 - ITAT AHMEDABAD ] wherein Co-ordinate Bench remitted back the issue to the file of AO with direction to re-compute the disallowance under Rule 8D(2)(iii) and consider only the investments which have actually yielded exempt income instead of gross investment. We are of the view that similar direction to the AO to decide the issue afresh in line with the directions of the Tribunal in AY 2013-14 would be just and appropriate in this assessment year also. We hold so and direct the AO accordingly. Levy of interest under section 234A of the Act for delay in filing return of income - HELD THAT:- As per the assessee, the assessee had furnished the return of income for year under consideration within the due date prescribed under section 139(1) of the Act. Though this interest is consequential in a nature, this issue is remitted back to the file of the AO to decide whether interest of Rs.1,97,584/- was in accordance with law or not. Allowing the differential interest made out of interest claimed under section 36(1)(iii) of the Act by treating it as a business expenditure - HELD THAT:- We find that the issue of payment of interest on overdue bills to the Sun Pharma Ltd. does not require elaborate discussion because, as stated by the ld.Senior Counsel, the issue was being agitated time and again i.e. in the year 1997-98, 2010-2011, 2011- 12 and 2012-13 and the assessee has succeeded in all these years either before the CIT(A) or before the ITAT and even before the Hon ble Gujarat High Court [ 2010 (5) TMI 823 - GUJARAT HIGH COURT ] Thus we dismiss this ground of appeal of the Revenue.
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2022 (5) TMI 519
Deduction u/s.80IB(10) - CIT- A allowed the deduction - scope of amendment brought - as per revenue CIT-A ignored that assessee sold three adjacent units to relatives of the same family and also holding that the amendment brought in by the Finance (No.2) Act, 2009 w.e.f. 01.04.2010 will apply for assessment year 2010-11 and is prospective - whether the provisions will apply retrospectively or prospectively? - HELD THAT:- As decided in M/S. ELEGANT ESTATES [ 2018 (6) TMI 1191 - MADRAS HIGH COURT] relevant year would be the year of the actual sale and not the year when the revenue chooses to recognize the sale.finding of the Appellate Commissioner and the learned Tribunal that actually sale of flats in question took place in 2008, long before the amendment of Section 80IB of the said Act, which is prospective, there is no question of law, let alone substantial question of law, involved in these appeals. Also in M/S. MANDAVI BUILDERS [ 2020 (9) TMI 1138 - KARNATAKA HIGH COURT] exactly identical situation was considered and held that the clauses (e) and (f) to section 80IB(10) as inserted by Finance (No.2) Act, 2009 w.e.f. 01.04.2010 as prospective.- Decide against revenue.
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2022 (5) TMI 518
Powers of CIT(A) u/s 251 - Enhancement of assessment - New source of income introduced by CIT(A) while deciding the appeal and enhancement of income - Deemed dividend u/s.2(22)(e) - enhancement of assessment on account of disallowance made being interest charged @ 12% p.a. on the presumption of diversion of borrowed capital for the purpose of advancing interest free loans to the extent of an average amount - HELD THAT:- We have gone through the assessment order and noted that the above noted three disallowances i.e., disallowance u/s.40(a)(ia), disallowance u/s.40A(3) and disallowance u/s.40a(ii) of the Act are made by the AO and there is no discussion on the issue of disallowance of interest or allowance of interest in regard to diversion of funds for non-business purposes or on the issue of advance given to the wife of Managing Director in violation of provisions of section 2(22)(e) of the Act i.e., deemed dividend. As gone through the case law of Hon ble Supreme Court in the case of CIT vs. Shapoorji Pallonji Mistry,[ 1962 (2) TMI 12 - SUPREME COURT] wherein the Hon ble Supreme Court has considered this issue and held that it would not be open to the first appellate authority to introduce into assessment a new source of income as his power of enhancement is restricted only to income which was subject matter of consideration for the assessment by the AO. Also Hon ble Delhi High Court in the case of Sardari Lal Co [ 2001 (9) TMI 1130 - DELHI HIGH COURT] has considered the case laws cited by CIT(A) and the ld.Senior DR and finally held that no new source of income can be introduced by CIT(A) while deciding the appeal and enhancement of income. In view of the above case laws considered and facts of the case that the two issues i.e., disallowance of interest on diverted borrowed capital and advance of amount to the wife of the Director treated as deemed dividend u/s.2(22)(e) of the Act, were never subject matter of assessment order. Hence, we are of the view that enhancement made by CIT(A) on altogether new issues is without authority of law and accordingly, we quash the enhancement and allow these issues of assessee s appeal.
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2022 (5) TMI 517
Deduction u/s 10A - denial of exemption to profits derived by the assessee from its unit located in Software Technology Park (STPI), Gandhinagar jurisdiction, as per the provisions of Section 10A - expansion Unit not being approved as a bonded warehouse by the Customs and Central Excise authority as on the date of seeking approval - Whether assessee was approved as a STPI unit? - For denial of exemption, it was stated, was on account of and for the period, the expansion/new unit of the assessee, originally registered under STPI Gandhinagar jurisdiction, was allegedly not granted approval by STPI - HELD THAT:- The violation was undoubtedly noted from the application filed by the assessee in January 2010 for approval of expansion Unit and it pertained to more particularly the expansion Unit not being approved as a bonded warehouse by the Customs and Central Excise authority as on the date of seeking approval i.e. January 2010. If the approval was with effect from April 2010,then the fact of the expansion unit not being approved so from January 2010 onwards would not tantamount as violation of prescribed Rules and Regulations so as to penalize the assessee. Even otherwise, the assessee having cured all defects from January 2010 onwards, paid penalty for the defects also, the fresh application filed in April 2010 is to be treated for all purposes in continuation of its original application filed in January 2010 .And the approval so granted by STPI vide letter dated April 2010 is therefore to be treated as in pursuance to the original application filed in January 2010.Which is how even the STPI authorities have treated it by certifying invoices relating to the January March 2010 period. Also gone through the Circular of 2005, which the Revenue contends operates against the assessee and we find that the scope of the said circular is with respect to exemptions claimed u/s. 10B of the Act and not 10A under which the assesse has claimed exemption. Also, we find that in response to representations received by the CBDT, whether Domestic Tariff Area (DTA) Units converted to export oriented unit (EOU) are eligible to exemption u/s 10B, it was clarified by way of the said Circular that such units shall be eligible to exemption, that too from the year of conversion and for the period remaining in the block of 10 Years since it began manufacturing as a new unit under DTA. The scope of operation of this circular is totally different and has no applicability to the facts of the case where the issue is whether the approval granted in lieu of renewed application filed can be treated as retrospective from the date of original application filed. We have no hesitation in holding that the assessee was approved as a STPI unit from Jan., 2010 onwards and was therefore eligible to claim the profits generated from turnover of the said unit as exempt under the provisions of Section 10A of the Act. The A.O. is therefore directed to grant the assessee exemption to its profits of Rs. 56,04,930/- - Appeal of the assessee is allowed in above terms.
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2022 (5) TMI 516
Penalty u/s 271(1)(c) - Addition u/s 68 - assessee failed to prove the creditworthiness of creditor and made addition under section 68 by treating the unsecured loan as unexplained cash credit - HELD THAT:- Addition made in the quantum assessment attained finality. We are of the conscious of the fact that penalty proceedings are separate and independent proceedings though the observation on the addition in the quantum assessment may have bearing in the penalty proceedings. However, such observation are not conclusive. We find that the identity of creditor including PAN and details of agricultural procedure was filed by the assessee and the assessee claimed that loan amount was received through banking channel. AO has not made any independent investigation nor issued any show cause notice or summons to the creditor to bring other adverse material against the assessee. It is also fact that the assessee could not prove his contention about the unsecured loan. However, we find merit in the submission of Ld. AR of the assessee that the explanation offered by assessee has not been disproved by the Assessing Officer. The Hon'ble jurisdictional High Court in the case of National Textiles [ 2000 (10) TMI 19 - GUJARAT HIGH COURT] and Jalaram Oil Mills [ 2001 (6) TMI 15 - GUJARAT HIGH COURT] held that where the circumstances do not lead to the reasonable and positive inference that the assessee s Explanation is false, the assessee must be held to have proved that there was no mens rea or guilty mind on his part. In view of the aforesaid factual discussion, we are of the view that in absence of material on record to disprove the explanation offered by assessee about the creditworthiness and genuineness of transaction, the AO was not justified in levying penalty under section 271(1)(c). Therefore, grounds raised by assessee is allowed.
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2022 (5) TMI 515
Penalty u/s 271(1)(c) - assessee in the year under consideration has declared loss on account of sale of unit of mutual funds under the head short-term capital gain which was carried forward to the subsequent assessment years impugned loss was inclusive of the loss which was to be ignored under the provisions of section 94(7) - HELD THAT:- Under the explanation 1 to section 271(1)(c) of the Act, there are 2 situations. In situation (A), if the assessee failed to offer an explanation or offers an explanation which is found to be false with respect to any fact material to the computation of income, then the amount added or disallowed shall be deemed as concealment of income. In situation (B), the assessee offer an explanation but fails to substantiate the explanation offered by him and fails to prove that such explanation is bona fides and that all the facts relating such explanation and material to the computation of income have been disclosed by him, then the amount added or disallowed to the total income of the assessee shall be deemed as concealment of income. Coming to the present case, we have to test whether the case of the assessee falls under the main provisions of section 271(1)(c) of the Act or explanation 1 attached with it. As regards the main provisions of section 271(1)(c) of the Act, we find that there was no allegation that the assessee has claimed bogus loss by furnishing inaccurate particulars of income. Thus, the claim of the assessee at the most can be regarded as inaccurate claim which cannot be equated with the inaccurate particulars of income. It is for the reason that nothing has been brought on record by the authorities below suggesting that the assessee has furnished the particulars of income with dishonest intent. As regards the explanation 1 to section 271(1)(c) of the Act, there was no iota of evidence suggesting that the explanation offered by the assessee was false. STCG loss claimed by the assessee cannot be said amounting to concealment of particulars of income. Likewise, there was no finding of the authorities below qua the fact that the assessee fails to substantiate the explanation offered by him and fails to prove that such explanation is bona fides with respect to material facts relating to the computation of total income. Thus, in our considered view the provisions of expression 1 to section 271(1)(c) cannot be attracted in the given facts and circumstances. In view of the above and after considering the facts in totality, we set aside the finding of the CIT (A) and direct the AO to delete the penalty levied by him under section 271(1)(c) of the Act. Hence the ground of appeal of the assessee is allowed.
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2022 (5) TMI 514
Penalty u/s 271(1)(c) - non-recording of clear satisfaction for levy of penalty - depreciation disallowance and vehicle insurance expense disallowance - scope of word used under section 271(1)(c) of the Act May - Assessee challenged that penalty levy on the reasoning that there was no satisfaction/ direction for initiating the penalty recorded by the AO before levying the penalty as provided under the provisions of section 271(1B) - HELD THAT:- The provisions of section 271(1)(c) of the Act authorizes the AO to levy the penalty if a satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income, then he may levy the penalty. The word used under section 271(1)(c) of the Act May gives an authority to levy or not to the penalty. Since the main purpose of introduction of the penalty sections is to check tax evasion, the provisions of sections 271(1)(b), 271(1)(c), 271 A, 271B, 271BB and 273 are discretionary and a discretion is vested in the authority, by the use of word 'may', to impose or not to impose penalty when there is no loss of revenue and there is only a venial breach of the provisions of law. When the returned income is accepted and neither there is found to be an evasion of tax, nor the revenue is put to any loss, the officer is empowered not to impose any penalty. The use of the word 'may' in these sections also makes the intention of the Legislature clear in this regard. At this juncture, it is also important to note that the penalty was finally levied by the AO in the penalty order for 2 additions namely deemed dividend and interest paid on the housing loan. Thus, there was no penalty finally levied qua the depreciation disallowance and vehicle insurance expense disallowance. There was the need for the AO to record the clear satisfaction with respect to each addition/disallowances made during the assessment proceedings for initiating the penalty. Accordingly, in the absence of necessary satisfaction of the AO, we hold that the penalty order is not sustainable. Thus, we reverse the order of the learned CIT-A and direct the AO to delete the penalty levied by him under the provisions of section 271(1)(c) - Decided in favour of assessee.
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2022 (5) TMI 513
Reopening of assessment u/s 147 - claim of relief under section 54 - delay and non-maintainability of the appeal filed by the assessee - HELD THAT:- Since the assessee has initially preferred an appeal against the reassessment order under section 147 of the Act dated 19.12.2017 against which, the assessee filed an appeal before the ld. CIT(A) and the same was concluded by the ld. CIT(A) vide his order dated 29.06.2018, against which, the appeal filed before the ITAT has also been concluded vide Tribunal's order[ 2019 (8) TMI 1817 - ITAT CHENNAI] - Since the assessee has again filed another appeal against the original assessment order under section 143(3) of the Act dated 26.03.2013 with a delay of 2002 days by raising the issues already adjudicated in the appeal filed against the order under section 147 of the Act, we are of the opinion that the ld. CIT(A) has correctly dismissed the appeal on both the counts of delay and non-maintainability of the appeal filed by the assessee. We find no reason to interfere with the order passed by the ld. CIT(A). Appeal filed by the assessee is dismissed.
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2022 (5) TMI 512
Disallowance of loss - AO disallowed current year s entire loss and he has not given set off of loss of the current year from the other heads of income - assessee had not filed original return u/s.139(1) and also failed to file the return of income in response to notice u/s.153A within the due date specified , the loss declared by the assessee is not allowable and accordingly, he disallowed the same - assessee submitted that current year s loss has not been carried forward to the next year and only the assessee has set off the current year s loss from the other heads of income, which are allowed as per the provisions of the Act. Under Chapter VI, under the head, the assessee can set off, or carry forward and set off of loss as per section 70, 71, 71A, 71B, 72, 72A, 72AA, 72AB, 73, 73A, 74, 74A, 75, 78 79 - HELD THAT:- We make it clear that the assessee can set off of current year s loss from other heads of income and assessee is not eligible to carry forward the balance loss of the current year for the reason that it did not file return of income within the due date of filing of return of income as mentioned in the notice dated 10/11/2014 issued u/s 153A of the Act. We find that the submissions made by both the sides are contrary In nature and, therefore, we deem fit and proper to restore this issue back to the file of the AO with a direction to find out or verify the exact claim of the set off of loss and carried forward, if any, and decide the issue in accordance with law and on merits after providing opportunity of hearing to assessee. Thus, this ground raised by the revenue is treated as allowed for statistical purposes. Addition on account of interest attributable to the debit balance of the partners - partners had withdrawn huge funds from the firm but no interest was charged on these drawings. Thus, according to AO, the interest bearing funds were diverted/misutilised by the partners in the form of interest free drawings - HELD THAT:- On perusal of the balance sheet, it clearly shows that the assessee s capital account is showing debit balance and further observed that no interest has been charged by the assessee on the debit balance of the partner s capital account whereas the assessee is paying interest on loans. We observe that both the parties were unable to establish that the interest bearing funds were given to the partners by the assessee and also unable to substantiate that there was direct nexus between the interest bearing loans were given to partners. In view of these observations and considering the totality of the facts and circumstances of the case, we restore this issue to the file of the AO with a direction to examine whether the assessee has given interest bearing loans to the partners and thereafter decide the issue in accordance with law after providing opportunity of being heard to assessee. The assessee is directed to substantiate its claim that no interest bearing funds were utilized by the partners before the AO. Thus, the grounds raised on this issue are treated as allowed for statistical purposes.
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2022 (5) TMI 511
Addition u/s 68 - Cash deposits into bank account of the assessee - CIT(A) deleted the addition made u/s 68 holding that the assessee has proved the identity, creditworthiness of the transaction which was made with its sister concern - assessee contended that the company became sick and could not pay the loans to the creditors, bankers and there was one-time settlement offered to the assessee and the business was completely closed down and in fact there was an auction notice issued by Haryana Financial Corporation and the assessee in order to pay one-time settlement and the other dues sold scrap and the sale proceeds were deposited into bank account and the loans were discharged by utilizing the sale proceeds and Assessing Officer in the absence of any further details treated the cash deposits of Rs.36,25,000/- as unexplained cash credits u/s 68 - HELD THAT:- As decided in P. MOHANAKALA [ 2007 (5) TMI 192 - SUPREME COURT] in order to attract the scope of section 68 of the Act the assessee offers no explanation about the nature and source of such credit found in the books or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory. It is only then the sum so credited in the books may be charged to Income tax as income of the assessee - the expression the assessees offered no explanation means where the assessee offers no proper reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. Here in the case of the assessee, the assessee has given an explanation that the credit entries in the bank account are relating to sale of scrap and the original vouchers were also furnished before the Assessing Officer in the remand proceedings. On examination of all the original vouchers the Assessing Officer could not point out any discrepancy in the vouchers. Therefore, the assessee has discharged its initial onus and there was no further enquiry by the Assessing Officer in the remand proceedings though requested by the assessee to summon the vendors. Therefore, taking the totality of facts and circumstances into consideration, we hold that the cash deposits made into bank account by the assessee are nothing but the sale proceeds of scrap sales and the Assessing Officer should not have treated such scrap sales as unexplained cash credits u/s 68 of the Act. Thus, we direct the Assessing Officer to delete the addition made u/s 68 of the Act and re-compute the income of the assessee accordingly. Grounds of appeal of the Assessee are allowed.
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2022 (5) TMI 510
Deduction u/s.80IC on the profits of Roorkee undertaking - Whether deduction u/s.80IC is required to be restricted to the amount of `gross total income ? - HELD THAT:- The total amount of deductions under the Chapter VIA cannot breach the amount of gross total income, which, in turn, means the total income computed in accordance with the provisions of the Act immediately before making any deductions under this Chapter. Thus, the procedure is to compute head-wise income under Chapter IV; club incomes of other persons in the assessee s total income as per Chapter V; then apply the provisions of set off and carry forward as per Chapter VI, so as to reach the amount of gross total income. To put it simply, the amount of gross total income is the total income of the assessee immediately before the claim of deductions under Chapter VIA of the Act. Going with the prescription of section 80A(2) of the Act, if the gross total income is more than the aggregate amount of deductions under Chapter VI-A, then such total amount of deductions is reduced from it to find out the total income. If however, the aggregate amount of deductions under this Chapter happens to be more than the gross total income, then such aggregate amount of deductions gets restricted to the amount of the gross total income with the effect that the total income is reduced to Nil and is not converted into loss so as to allow carry forward of the amount of deductions under this Chapter to the next year. The Hon ble Supreme Court in M/s. Synco Industries Ltd. Vs. AO and another [ 2008 (3) TMI 13 - SUPREME COURT] has also laid down to this extent. Adverting to the facts of the instant case, it is seen that the assessee s final gross total income was Rs.3,11,49,011/-. Thus, the total amount of deductions under Chapter VI could not have breached the amount of gross total income. The authorities have rightly restricted the amount of deduction u/s 80IC to the extent of gross total income computed at Rs.3.11 crore. The ld. AR was fair enough to accept this position against the assessee. The ground is thus dismissed. Deduction u/s.80IC be allowed in the computation of book profit u/s.115JB of the Act in the light of sub-section (5) thereto - HELD THAT:- It is clear that for the purpose of calculation of tax liability u/s.115JB of the Act, there is no scope for reducing book profit by the amount of deduction u/s.80IC. The Mumbai Tribunal in Neha Home Builders [ 2018 (10) TMI 922 - ITAT MUMBAI] has held that deduction u/s.80IC is permissible in computing book profit u/s.115JB of the Act. Unfortunately, the above referred judgments of the Hon ble Guwahati [ 2009 (3) TMI 511 - GAUHATI HIGH COURT] , Uttarakhand [ 2010 (11) TMI 671 - UTTARKHAND HIGH COURT] and Karnataka High Courts [ 2013 (6) TMI 310 - KARNATAKA HIGH COURT] , which were prevailing on the date of hearing by the Mumbai Bench, were not brought to its notice. In view of the fact that four consecutive High Courts have disentitled the assesses to reduce the amount of deduction u/s.80IB/80IC in the computation of book-profit u/s.115JB of the Act, and not even a single divergent judgment of any Hon ble High Court has been brought to our notice, there is no scope for taking a contrary view. Ex consequenti, the Tribunal, which is an inferior authority, is incapacitated to lay down differently. Reverting to the language of section 115JB(5) making all other provisions of the Act applicable but by saving section 115JB and sub-section (1) of section 115JB containing a non obstante clause qua any other provision of the Act in the manner of computation of income tax liability of a company at 18.5% of its book profit and because of deeming provision in this sub-section regarding the computation of book profit and further Explanation 1 defining book profit in an exhaustive manner, we hold that there is no merit in the contention of the ld. AR in seeking reduction of the book profit u/s 115JB with the amount of deduction u/s 80IC of the Act. The additional ground, therefore, fails.
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2022 (5) TMI 509
Addition u/s 68 - disallowance of the claim from F O trading - profit from F O trading was to be assessed either as business income or under either of the heads of income A to F of section 14 - HELD THAT:- As assessee has already declared the said income from business and offered for taxation in his return. How the same is required to be considered as undisclosed as income is not understood able. The CIT(A) has relied upon the decision in the case of Margaret s Hope Tea Co. Ltd. [ 1990 (8) TMI 12 - CALCUTTA HIGH COURT] - The facts are not distinguishable at this stage. The CIT(A) has rightly adjudicated the matter of considered by giving the detail reasons. No incriminating material is available on record to interfere with the finding of the CIT(A). In view of the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfered with at this appellate stage. Accordingly, both the issues are decided in favour of the assessee against the revenue. Addition being the brokerage and commission u/s 69C - Non-Applicability of Sec. 115BBE - whether amended provision of Section 115BBE is liable to be applicable in the present case also or not? - HELD THAT:- The notification speaks about the applicability w.e.f. 01.04.2017 onwards. The present case is the case for the A.Y.2015-16. The expenses having explained and considered by CIT(A) in view of the decision in case of T. A. Quereshi [ 2006 (12) TMI 91 - SUPREME COURT] . We nowhere found any reason to interfere with the finding of the CIT(A) on this issue, therefore, we are of the view that the finding of the CIT(A) in quite correct which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue.
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2022 (5) TMI 508
Estimation of income - Addition u/s 69C of the Act for bogus purchases - HELD THAT:- CIT(A) has followed the finding in the case of Saraswathi Oil Traders versus CIT [ 2002 (1) TMI 3 - SUPREME COURT] and upheld only additional profit element earned by the assessee on the bogus purchases. In the circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and we accordingly, uphold the addition for bogus purchases in all the three assessment years. Addition u/s 68 - negative cash balance in the cash flow statement prepared by the assessee for justifying cash deposits in bank account - HELD THAT:- AO has considered the cash flow statement produced by the assessee to explain the cash deposits in bank account found during the course of the survey proceedings carried out at the premises of the assessee. In such cash flow statement, negative cash balance was observed by the assessee and same was treated as unexplained cash credit. The subsequent computer-generated cash book filed during appellate proceeding before the Ld. CIT(A), has not been accepted in absence of original cash book for verification. In our opinion, in absence of original cash book produced by the assessee, the Ld. CIT(A) is justified in upholding the addition for negative cash balance observed in cash flow statement filed during the course of assessment proceeding. We do not find any error in the order of the Ld. CIT(A) on the issue in dispute and we accordingly uphold the addition made under section 68 of the Act for negative cash balance observed in all the three assessment years. Assessee appeal dismissed.
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2022 (5) TMI 507
Payment of expenses in cash - Addition being cash payment in contravention to the provisions of section 40A(3) - CIT(A) in appeal proceedings analyzed the issue in detail and has agreed to assessee's contention that the ld. A.O. has not pointed out any specific payment exceeding Rs. 20,000/- in contravention of section 40A(3) - HELD THAT:- In the case of ACIT v. Shree Shanmughar Gunny Stores [ 1982 (10) TMI 14 - MADRAS HIGH COURT] it was held that a single payment exceeding the specified amount made to a party would be covered by the sub-section, though it relates to different items of expenditure. The assessee has submitted before Ld. AO that assessee settles account with printer, once or twice a month as per outstanding amount. However, payments have been made to different parties as per their separate invoices raised by them and no payment is in excess of limit specified u/s. 40A(3) of the Act. We are therefore in agreement with assessee who has provided detailed branch-wise breakup of expenses incurred in cash, that if separate invoices have been raised in respect of each payment by various parties and payment on a single day to a party does not exceed Rs. 20,000/- then there is no reason to disturb the findings of the Ld. CIT(A). We therefore restore the case to the file of Ld. AO with a direction for verification on a limited point whether separate invoices were raised by various parties and separate payments have been made by assessee not exceeding Rs. 20,000/- against such individual invoices as per Chart furnished by the assessee - matter is restored to the file of Ld. AO for carrying out necessary verification as per directions given. Validity of reopening of assessment u/s 147 - reopening based on Audit objection - HELD THAT:- We would like to place reliance on the decision of ITAT Hyderabad in the case of ITO v. Mayuri Construction [ 2021 (8) TMI 790 - ITAT HYDERABAD] wherein the ITAT held that reopening based on Audit objection is valid if cash payments above Rs. 20000 has escaped scrutiny. Moreover, we note that from reasons recorded, Ld. AO has also independently applied his mind to the issue, while initiating re-assessment proceedings. Whether reopening of assessment proceedings can be initiated on account of change of opinion or not? - A perusal of original assessment order dated 23/01/2013 does not seem to indicate that the Ld. AO has applied his mind to the issue of disallowance on account of cash payment in excess of Rs. 20,000/- u/s. 40A(3) of the Act. The assessee has placed reliance on questionnaire dated 01-04-2013 issued at the time of original assessment. However, a perusal of the same reveals that the said questionnaire is a general questionnaire and no specific query with regard to details of cash payment in relation to disallowance u/s. 40A(3) of the Act was specifically called for. Moreover, the assessee has not brought on record any submission filed by the assessee before the Ld. AO justifying payments in cash exceeding the specified limit u/s. 40A(3) of the Act. Therefore, from facts it is seen that Ld. AO has not applied his mind to the issue of disallowance u/s. 40A(3) of the Act. Therefore, this is not a case of change in opinion as averred by the assessee. Whether AO has erred both on facts and in law by passing order u/s. 143(3) r.w.s 147 of the Act, without providing reasons recorded to the assessee specifically asked for during the time of re assessment proceedings? - A perusal of assessee's facts reveals that he neither sought reason for re-opening of case on receipt of notice initiating re-assessment proceedings, nor did he object to reopening of reassessment proceedings. The reasons were sought almost two months after reply on merits was filed by the assessee and that too just 10 days before the Ld. AO completed the reassessment proceedings vide order dated 24-09-2015. We therefore, find no merit in Cross Objection No. 4 and the same is hereby dismissed.
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2022 (5) TMI 506
Exemption u/s 11 - grant of approval/registration u/s. 80G rejected - Assessee charging exorbitant fee as stated by ld. CIT(E) - HELD THAT:- Matter can be restored back to the file of ld. CIT(E) for de novo consideration of assessee's application for registration/approval u/s. 80G(5) of the Act. We have observed that ld. CIT(E) issued notice dated 02.09.2017 seeking as many as 23 queries. The case was fixed for hearing on 28.09.2017. The assessee sought adjournment, and the case was fixed for 11.10.2017. The assessee had filed part reply before ld. CIT(E) on 11.10.2017, which is placed on record. The case was adjourned to 18.10.2017. On the next date of hearing on 18.10.2017, the assessee/counsel did not appear, and ld. CIT(E) did not give any further opportunity of hearing to the assessee, and rather dismissed the application filed by the assessee for registration/approval u/s. 80G(5) of the 1961 Act on the same date viz. 18.10.2017. Assessee has averred before us that many of the findings of ld. CIT(E) are erroneous/perverse, and if one more opportunity is granted, the assessee shall produce books of accounts, vouchers and other evidences to substantiate its contentions, and the assessee shall also furnish necessary details/evidences if any other queries which ld. CIT(E) may require assessee to explain. The ld. CIT-DR has also fairly stated that the matter can go back to the file of ld. CIT(E) for denovo consideration of assessee's application. Thus, under these circumstances it will be in the interest of justice and fairness to both the parties that the order dated 18.10.2017 passed by ld. CIT(E) be set aside and matter be restored back to the file of ld. CIT(E) for fresh consideration of the assessee's application for registration/approval u/s. 80G(5) - Appeal of the assessee is allowed for statistical purposes.
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2022 (5) TMI 505
Disallowance of expenses - Self made vouchers - cash expenditure - In the absence of any invoices/bills/vouchers, complete cash book etc., the genuineness and correctness of expenses could not be verified by the Assessing Officer - assessee is engaged in the transportation business but he could not submit any documentary evidences to substantiate his claim, 3% of the total other expenses - addition reduced to 0.60% of the Net Profit by the learned CIT(A) - HELD THAT:- The assessee could not able to establish as to why there is a drastic loss in the net profit comparing to the earlier assessment years. Further, the gross profit for the Assessment Year 2015-16 shown by the assessee is 13.23% and claimed a loss of (-) Rs. 56,074/- which is also not seems to be a correct proposition since no evidence is produced before us to establish the loss claimed by the assessee. The reason given by the assessee that the loss is due to depreciation on trucks, the same could have been explained before the lower authorities which has not been done by the assessee but the expenses incurred is not proved with proper evidences and mostly done by cash mode. After going through the order of the learned CIT(A), we are not in agreement with the order of the learned CIT(A) in estimating the profit at 0.60% on the net profit when the assessee has not produced any evidences on the claim of expenses. In the above circumstances, we are of the considered opinion that it would serve the interest of justice, if we restrict the disallowance to 1% of the total turnover of Rs. 27,93,02,001/-, i.e. Rs. 27,93,020/-. Thus, the Assessing Officer is directed to restrict the disallowance to 1% of the total turnover of Rs. 27,93,02,001/-, i.e. Rs. 27,93,020/- and pass appropriate order.
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2022 (5) TMI 504
Disallowance of payment of employees contribution towards Provident Fund and ESI under section 36(1)(va) read with section 43B - scope of amendment - HELD THAT:- This issue stands covered by series of decisions of this Tribunal following various judgments of Hon'ble High Courts including Delhi High Court that, if the payment of employees contribution to PF/ESI though has been made beyond the amendment of statutory date but much before filing of return of income, then no disallowance can be made. See FLYING FABRICATION VERSUS DEPUTY COMMISSIONER OF INCOME TAX [ 2021 (11) TMI 1041 - ITAT DELHI] Amendment regarding due date of deposit of employees contribution of PF/ESI are prospective, i.e., beyond AY 2021-22 and the same is allowed if it is paid before the due date of filing of Income-tax return prior to AY 2021-22 and same cannot be disallowed u/s 36(1)(va) - See RAJ KUMAR VERSUS ITD, CPC, BENGALURU KARNATAKA [ 2022 (2) TMI 1224 - ITAT DELHI] - Decided in favour of assessee.
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2022 (5) TMI 503
TP adjustment made in respect of international transaction on purchase of traded goods - inclusion of comparable company ADS Diagnostics Ltd., and its correct gross margins thereon - HELD THAT:- Valuation adopted by the said comparable company is in accordance with generally accepted accounting principles and in consonance with accounting standards issued by ICAI which are mandatorily to be followed by every corporate in India. In view of the same, we find considerable force in the argument advanced by the Ld. AR that closing stock of inventories figure of ADS Diagnostics Ltd., should be considered only at Rs.2,24,02,515/- as against Rs.3,00,11,802/- taken by the Ld. TPO. If the revised closing stock figure of Rs.2,24,02,515/- is considered, then the gross profit margin of the comparable company as worked out in the table supra comes to 11.08%. The aforesaid tabulation has been reproduced in the order of the Ld. DRP in page 18. The workings thereon are not disputed by the Revenue before us. Hence, we direct the Ld. TPO to consider the gross profit margin of ADS Diagnostics Ltd., only at 11.08%. AR before us stated that if the revised gross profit margin of 11.08% is considered, then even after inclusion of said two comparables by the Ld.TPO, the assessee s margin would be through and no transfer pricing adjustment is required to be made. In view of the same, we direct the Ld. TPO to delete the transfer pricing adjustment made in respect of international transaction on purchases of traded goods. Accordingly, the ground No.1.5 raised by the assessee is allowed.
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2022 (5) TMI 502
Intimation u/s. 143(1) - assessee has apparently claimed exemption u/s. 10(37) towards enhanced compensation along with interest u/s. 28 of the land acquisition Act. - enhanced compensation has been taxed as per the provisions of Section 56(2) and tax liability has been created as per the provisions of Section 57(iv) - HELD THAT:- The question is firstly the requisite facts have to be brought on record in terms of nature of the land being acquired by the government and the quantum of compensation, enhanced compensation and interest and the relevant provisions of land acquisition Act under which such compensation and interest has been granted and thereafter, the relevant provisions as applicable needs to be applied. Further, Wthere are decisions rendered by the Highest Court of the land and which are duly brought to the notice of the ld. CIT(A), the latter cannot merely rely on the relevant provisions of the Act without taking into consideration the legal proposition so laid down in the said decisions regarding the exact nature of compensation and how the same needs to be construed under the relevant statute and the tax statue. The judicial discipline requires that the law laid down by the Highest Court of the land need to be followed irrespective of individual opinion or view point which the ld. CIT(A) may have in a particular matter. At the same time, where there is change in law or any subsequent jurisdictional High Court decision(s) where such decisions rendered by the Hon'ble Supreme Court have been considered and which the ld. CIT(A) ought to rely upon, the ld. CIT(A) has to say so by way of a speaking order rather than maintaining silence on the applicability of the said decisions. Therefore, in light of the aforesaid discussion and in the entirety of facts and circumstances of the case, we deem it appropriate to remand the matter to the file of the ld. CIT(A) to decide the same afresh after bring on record the relevant facts and the decide the same as per law after providing reasonable opportunity to the assessee.
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2022 (5) TMI 501
Addition u/s 68 - bogus LTCG - onus to prove - HELD THAT:- As relying on MRS. PALLAVI PANDEY, SHRI RAJENDRA CHATURVEDI VERSUS DCIT (CC) 2 (3) , MUMBAI [ 2020 (12) TMI 1276 - ITAT MUMBAI] contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But The Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. - Decided in favour of assessee.
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2022 (5) TMI 500
Validity of reopening of assessment u/s 147 - Eligibility of reason to believe - bogus accommodation entry - HELD THAT:- We fully agree with learned CIT(A) that the Assessing Officer was in receipt of tangible material from the reliable source of Investigation Wing of the Income Tax Department. Information so received had live link with the reason to believe that income has escaped assessment. The reliance by learned CIT(A) appears on the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. [ 2007 (5) TMI 197 - SUPREME COURT] is fully applicable. Hence, we do not find any infirmity in the order of learned CIT(A). Addition u/s 68 - As regards the merits of the case we note that consequent upon information that the assessee has engaged in obtaining bogus accommodation entry the tune of Rs. 3.10 crore, assessee has except for denial not provided any cogent material to respond to the query raised in this regard. Assessee has not submitted the relevant details called for. The assessing officer has noted that assessee has wanted time to provide the necessary details but had failed to do so despite repeated notices. The learned CIT(A) has also given the finding that assessee s denial that the transaction was not entered cannot be accepted as assessee has failed to submit full bank account and submitted only part of Bank account. We find learned CIT(A) is correct in holding that when the assessee has been found to be engaged in bogus accommodation entry by investigation wing and assessee simply denies the same without submitting complete details of bank statement assessee's plea has no legs to stand. In this view of the matter we do not find any infirmity in the orders of authorities below. - Decided against assessee.
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2022 (5) TMI 499
Revision u/s 263 - As per CIT AO had failed to verify whether the claim of agricultural expenses was commensurate with the agricultural income - HELD THAT:- As the assessee had pointed out that the absence of irrigation expenses/electricity expenses had been explained during assessment proceedings itself being on account of the fact that the assessee was cultivating Raw tobacco which required very little quantity of water and also hardly any pesticide ,the crop itself being a pesticide and further that since the members of the assessee HUF were engaged in agricultural activities the labor cost also was low. The assessee also explained to the Ld.Pr.CIT that the expenses for crops sold in the year were mainly incurred in the preceding year since the crop, i.e tobacco, grown by the assessee took a particularly long time to grow and the assessee accounted for the expenses on cash basis, therefore, the expenses reflected against its income for a year did not necessarily relate entirely to the income earned in that year and the income of a year was to be compared with the expenses incurred in the preceding year to arrive at a proper comparison. To this effect, he had pointed out also that there was no discrepancy in the percentage of expenditure incurred in the preceding year as compared to the income earned in the impugned year, being approximately 30 to 40% of the same, which was in accordance with the comparative figures of the preceding year and succeeding years also. All the above finds mention in the letter addressed to the Ld.Pr.CIT We find that in relation to the SAANTH earned by the assessee as stated above admittedly the Assessing Officer had conducted inquiries and asked for confirmation also from the members of the HUF who had paid the agricultural rent to the assessee HUF. Now, without pointing out any infirmity in the inquiry conducted by the Assessing Officer or any fact which the inquiry conducted revealed raising suspicion with regard to the transaction, the ld. Pr. CIT has merely stated that the issue needed to be further investigated in depth. AO therefore having examined the specific aspects of agricultural income/SAANTH pointed out by the Ld.Pr.CIT and the assessee also having addressed every discrepancy /anamoly pointed out by the Ld.Pr.CIT vis a vis the inadequacy of inquiry, there could not possibly have been any finding of error in the order of the AO without the Ld.Pr.CIT addressing/dealing and controverting the explanation of the assessee vis a vis the discrepancies noted. It is clear therefore that the Ld.Pr.CIT has failed to make out a case of inadequate inquiry by the AO in the present case and the exercise of revisionary powers is simply based on the Ld.Pr. CIT taking a different view on the facts relating to the issues in question, as opposed to the Assessing Officer, without pointing out any infirmity in the view taken by the Assessing Officer. This is clearly beyond the our view of section 263 of the Act. ITAT Ahmedabad Bench in an identical case where revisionary powers were exercised for directing detailed inquiry on agricultural expenses incurred ,held that where the AO had accepted agricultural income after conducting due inquiries no revision u/s 263 can be done and that it tantamounted to mere change of opinion for which revisionary powers cannot be exercised. Copy of the said order in the case of M/s Sitaram J Gavli ,Silvasa [ 2009 (12) TMI 1047 - ITAT AHMEDABAD ] Appeal of assessee allowed.
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2022 (5) TMI 461
Delay in making the payment towards the employees contribution for the provident fund, under section 36(1)(va) r.w.s. 2(24)(x) - intimation under section 143(1) - HELD THAT:- When one considers what has been reported to be due date in column 20 (b) in respect of contributions received from employees for various funds as referred to in Section 36(1)(va) and the fact that the expression due date has been defined under Explanation (now Explanation 1) to Section 36(1)(va) provides that For the purposes of this clause, due date means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise , one cannot find fault in what has been reported in the tax audit report. It is not even an expression of opinion about the allowability of deduction or otherwise; it is just a factual report about the fact of payments and the fact of the due date as per the Explanation to Section 36(1)(va). This due date, however, has not been found to be decisive in the light of the law laid down by Hon'ble Courts above, and it cannot, therefore, be said that the reporting of payment beyond this due date in the tax audit report constituted disallowance of expenditure indicated in the audit report but not taking into account in the computation of total income in the return as is sine qua non for disallowance of Section 143(1)(a)(iv). When the due date under Explanation to Section 36(1)(va) is judicially held to be not decisive for determining the disallowance in the computation of total income, there is no good reason to proceed on the basis that the payments having been made after this due date is indicative of the disallowance of expenditure in question. While preparing the tax audit report, the auditor is expected to report the information as per the provisions of the Act, and the tax auditor has done that, but that information ceases to be relevant because, in terms of the law laid down by Hon ble Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law, and we must delete the same for this short reason as well. In view of the detailed discussions above, we are of the considered view that the impugned adjustment in the course of processing of return under section 143(1) is vitiated in law, and we delete the same. Appeal allowed.
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Customs
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2022 (5) TMI 549
Country from where the goods imported - Magnesium lump - whether the writ applicants imported the goods from UAE or the Turkey? - case of the Revenue is that the goods have travelled from Pakistan - HELD THAT:- If the goods have travelled from Pakistan, then the levy of duty shall be at the rate of 200%. Whereas if the goods have travelled from UAE, then the levy of duty shall be at the rate of 5% - The Revenue is not able to make any headway so far as this inquiry is concerned. The goods are lying at the customs warehouse past almost more than seven months.The possibility of passing an interim order releasing the goods subject to certain terms and conditions, is explored. However, the writ applicants are not in a position to furnish any tangible security. All that has been offered is a bond. Post both the matters on 21st April 2022 on top of the Board.
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2022 (5) TMI 498
Validity of order of settlement commission - Demand of differential duty - undervaluation - whether the Settlement Commission committed any error in passing the impugned order? - HELD THAT:- In view of the settled position of law, the principal contention canvassed on behalf of the writ applicant that the Settlement Commission ought not to have gone into the merits of the show-cause notice. If the Settlement Commission was of the view that the writ applicant failed to make full and true disclosure of the duty liability, it should have rejected the settlement application. The writ applicant should have been relegated to suffer and undergo the adjudication mechanism and procedure as per the provisions of the Act. The impugned order passed by the Settlement Commission to the extent the same adjudicate and confirm the demand raised in the show-cause notice is hereby quashed. The legal consequences as postulate in law would follow. The proceedings pursuant to the show-cause notice before the concerned authority shall commence - this writ application is partly allowed.
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2022 (5) TMI 497
Revocation of Courier License - mismatch in the invoice values and description found on the invoices pasted on the boxes/bags and invoice details uploaded electronically in Electronic Courier Clearance System (ECCS) or as found in Courier Bills of Entry (CBE) - appellant submits that the mistake occurred at the end of their overseas counterpart - HELD THAT:- It is apparent from the facts of the case that the appellant had failed to comply with the provisions stipulated in Public Notices dated 7.5.219 and 15.5.2019 inasmuch eight boxes were destined to States other than that seven States in violation of the said Public Notices. The submission of the learned Authorised Representative that the appellant mis-declared the particulars like consignee-consignor address, value, quantity and description of goods in the House Air Way Bills (HAWB) and that when the address of consignee was given wrongly, the appellant would have been in no position to obtain the requisite authorization from the actual consignor/consignee as mandated in the Regulation 12(1) (i) of the Courier Regulations, cannot be agreed upon. The appellant did not disclose/ declare the actual consignor/consignee for the purpose of the clearance of their goods. Therefore, the department was not wrong in alleging that the appellant had mis-declared the details in House Air Way Bills (HAWB), in terms of consignee-consignor address, value, quantity and description of goods. By applying the principle of preponderance of probability, we find it quite logical to accept the contention of the department that the the appellant had an intention to evade payment of customs duty. The Government has been simplifying the law and procedure relating to imports through courier from time to time. Accordingly, lot of trust and reliance has been placed on the courier agencies. A very clear procedure has been put in place by way of Courier Regulations to stream line the imports through Courier mode. It was incumbent upon the appellant Courier agency to adhere to the Regulations in order to safeguard the interest of Revenue and the trust placed on them. The appellant Courier was mandated to work within legal framework of the Customs Act, 1962, Rules and Regulations made thereunder. The appellant failed to do so. The appellant did not exercise due diligence in submitting the correct and complete information to the assessing officer with reference to the impugned goods. By violating the Regulations, it had given scope for massive misuse of the facility given in addition to loss of Revenue. In short, the appellant courier agency has breached the trust reposed on it by the Revenue. Therefore, the revocation of License is justified and any leniency shown in the misconduct of this nature would send wrong signals. Appeal dismissed.
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2022 (5) TMI 496
Valuation of imported goods - import of various parts such as side plate, back plate, tube casting, motor base and impeller for use in manufacturing its final products - buyer and seller are related persons in terms of Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 or not - transaction between the buyer and seller are influenced by such relationship or not - addition is required to be made to the assessable value of the imported goods under Rule 10 of the Valuation Rules or not. Whether the buyer and seller are related persons in terms of Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007? - HELD THAT:- It is undisputed that the appellant and its overseas supplier are sister concerns and are related persons. It is also undisputed that the relationship has not affected the transaction value. However, in terms of Rule 3 read with Rule 10(1)(c) of the Customs Valuation Rules royalty and license fee related to imported goods which the buyer is required to pay directly or indirectly as a condition of sale of the goods has to be included, to the extent that such royalty and fees are not included in the price payable or paid has to be added. It is also undisputed that the ex-factory price of the goods did not include the miscellaneous charges which were indicated in the invoices and that they need to be included. The only dispute is factual - whether they were included or not in the Bill of Entry. Learned Counsel has demonstrated before us that they were indeed included in the values in the Bill of Entry. However, these charges were included under a different column and the figure 0 was indicated against the column Miscellaneous Charges . The net effect of the valuation insofar as these charges is concerned is that the miscellaneous charges were included by the appellant in the Bill of Entry. Therefore, there are no reason or justification to add them again to the assessable value. Includibility of royalty/license fee paid by the appellant to its holding company as a percentage of its total sales turnover in the assessable value - HELD THAT:- As per Rule 10(1)(c ) any royalty paid directly or indirectly as a condition for the import is includible in the assessable value of the imported goods. In Matsushita Television Audio (I) Ltd. the agreement between the importer and the technology service provider related to the components which were imported since clause 7.02 of that agreement stipulated that not only the technology partner assisted the appellant by selling the components were also assessed and approved components which were bought out items - It needs to be seen whether the payment of such royalty is pre-condition to the sale of the imported goods. No such condition emerges from the agreement in the present case. The goods were also not imported under the agreement. In view of the above, it is found that the royalty cannot be included in the assessable value. Appeal allowed - decided in favor of appellant.
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2022 (5) TMI 495
Classification of import goods - Multimedia Speakers - to be classified under CTH 8518 2200 of the Customs Tariff Act, 1975 as Multiple Loud Speakers mounted in the same enclosure or under CTH 8519 8100 for Speakers with USB playback and 8527 9100 for Speakers with FM Radio feature - HELD THAT:- The issue has already been settled by this Tribunal in appellant s own case,LOGIC INDIA TRADING CO VERSUS COMMISSIONER OF CUSTOMS [ 2016 (3) TMI 5 - CESTAT BANGALORE] , wherein the Tribunal was posed with the classification of Multimedia Speakers of three types as imported by the appellant, viz. Speakers without USB port or FM; Speakers with additional functions of USB playback and Speakers with FM Radio and USB playback. Upon analyzing the legal provisions, the rules provided under the General Rules of Interpretation, common parlance theory etc., the Tribunal has held that though the Multimedia Speakers under consideration have additional features, the main and principal function of the product is as a Speaker and therefore, the goods in question are classifiable under CTH 8518 2200. The impugned order passed in changing the classification of the disputed goods cannot be sustained - Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2022 (5) TMI 537
Maintainability of petition - legality of removal of the Petitioners from the Directorship - applicability of Section 241-242 of the Companies Act - Whether the Petitioners are eligible to maintain this Petition under Section 241-242? - HELD THAT:- It is seen from the records that the 1st Petitioner was holding 44.33% fully paid-up share in the 1st Respondent Company and he has filed the affidavit on behalf of the 2nd Petitioner who was having 5.75% of fully paid-up shares in the 1st Respondent Company. Hence, the affidavit submitted by the 1st Petitioner holding 44.33% for filing a petition is sufficient and the same can be accepted in order to accept a petition under Sections 241-242 of the Companies Act, 2013. Given the facts, the Petitioners are eligible to file a Company Petition under Section 241-242 of the Companies Act, 2013. Whether the removal of the Petitioners from the Directorship is illegal? - Section 169 of the Companies Act, 2013 - HELD THAT:- A reading of provision of Section 169 makes it clear that to remove a director from the Company, the Company has to comply with the procedure prescribed under Section 169 of the Companies Act, 2013. As per Section 169(2), a special notice is required to remove a Director or to appoint somebody in place of a Director so removed, at a meeting at which he is removed. The Company shall forthwith send a copy thereof to the Director concerned, and the Director shall be entitled to be heard on the resolution at the meeting - the act of the shareholders in the matter of appointing or removing the directors of the company from the Board cannot be a subject matter of judicial scrutiny, since the right to appoint or remove directors is supreme as a part of the corporate democracy. Whether the removal of the Petitioners from the Directorship is oppressive or prejudicial to attract Section 241-242 of the Companies Act? - HELD THAT:- It is seen from the records that the removal of the Petitioner from the Directorship of the Respondent Company was done following all the mandatory requirements in accordance with law. There are no oppression and mismanagement in the Company, while doing so. Moreover, the contention of the petitioners regarding the share transfer cannot be accepted as they have affixed their signatures on the Share Transfer Deed (SH4) on 29.01.2021 at Trichur before the Statutory Auditor of the 1st Respondent Company which was not refuted by the Petitioners - even though the 2nd Petitioner is eligible to maintain the Company Petition on the basis of the affidavit sworn to by the 1st Petitioner, there are no reason to allow the Company Petition and grant any relief to the Petitioners as sought for. Petition dismissed.
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2022 (5) TMI 536
Seeking for the sanction of Scheme of Arrangement - Sections 230 and 232 of the Companies Act, 2013 and in terms of Rule 15 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- It is concluded that the objections/observations to the Scheme received from RD, RoC, have been adequately replied by the Petitioner Companies and hence there is no impediment in approval of the Scheme. The Scheme in question as annexed at Annexure-15 is approved and it is hereby declared that the same is to be binding on all the shareholders and creditors of the Demerged Company as well as Resulting Company. While approving the Scheme, it is clarified that this order should not be construed as an order in anyway granting exemption from payment of any stamp duty, taxes, or any other charges, if any, and payment in accordance with law or in respect of any permission/compliance with any other requirement which may be specifically required under any law. Application allowed.
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2022 (5) TMI 535
Sanction of the Scheme of Amalgamation - section 230(6) read with section 232(3) of the Companies Act, 2013 - HELD THAT:- Various directions with regard to holding, convening and dispensing with various meetings issued - directions with regard to issuance of various notices also issued. The scheme is sanctioned - application allowed.
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2022 (5) TMI 534
Sanction of Scheme of Arrangement - section 230-232 of Companies Act - HELD THAT:- Various directions with regard to holding, convening and dispensing with various meetings issued - directions with regard to issuance of SCN also issued The scheme is approved - application allowed.
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Insolvency & Bankruptcy
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2022 (5) TMI 494
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- There is no specific approval either of the payment of arrears or of any fixation of the MD s remuneration or increase of his salary/perks. It is also relevant to note that there is no crystallised quantum of amount which can be claimed as salary/remuneration fived by the Board of Directors as contemplated under Section 196 of the Companies Act, 2013. The contention of the Learned Counsel Mr. Sharma that the cause of action did not arise till the dispute arose is untenable, keeping in view, that the claims date back to 2010 and there is no record of disputes having arisen at that point of time - the emails, the correspondence relied upon by the Learned Counsel for the Respondent do not give any definitive quantum of salary to have been accepted by way of any Resolution by the Board of Directors, to fall within the ambit of the definition of acknowledgement of debt as contemplated under Section 18 of the Limitation Act, 1963. Therefore, this Tribunal if of the earnest view that the Section 9 Application filed on 27/08/2021is barred by Limitation as the claims of Rs.96,92,000/- and Rs.18,00,000/- pertain to the period prior to 31/03/2016 and more than three years have lapsed since. Pre-Existing Dispute existing between the parties or not - HELD THAT:- It is seen from the record that the remuneration of the MD is a disputed question of fact . It is not within domain under IBC to decide the issue of the fixation of the salary of the MD , but to ascertain if there is any Dispute regarding the issue. Having regard to the emails/correspondence and the Minutes on record, it is opined that the Dispute raised is not a feeble legal argument nor is it a spurious one but one which is supported by evidence. The Adjudicating Authority has not addressed either to the question of claims having been time barred nor to the issue of the existence of a Pre-Existing Dispute between the parties - Appeal allowed.
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2022 (5) TMI 493
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - dues pertaining to LTC and Leave Encashment - existence of debt and default or not - HELD THAT:- It is not the case of the Appellant that the amounts claimed are due towards any emoluments/salary for the services rendered by him to the Corporate Debtor , while he was in service. Though service benefits like LTC accrue, on account of the service rendered during the period of employment, the scope and objective of the Code is simply not just for recovery of dues but Resolution of the Companies meant for maximisation of the value of assets , to promote entrepreneurship, availability of credit and balance all interest of the stakeholders. Employees and workmen do constitute a major part of the stakeholders. The term employee in general parlance refers to a person, who is hired by the employer to perform a particular job and is entitled to a specific wage or salary. Section 3(36) of the Code states that the term workmen shall have the same meaning as provided under Section 2(s) of the Industrial Disputes Act, 1947. For the purpose of the Code, the term workmen dues has to be interpreted in terms of explanation to Section 326 of the Companies Act, 2013. As per the definition incorporated therein, the dues would cover wages and salary, accrued holiday remuneration, workmen compensation, and all sums due from Provident Fund, Pension, Gratuity Fund or any other fund for the welfare of the workmen, maintained by the employer. The Claims of the workmen/employees may be classified as service claims which arise during the terms of employment, in lieu of service rendered by the employee, salary, wages, bonus, dues etc., and welfare claims which arise after cessation of employment, like Gratuity , Leave Encashment , Superannuation Dues, Workmen Compensation for closure of the entity which all depend on the tenure of the employment. Subsequent to the Company going into the Insolvency, all such claims may be submitted in Form D under Regulation 9 of the (Insolvency and Bankruptcy) CIRP Regulations, 2016. But seeking to initiate CIRP on the ground that LTC and EL Encashment has not been paid, which fall within the ambit of service benefits/welfare benefits cannot be said to be the intent and objective of the Code. The Principal Gratuity amount was paid to the Appellant on 17/02/2022 and deciding the question of interest is not within the domain of IBC. Hence, this Tribunal is of the considered view that there is no illegality or infirmity in the well-considered Order of the Adjudicating Authority - Appeal dismissed.
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2022 (5) TMI 492
Seeking liquidation of the corporate debtor - section 33(2) of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In view of the satisfaction of the conditions provided under Section 33 of the Code, the Corporate Debtor i.e. M/s Maruti Kesri Nandan Agrofoods Private Limited is directed to be liquidated in the manner as laid down in Chapter III of the Code - Application allowed. Direction for payment of fee to the Resolving Professionals pertaining to lockdown period from 25.03.2020 to 31.07.2020, which is over and above 9 months of CIRP as per the revised bill - HELD THAT:- CIRP fees has already been approved by the CoC in its first meeting dated 06.03.2020 as per Agenda item No.10 and expenses incurred by the Resolution Professional during the period from 29.01.2021 to 05.03.2021 have also been ratified by the CoC in its seventh meeting as per Agenda item No. 10 and the pending matter in issue is with respect to professional fee of the Resolution Professional for the lockdown period from 25.03.2020 to 31.07.2020 and for the period from 11.03.2021(post liquidation resolution) till the disposal IA No.294/2021 - the fee of the resolution professional must be commensurate to and be reasonable compensation of the amount of work involved,including all other expenses such as counsel fees and out of pocket expenses considering the continuous involvement of the Resolution Professional and post liquidation resolution litigation carried on for the purpose of better management of assets of Corporate debtor. Application allowed.
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2022 (5) TMI 491
Situation of recovery of claims post approved Resolution Plan - recovery of an amount to be paid in accordance with the provisions of Section 8B of Employees Provident Funds Miscellaneous Provisions Act, 1952 along with interest under Section 7Q of the said Act and all costs, charges and expenses, after resolution plan approved and dues discharged/extinguished - HELD THAT:- No one can come and raise demand/file claims after the Resolution Plan is approved and plan is under implementation. If claims are allowed to be admitted as and when the claims are submitted after the Plan is approved, then the Resolution Plan of the Stressed Assets shall fail and the objectives of the IBC defeated - It is also observed that in the approved Resolution Plan, it was clearly stated that barring aside the claims admitted and forming part of the Resolution Plan any other claim and/or demand prior to the effective date shall stand extinguished. Under these circumstances, the present application with the prayers needs to be allowed. Hence the demand of the Respondent prior to 20th September, 2018 amounting to Rs. 78,93,960.00, out of the total claim of Rs. 80,07,965.00 for the period February, 2016 to April, 2019 is hereby extinguished as prayed for in terms of the Resolution Plan approved - Application admitted.
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2022 (5) TMI 490
Validity of approved Resolution Plan - correctness of computation and disbursal of liquidation value - it is alleged that wrong liquidation value has been provided to dissenting shareholders - Whether the decision of the CoC taken in 32nd CoC meeting held on 27.08.2020 to obtain a more recent valuation report and reliance on such valuation report as on 31.07.2020 is contrary to the provisions of the Code and Regulations framed thereunder? - Whether the liquidation value ascribed by Resolution Professional and CoC to the Appellant as per Section 53 of the Code violates any provisions of the Code or Regulations? - Whether the allocation of the amount to the Appellant, a Dissenting Financial Creditor is not in accordance with Section 30(2)(b) of the Code? HELD THAT:- Under the CIRP Regulations, no power has been given to CoC to call for any valuation of fair and liquidation value though we don t think that there is any bar under IBC provisions for the CoC to call for a fresh valuation report. We, thus, do not find any substance in the submission of the Counsel for the Appellant that fresh liquidation value could not have been obtained by CoC and we further do not accept the submission of the Counsel for the Appellant that distribution consequent to liquidation value as on 31.07.2020 is not in accordance with law. Whether liquidation value ascribed to the Appellant in the Resolution Plan as well as by the CoC. Submission is that the value ascribed is in accordance with Section 30(2)(b) r/w Section 23 or not? - HELD THAT:- All dissenting creditors have been allotted amount of 19% of their admitted amount without there being any discrimination in the dissenting creditors. It is relevant to notice that the Appellant is not the only dissenting creditor. The Appellant himself has brought on the record minutes of 39th meeting of the CoC held on 01.01.2021 which indicate that apart from Indian Bank, Bank of India, Union Bank of India, Punjab National Bank, Karur Vyasa Bank and Canara Bank were also dissenting creditors. All dissenting creditors have been provided same percentage as against the admitted claim. In the 39th CoC meeting held on 01.01.2021, where the voting result of the Agenda on 38th meeting of the CoC came for consideration. The final indicative lender wise distribution presented were noticed in the minutes. The proposed plan value distribution to the Appellant was INR 40.39 Crores whereas indicative plan value distribution was INR 42 Crores. Suffice it to note that distribution to dissenting Financial Creditors and other Financial Creditors have been discussed, deliberated and approved by the CoC, the distribution which has been approved for payment to the dissenting Financial Creditors was discussed and deliberated by CoC. What the Financial Creditors shall be paid was the query raised and discussed and in the meeting of the joint lenders held on 07.12.2020, the revised distribution after considering increase of Rs.6 Crores by Resolution Applicant was noticed. In the joint lenders forum meeting, Indian Bank expressed its agreement to distribution as per revised scenario-1 under which the Indian Bank was proposed INR 40.39 Crores. In the CoC meeting held on same date i.e. 07.12.2020, Agenda Item No.6 which was to finalise the Resolution Plan for distribution where details of allocation as per each lenders liquidation value was placed. When the distribution is ultimately approved by e-voting by the CoC, the approved distribution value to each lender s including the dissenting Financial Creditors, is taken by the CoC in its commercial wisdom, which cannot be interfered with by the Adjudicating Authority or by this Appellate Tribunal since it has not been placed before us that the approval of the Resolution Plan by the CoC and the Adjudicating Authority violates any statutory provision - the allocation to the Appellant, a dissenting Financial Creditor, is not in contravention of Section 30(2)(b) (ii) r/w Section 23. Appeal dismissed.
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2022 (5) TMI 489
Seeking refund of money equivalent to the Bank Guarantees invoked - moratorium in place - whether a Performance Bank Guarantee and/or Mobilisation Advance Bank Guarantee be invoked or encashed after Moratorium has been imposed under Section 14 of the I B Code, 2016. Performance Bank Guarantee - HELD THAT:- In a Performance Bank Guarantee , compensation of money will be made by the Bank when there is any delay in delivering the performance. The payment will necessarily have to be made even if the service is delivered inadequately. A Performance Bank Guarantee kicks in if services of goods are not provided to the buyer by the seller as per the specifications mentioned in the Contract. Thus, a Performance Bank Guarantee provides an assurance of compensation in the event of any inadequate performance of Contract. Section 3(31) of the Code excludes Performance Guarantee from the definition of Security Interest which certainly expresses the intention of the Legislature. Mobilisation Advance Bank Guarantee - HELD THAT:- Mobilisation Advance Bank Guarantee is meant specifically for facilitating the Contractor to spend for provisioning the works contract service. The contract provides a mechanism in the form of this Bank Guarantee which ensures that the advance is not diverted to any other purpose but utilised for the specific work contract. It s application as payment is therefore direct and is like a consideration whether or not in the form of a deposit for the supply of the works contract service. This Tribunal in UCO BANK VERSUS SUDIP BHATTACHARYA RESOLUTION PROFESSIONAL OF RELIANCE NAVAL ENGINEERING LTD. [ 2021 (9) TMI 932 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH, NEW DELHI] , has held that it is a well settled proposition that liability under Performance Bank Guarantee cannot be terminated by actions of a third party and that a Bank which gives a Performance Guarantee must honour its Guarantee according to its terms. Mobilisation Advance is an advance meant for ensuring/performing a contract and does not construe a debt except in the case of home allottees where there is consideration for Time Value of Money . In the instant case, the amount given as an advance under Mobilisation Advance Bank Guarantee is not a debt or an obligation in respect of a claim . It is only on completion of the Project/execution of the contract in its totality, that the debt / liability kicks in. An advance for a contract work which is still to be completed, there is no Time Value for Money. Therefore, we are of the considered view that the amount does not belong to the Corporate Debtor . What does not belong to the Corporate Debtor cannot be sought to be refunded back to the Corporate Debtor . In the instant case, the Corporate Debtor was unable to execute the work with the given advance and the Mobilisation Advance Bank Guarantee , which is generally issued at the commencement of the contract, viewed from any angle, cannot be said to be an Asset belonging to the Corporate Debtor - this Tribunal is of the considered opinion that undisputedly these two Bank Guarantees were issued to ensure Performance of an obligation to construct 105 Residential Quarters and towards Security for execution of the same, it is significant to mention that admittedly the Corporate Debtor has vide letter dated 11/12/2018 expressed its inability to complete the works, and the Contract has been terminated by the Appellant on 27/08/2019, which was unchallenged. Thus, a Security Interest does not include Performance Bank Guarantee and therefore is not covered under Section 14(1) and the Appellant is entitled to invoke its Performance Bank Guarantee in full. Having regard to the nature of the Guarantee, the relationship between the Appellant and the Corporate Debtor , the intent behind the issuing of the Mobilization Advance Bank Guarantee , it requires to be treated on an equal footing as that of a Performance Bank Guarantee . The Adjudicating Authority ought not to have allowed the refund of the amounts covered under these two Bank Guarantees - Appeal allowed - decided in favor of appellant.
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2022 (5) TMI 488
Consideration of claims - seeking to include claims submitted by the Petitioner in Form C under Regulation 17 of the Insolvency and Bankruptcy Board of India (Liquidation Process), 2016, in the list of stakeholders for adjudication - HELD THAT:- From a reading of the order of the Hon ble Supreme Court in IN RE COGNIZANCE FOR EXTENSION OF LIMITATION, it can be deciphered that even though there is a delay of 361 days in submitting the claim by the Appellant before the Liquidator, in view of the dictum laid down by the Hon ble Supreme Court of India, this delay may be condoned in respect of the claim made by the Appellant before the Liquidator. The Liquidator during arguments stated that in case the Adjudicating Authority condones the delay and direct the Liquidator to accept the claim, he is ready to accept the claim of the Appellant herein. The contention of the Liquidator that in case the claim of Appellant is admitted, they have priority over the Operational Creditor cannot be accepted, because the governmental claim cannot be neglected for the benefit of other stakeholders. Considering the Appellant being a governmental authority and in view of the judgment of the Hon ble Supreme Court, this Appeal is allowed and the Liquidator is directed to accept the claim made by the Appellant before him on 17.02.2022 and take appropriate decision on the claim of the Appellant, in accordance with the extant Rules and Regulations - application disposed off.
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2022 (5) TMI 487
Seeking consideration of claims submitted by all the allottees in Haritham tower before the last date stated and also the claims submitted pursuant to email send by the 2nd Respondent after the last date before the notice is issued calling committee of creditors - direction to 2nd Respondent to see that the claims submitted are only the allottees of The Greens Township Project Including the Haritham Tower and to exclude those claims which are submitted by creditors from Ernakulam Project - direction that details of all claims received, with the receipt date, be intimated to the claimants and to take corrective action prior to formation of CoC if objections are raised by the claimants - direction that all claims received prior to 01.01.2022 be verified prior to the formation of Committee of Creditors and selection of Authorized representative - direction that the claim of Thomas Kuruvilla (who has flats only in Prakrithi Towers) be made available to the applicant for scrutiny - direction that 2nd Respondent to postpone the committee of creditors meeting to be scheduled - interest rate for calculation of Financial Debt as on commencement of Insolvency be as per the provisions of the RERA act or as per the contract whichever is higher - direction that the element of Compensation, allowable under RERA Act at least on the notional rental lost due to delay be allowed. HELD THAT:- It is evident from the records that out of the 53 members of the Applicant Association, claims of 22 members were admitted before the 01.01.2022 and they had attended through Authorized Representative in the 1st Meeting of COC. Thereafter on submission of appropriate documents, the claims of all the members of the Applicant association were also admitted and they have taken part in the decision-making process through duly appointed Authorized Representative. Therefore, the Applicant herein is factually beneficiaries due to the decisions taken in the 1st Meeting of CoC held on 22.02.2022 who were part of CoC and had agreed to extent the Interim Finance for the CIRP. There are no provision in the IBC, 2016 allowing the claimants to scrutinize the claims made by other claimants. To sum up, after analysing the entire gamut of the issue, we are of the considered opinion that IRP being an officer of the Tribunal under the provisions of the IBC, 2016 and Regulations is to verify and collate the claims submitted by the claimants and follow the process as laid down in the Regulations for admission of the claims. In view of the fact that all the members of the Applicant Association are part of the CoC, through the Authorized Representative, their grievance has already been settled by the IRP/RP itself. As stated, other reliefs cannot be granted to the Applicants through this application. There are no merit in this application, which is dismissed as not maintainable. Application dismissed.
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2022 (5) TMI 486
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - whether the Corporate Debtor is liable to repay the monies back under the Harvesting and Transportation Loan? - Whether the IRP/Respondent was correct in rejecting the claim of the Applicant as Financial Creditor of the Corporate Debtor? - HELD THAT:- This Bench is of the considered opinion that the sanction letter dated 29.03.2017 issued by the applicant bank demonstrates that the loan is disbursed at the behest of the Corporate Debtor and that there is undertaking by the Corporate Debtor to repay the amounts due under the said loan to the applicant. It was expressly agreed by the Corporate Debtor that the H T Contractors who have executed agreement for harvesting and the transportation works, they will provide sufficient work for harvesting and the transportation and the sugar factory shall deduct the amounts of instalments from the bills payable to the contractors. The amounts deducted shall be remitted to the bank towards repayment. It was further agreed that the sugar factory/Corporate Debtor shall pay the dues of H T Contractors from their own sources if the bill is found to be insufficient for repayment. Application allowed.
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2022 (5) TMI 485
Mandatory injunction directing Respondent Nos. 1, 2 and 4 to take appropriate steps for de-freezing the ODCC account of the applicant maintained with HDFC Bank Limited - section 8-F of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 - HELD THAT:- After a lot of discussion on the demand and the liability of the Daaksh Jute Mill LLP and that of the Corporate Debtor, finally the Ld. Counsel for the applicant submitted that from the date Daaksh Jute Mill LLP came into possession, pursuant to lease in its favour, the amount of the employer and employee's contribution has already been paid. Since the total amount being claimed by the PF authorities Rs. 1,92,75,853/- includes the dues from 2004 onwards, the amount from 2004 till the date of the CIRP have already been claimed by the PF Authorities, who have submitted their claim with the liquidator. The Ld. Counsel for the Daaksh Jute Mill LLP, however, submitted that even though all the amounts relating to the employer and employees working with the Daaksh Jute Mill LLP have already been deposited with the authorities but even if there is anything pending in that regard that shall be deposited by Daaksh Jute Mill LLP and no liability will fall on the Corporate Debtor or for that matter on the liquidator. Since the amount claimed by PF Authorities, a major portion whereof is stated to have already been paid by Daaksh Jute Mill LLP, and the remaining amount has already been claimed by the PF Authorities by submitting their claim before the Liquidator, there is hardly anything left to be argued in this matter. In these circumstances, the prayer of the applicant in the IA 849/2022 is allowed in terms of the prayer made in the application. Application disposed off.
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2022 (5) TMI 460
Validity of approved Resolution Plan - mismatch in the liquidation value and fair value arrived at by two registered valuers - value arrived by the third valuers nearly half the value arrived by the two registered valuers previously - it is alleged that the resolution plan approved by the Impugned Order has resulted in transfer of the business of the company at a value which is much below its actual worth causing loss to all the stakeholders including the creditors - HELD THAT:- In the instant case, the first valuation by two registered valuers were made on 28.5.2018 and the two valuations of liquidation value were Rs.126.30 crores and Rs.121.01 crores, leading to average value of Rs.123.66 crores. Even if the CoC thought it fit to get another valuation of a more recent date, it was desirable that the procedure outlined in regulations 27 and 35 should have been followed. The source of payment for valuation is not a material factor insofar as valuation figures are concerned nor will they have any impact on them. They are really disjointed activities. Moreover, in the present case the third valuation estimates the liquidation value as Rs. 52.69 crores, which is even less than half of the liquidation value estimated earlier and hence significantly different from the two earlier valuations. Thus, the procedure of obtaining a third valuation and then considering it as basis for deciding the payment particularly of the operational creditors under Section 30(20(b) defective and not in accordance with the stipulated norms and procedure under the CIRP Regulations. The CoC did consider the variance between the two earlier liquidation valuation estimates and the third one and desired explanation regarding the same. The explanation could have been obtained from the three valuers since they had carried out the valuation exercise and would be in a position to explain the methodology and reason for divergence in values. It, therefore, appears surprising that rather than obtain explanation from the earlier valuers, the CEO of the erstwhile corporate debtor, who would have been an interested party and could have had a clouded opinion, was approached to provide this explanation. We do not think such an explanation would be fair and free from being coloured with possible conflict of interest. Therefore, taking it as the basis for calculating payments under the resolution plan cannot be considered as an error-free exercise - it is quite clear that the members of the CoC had concerns about the appointment of the third valuer and later about the low liquidation value in the third report. The Resolution Profession also expressed an opinion about the low liquidation value obtained in the third report. The detailed discussion regarding the third valuation report on fair and liquidation value and the approval of resolution plan of Rs. 54.02 crores make it clear that the quantum of liquidation value was relevant and material in allocating payments to be given to the workmen, employees and the operational creditors. The third valuation report of fair and liquidation should be discarded as it is not in accordance with the stipulated provision and procedure in the CIRP Regulations, and moreover the wide variance of the liquidation value of the third valuation report from the first two valuation reports also necessitates discarding of the third valuation report. Therefore, the average liquidation value of first two valuations viz. Rs. 123.66 crores should be the liquidation value on which various payments in the resolution plan should be based upon. The impugned order and the resolution plan set aside only to the extent it relates to allocation of payments to the stakeholders and creditors and direct that the revision of payments and subsequent approval of the revised resolution plan should be completed within a period of two months from the date of this judgment - appeal disposed off.
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Service Tax
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2022 (5) TMI 484
Admissibility of refund claim - Sale of goods in a duty-free area located in the Indira Gnadhi International Airport, New Delhi - HELD THAT:- The record shows that the respondent is selling goods in a duty-free area located in the Indira Gandhi International Airport, New Delhi and that service tax was not leviable in this area, is a position which has been settled at the Tribunal level in the matter concerning COMMISSIONER, SERVICE TAX-VII VERSUS M/S. FLEMINGO DUTY FREE SHOP PVT LTD [ 2017 (10) TMI 405 - CESTAT MUMBAI ] . It is this decision, which was rendered by the Mumbai Bench of the Tribunal on 28.09.2017, that the appellant/revenue has assailed in an appeal preferred with the Supreme Court. It is the rejection of the refund claim for the period in issue [i.e., October 2016 to December, 2016] which got escalated right up to the Tribunal and resulted in the passing of the impugned order dated 14.08.2019 - Since the foundation of the refund claim of the respondent is the decision rendered by the Mumbai Bench in Flemingo, and notice has been issued by the Supreme Court in the appellant's/revenue s appeal, in the fitness of things we would want to await the decision in that matter. List the appellant's/revenue s appeal on 17.08.2022.
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2022 (5) TMI 483
Classification of services - Erection, Commissioning and Installation or Works Contract Services? - appellant was engaged in providing Erection, Commissioning and Installation Services relating to petrol pumps for Indian Oil Corporation - non production of the requisite documents by the appellant - extended period of limitation - HELD THAT:- From the record, it is apparent that service tax returns have repeatedly been filed by the appellant for the period from 2008-09 to 2012-13, specifically mentioning the nature of services as that of works contract service. The appellant vide letter dated 9.7.2009 and 22.6.2011 has informed the Superintendent Range II Jaipur about opting to pay tax under Rule 3 of Work Contract (Composition Scheme for Payment of Service Tax) Rules 2007 along with an undertaking for not taking the Cenvat Credit on duties or cess paid on the inputs used in or in relation to the said work contract. It is not the case of the Department that the said undertaking has been violated by the appellant. Further, it is observed that it has specifically been mentioned since the stage of replying to the show cause notice till filing of the appeal before this Tribunal that the main activity undertaken by the appellants was appellants was installation of tanks, dispensing pumps and other equipments for setting up new petrol pump / retail outlet. Department has produced no document to falsify this submission of the appellant. From the appeal filed herein before this Tribunal, it is observed that the non submission of the requisite documents as that of contract, etc. was because of all documents being taken in possession by the Department at the time when anti-evasion had resumed the work contract vide resumption memo dated 23.9.2013 (the documents under the name of panchnama dated 23.9.2013 is found annexed in the file) - in view of the said document it is clear that work contracts, for want whereof the demand has been confirmed by Commissioner (A), were not in possession of appellant since September 2013, rather had been in Department s own possession. The production thereof was not possible for the appellant, whereas the Commissioner (A) had all opportunity to summon the said record instead of confirming the proposed demand for want of the said documents. From the submissions of the appellant about the nature of the contract, and in absence of any evidence to falsify the same, it is opined that the contracts awarded to the appellant, were in the nature of works contract services. Since the contracts are mentioned to be inclusive of installation of tanks, pumps / equipments, etc. the contracts are held to be in the nature of works contract only. The services provided by the appellant since involve the goods also which are leviable to sales tax / VAT, the contracts in question are definitely in the nature of works contract. Even if those being the contracts for Erection, Commissioning and Installation service. Since, the property in goods is also involved in rendering the said services, the appellant was entitled for the benefit of abetment of 67% under notification no. 19 of 2013 dated 21.8.2003. The appellant was entitled for exemption of 67% or the gross amount charged as the same was including the value of the pumps, plants and other equipments, etc. - there appears no liability of the appellant as was proposed vide the impugned show cause notice and as has been confirmed by Commissioner (A) who no doubt has been given the benefit of 67% abetment. The findings of Commissioner (Appeals) therefore are opined to rather be contradictory in nature. Extended period of limitation - HELD THAT:- The question of invoking the extended period of limitation also does not arise in the present case as apparently and admittedly appellant is a registered service provider and was regularly submitting the ST-3 returns with no objection by the Department except for the impugned show cause notice, No suppression of facts or malafide intent to evade duty can be attributed to the appellant. Hence, no occasion for the Department to invoke the proviso of Section 73 of the Finance Act. Appeal allowed.
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2022 (5) TMI 482
Levy of Service Tax - Club and association services - appellant is an association of its members - applicability of principles of mutuality - time limitation - whether the services provided by the appellant to its own members (who are also separate legal entities) can be considered as service provided by one entity to another? - HELD THAT:- The Constitution Bench of the Supreme Court has in STATE OF WEST BENGAL AND OTHERS VERSUS CALCUTTA CLUB LIMITED AND ANOTHER [ 2008 (2) TMI 837 - CALCUTTA HIGH COURT] discussed at length the doctrine of mutuality under Article 366 (29A) (e) of the Constitution and held that doctrine of mutuality continues to be applicable to incorporated and unincorporated members clubs after the 46th Amendment to the Constitution and, therefore, no sales tax is payable to the State by the Calcutta Club. It was further held that the same logic applies to service tax levied on members clubs. The law laid down in Calcutta Club is that a club and its members are one and the same and the club is formed for the purpose for mutual benefit of its members. Therefore, any amount paid by the members to the club and the services rendered by the club to its members are self service and cannot be taxed. The fact that the club is incorporated as a separate legal entity makes no difference. There are no good reason not to apply the same principle to the appellant, which is also a cooperative federation of milk unions who are its members. Although the milk unions (district cooperative societies) and the appellant (apex society) are registered under the Cooperative Societies Act of the State and are, therefore, distinct legal entities, the nature of relationship between the appellant and the milk unions continues to that of club to its members. Therefore, no service tax is payable on the services rendered by the appellant to the milk unions. Thus, in view of the judgment of the Constitution Bench of the Supreme Court in Calcutta Club, it has to be held that no service tax was payable by the appellant for the services rendered to its members - the interest on the demand and the penalties imposed also need to be set aside and are set aside - appeal allowed - decided in favor of appellant.
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2022 (5) TMI 481
Non-payment of service tax - Business Auxiliary Service or not - services of supply of bedroll kits to the passengers of train on behalf of IRCTC - outdoor catering services on the sale of breakfast, meals, package foods items and beverages in the trains - period from 01.03.2006 to 31.03.2008. Supply of bed rolls under the head business auxiliary services - HELD THAT:- The facts, is not disputed in the present matter that Appellant has supplied bedroll kits to passengers of Air-Conditioned class and other classes on behalf of IRCTC. As per the contract with IRCTC, the Appellant has to compulsorily provide the bedroll kit to passengers on demand. For the said services a monthly bill was raised by the appellant to IRCTC, the appellant for the said services needs not to charge the passengers. The services have been rendered by the appellant to the passengers on behalf of IRCTC. The said services rendered by Appellant for an on behalf of IRCTC to passengers in the nature of a customer care service - such services appropriately classifiable under business auxiliary services under the category of Customer care services provided on behalf of the client under Section 65(11) of the Finance Act, 1994 . Penalty u/s 76 and 78 of FA - HELD THAT:- This is not the case where the issue was under litigation or there is any interpretation of law involved for the reason that all the judgments relied upon by the appellant are on different facts and accordingly the demand of extended period is sustainable - As regard penalty imposed under Section 76 and 78, simultaneous penalty under Section 76 and 78 cannot be imposed. Therefore, the penalty imposed under Section 76 is set aside. Other penalties and interests to the extent demand was sustained is also sustainable. Outdoor catering services - HELD THAT:- Various facts has not been examined in the impugned order by the Ld. Adjudicating authority - the impugned order as regard the said issue is set aside and matter is remanded to the adjudicating authority to consider aforesaid aspects and pass a fresh order, after following the Principle of Natural Justice such as considering the submissions made/to be made by both the parties and granting the sufficient Personal hearing. Appeal allowed in part and part matter on remand.
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2022 (5) TMI 480
Refund of CENVAT Credit - Rejection on the ground that GST liability was not discharged - input services - import of services by the Appellant manufacturing company - reverse charge mechanism - point of taxation Rules - associated enterprises - HELD THAT:- It is noteworthy to mention here that Section 142(3) clearly stipulated that refund of any amount of CENVAT credit, duty etc. paid under the existing law (means the law prevailing then i.e. Central Excise Act) shall be dealt in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash. The issue before this Tribunal is to scrutinise as to if only existing law would govern the refund or else the procedure available under existing law for ultimate redressal /disposal of the refund application would extend to the Appellate stage available in the existing law too. The Circular No. 132/2/2020-GST dated 18.03.2020 by CBEC clarified that the Central Goods and Service Tax (ninth removal of difficulties) order 2019 dated 03.12.2019 provides that within 3 months of the President of GST Tribunal entering office, appeals can be filed when no such Tribunal is firmed and in case of existence of such GST Tribunal it is to be filed within 3 months of communication of the order. Be that as it may, the concern is to scrutinise the jurisdictional issue and the suggestions offered by the learned Counsel for the appellant that when the Tribunal had given divergent views, the matter should be referred to the President for constitution of a Larger Bench to settle the issue. This appeal is maintainable before the CESTAT and this Bench is competent to decide the issue of refund of CENVAT credit as such an order has been passed in accordance with the existing law and not under the GST Act. Its rejection by the Commissioner (Appeals) solely on the ground that GST was payable and no evidence of payment of GST was available is also not tenable and is erroneous to the extent that under GST Act recovery provisions are also available which can be resorted to by the competent authority instead of making a pre-condition of payment of GST to facilitate the refund process that was instituted under the erstwhile Central Excise Act in borrowing force from the new GST Act itself. Appeal allowed.
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2022 (5) TMI 479
Levy of Service Tax - Works Contract Service - composite contract of Construction of Residential Complex - composition scheme under Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 - Circular No.98/1/2008-ST dated 04.01.2008 - whether the appellants having been paying service tax on Construction of Complex Services, facility of composition can be denied to them from 01.06.2007 in view of the judgment of Apex Court in the case of LARSEN TOUBRO LTD. VERSUS COMMISSIONER OF C. EX, PUNE II [ 2007 (5) TMI 1 - SUPREME COURT] ? HELD THAT:- Various disputes were raised regarding the taxability of Works Contract prior to 01.06.2007 all the disputes got settled in view of the judgment of the Apex Court in the case of L T - It is evident from the case that the Composite Contracts involving goods and services are liable to service tax only from 01.06.2007 as submitted by the appellants. It is found from the facts of the case that it is not disputed that the services rendered by the appellants are not in the nature of Composite Services. The Department also does not deny the fact that the services rendered by the appellants are Works Contract Services. Department mainly relies upon the Circular No. 98/1/2008-ST dated 04.01.2008 wherein it was clarified that a service provider who paid service tax prior to 01.06.2007 for the taxable services like Erection, Commissioning and Installation Service, Commercial or Industrial Construction Service or Construction of Complex Service is not entitled to change the classification of the Single Composite Service for the purposes of payment of service tax on or after 01.06.2007 and therefore, the appellants are not entitled to avail the Composition Scheme. The adjudicating authority relies on the same and concludes that the appellants have no option to switch over to the Works Contract Service and the Composition Scheme thereof. In the instant case, the appellants have been paying service tax under Construction of Complex Services etc. before 01.06.2007. On introduction of service tax on Works Contract‟, the appellants had written to the Department for clarification. They have submitted a letter on 14.06.2007 that they will be opting for Composition Scheme. The Department has demanded the duty denying the opportunity - It is clear from the Rule that the person providing Works Contract can pay service tax under Composition Scheme if he opts for the same before payment of service tax. The appellants have exercised the option to go under Compensation Scheme vide letter dated 14.06.2007, the same is not disputed by the Department who sought to deny the benefit in view of the Circular 98/1/2008-ST dated 04.01.2008 - the benefit cannot be denied to the appellants. The Tribunal and Courts have been setting aside the demands raised in respect of Composite Works Contracts after the judgment in the case of L T. The appellants have been paying duty albeit under a different Head before 01.06.2007. It would be miscarriage of justice if the appellants are denied the compounded scheme of payment of duty under Works Contract after 01.06.2007 which could have been easily exercised by those who were not paying duty before 01.06.2007. Demand of duty on advances - HELD THAT:- The demand on service rendered as a sub-contractor is prior to 01.06.2007. Liability to duty on other two counts after 01.06.2007 requires to be verified as the appellants claimed that they have paid duty at the compounded rates as per the option exercised by them. Extended period of limitation - HELD THAT:- It is found that the show cause notice has been issued invoking the extended period. Looking into the fact that the appellant had been a regular service tax payer and have informed the Department vide letter dated 14.06.2007 and as the issue involves interpretation of statute, no mala fides can be imputed to the appellants - the demand for the extended period needs to be set aside. The appellants claimed that after 01.06.2007, they have paid duty at the compounded rate of 2.06% or 4.08% as the case may be. It is not forthcoming from the calculation sheets attached to the show cause notice, whether the appellant has paid the same as the Department has not given any deduction from the duty payable by the appellants. This is required to be verified by the lower authorities along with the verification of the fact of payment of duty on other counts though at the compounded rate. Appeal allowed in part and part matter on remand.
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2022 (5) TMI 478
Rectification of mistake - error apparent on the face of record - Maintainability of appeal - rejection on the ground of time limitation - appeal was filed before Commissioner (Appeals) who has rejected the same as being filed beyond a period of three month (two months plus one condonable month), from the date of the original order - rectification of mistake - Whether it is 22.11.2019 the date of order in original or it is 06.10.2020 the date when the original authority communicated the order rejecting the ROM dated 06.10.2020 to the present appellant to be the relevant date under section 85(3A) of the Finance Act 1994 for period of two months therein to reckon? HELD THAT:- Perusal of the provision of section 74 of the Finance Act 1994, makes it clear that after an ROM has been filed the order wherein the mistake has been alleged can be amended in any possible way, as mentioned in the above provision, depending upon the facts of each case. This particular perusal is sufficient for me to hold that once an application for rectification of mistake has been adjudicated by the original adjudicating authority on the merits, the final order of original adjudicating authority irrespective that ROM was rejected or allowed, i.e. irrespective that the original order was amended or not, the date for original order to attain finality is the date of the order of the said ROM application. The perusal makes it clear that the appellant-assessee had since paid certain amount of tax and the demand was raised on the gross amount that the absence of the benefit of cum tax was alleged to be an error apparent on record - the submission of the learned DR that the prayer in the application was such which could be raised before the appellate authority as above plea is held to have justifiably been raised by the original adjudicating authority only, cannot be agreed upon. Thus, the relevant date for a period of two months to reckon in terms of section 85 of the Finance Act 1994 is the date when the original adjudicating authority after deciding the application praying for rectification of mistake in the original order passed by the said Original Adjudication order and communicated the same to the said applicant - in view of the adjudication since the relevant dated is held to be 06.10.2020 when the order about ROM application was communicated to the appellant. Admittedly the appeal before the Commissioner (Appeals) was filed on 07.12.2020, it becomes clear that the appeal was filed within the period of two months required to be calculated for filing the appeal before Commissioner (Appeals) (date of order has to be excluded in terms of the provisions of General Clause Act Section 9). In view of the entire discussion the findings of Commissioner (Appeals) while rejecting the appeal before him on the grounds of limitation are held absolutely wrong. The order is thereby set aside. However, since the order was on the technical ground of limitation, Commissioner (Appeals) is required to precisely and properly adjudicate the same on the merits of the case. Accordingly the matter is remanded back to the Commissioner (Appeals) for adjudication of merits. The appeal stands allowed by way of remand.
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Central Excise
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2022 (5) TMI 477
Violation of principles of natural justice - case of the petitioner is that no opportunity of furnishing a written reply to the said audit para was provided - demand of excise duty with interest and penalties on Food Items manufactured by the petitioner - benefit of N/N. 12/2012-Central Excise dated 17.03.2012 - HELD THAT:- Admittedly in the instant case, the Order-in-Original has been passed and the thrust of argument of this petitioner is that principle of natural justice has not been complied in this case, and as such, the instant writ application is maintainable. However, after going through the Order-in-Original it clearly transpires that the Adjudicating Authority has held at page 47 of the order in O.I.O that opportunity of personal hearing was given to the petitioner on 17.11.2020 through virtual mode as well as physical mode, however, the noticee failed to appear. On 17.12.2020 again the petitioner was given an opportunity of personal hearing through virtual mode as well as physical mode. In response to personal hearing scheduled on 17.12.2020, the petitioner requested adjournment on the ground that the authorized person was suffering from COVID-19 and requested that personal hearing may be given on some other day - Finally, personal hearing in the case was held on 08.01.2021 when the noticee appeared and was represented by Sh. Mukesh Kasera, Manager (Finance) and Sh. Rahul Lakhwani, Authorized representatives. In view of the categorical finding in the Order-in-Original it clearly transpires that principle of natural justice has been duly followed. Jurisdiction - powers of High Court - HELD THAT:- After going through the judgment in M/S RADHA KRISHAN INDUSTRIES VERSUS STATE OF HIMACHAL PRADESH ORS. [ 2021 (4) TMI 837 - SUPREME COURT] , it appears that the law on the issue of maintainability has been reiterated in this case and the Hon ble Apex Court has categorically held that exceptions to rule of alternative remedy arise where the writ petition has been filed for the enforcement of fundamental right or there has been a violation of principle of natural justice or the order or proceeding are wholly without jurisdiction or the vires of legislation is challenged. In the case of M/S RADHA KRISHAN INDUSTRIES, the Hon ble Apex Court has also held that when a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy - Coming to the facts of the case as stated, there appears to be no violation of principles of natural justice. Moreover, the petitioner has prayed for quashing of the Order-in-Original for which there is a statutory remedy prescribed by the statute. It is also not the case of the petitioner that the Order-in-Original is passed without jurisdiction. None of the exceptions as carved by the Hon ble Apex Court for maintainability of the writ application, bypassing the alternative remedy, has been met out in the instant application. As such merits of this case is not considered and the instant writ application is dismissed on the ground of maintainability itself with a liberty to the petitioner to prefer an appeal under Section 35 B of Central Excise Act, 1944. Application dismissed.
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2022 (5) TMI 476
Benefit of exemption - Misclassification of goods - Bulker mounted on chassis fitted with engine - classifiable under Chapter Heading 8704 or 8707 or 8716 or otherwise - eligibility of benefit of exemption as per the Notification No. 6/2006-CE dated 01.03.2006 by classifying their products under Chapter Heading No. 8704 or other otherwise - recovery of duty alongwith interest and penalty - HELD THAT:- It is admitted fact that the appellant‟s customers supply duty paid chassis which are used for production of Bulker which is in the nature of fabricated tanker. The said Bulker specially designed for transport of fly ash which is mounted on duty paid chassis fitted with the engine received from the customers. It is found that the Appellant had classified the said goods under Chapter heading No. 8704 and also claimed the exemption benefits available as per the Notification No. 6/2006-CE dated 01.03.2006. From the Central Excise Tariff heading and chapter Note, it is found that Chapter heading 8704 covers the product Motor Vehicle for the transport of goods and Chapter heading 8716 covers a group of non-mechanically propelled vehicles. Chapter Note 5 to the Chapter 87 creates a fiction whereby building a body or fabrication or mounting or fitting of a structure or equipment on a chassis, falling under Heading 8706, shall amount to manufacture of a motor vehicle -. In terms of the legal fiction, since the appellant is mounting or fitting bulkers on the chassis falling under Chapter 8706, Appellant is deemed a manufacturer of motor vehicle and since the said vehicle is used for transportation of goods viz. fly Ash /cement etc, Appellant is a manufacturer motor vehicle falling under 8704. From the description of the articles and the use to which they put, it is found that heading 8704 is the most appropriate. The view taken by the Adjudicating authority that Bulkers mounted on chassis is classifiable under Chapter heading no. 8716 is incorrect. There is no dispute that after fabrication of bulkers appellant undertaking the process of mounting it on chassis and in the same form they were clearing it as complete and integrated motor vehicle for transport goods. Further Chapter heading 8716 would be applicable for fabrication of bodies for trailers /semi-tailers covered under Heading 8716 and these fabrication of bodies would be regarded as bodies for trailer /semi-trailer of Heading 8716 and such bodies would also be classified under Heading 8716.Thus it is quite clear that the disputed goods cannot be classifiable under Chapter Heading 8716. Serial No. 39 of the table annexed to Notification No. 6/2006 motor vehicles for the transport of goods falling under 8704 is exempt from excise duty subject to condition No. 9 which stipulates that the manufacturer does not avail of the Cenvat Credit of duty paid on chassis falling under 8706 or other inputs used in the manufacture of such vehicle - In the present case, it is not in dispute that the appellant has not availed any Cenvat Credit on any of the inputs which have been used in the manufacture of either the bulkers or the duty paid on the chassis and therefore, the appellant would be entitled for the benefit of exemption under the said Notification vide Serial No. 39. Therefore, there would not be any duty liability on the appellant on the bulkers manufactured and captively consumed in the manufacture of motor vehicle falling under Chapter 8704. Appeal allowed.
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2022 (5) TMI 475
CENVAT Credit - goods used for civil construction purpose or repairs - inputs/Capital Goods or not - M.S Beams - M.S. Pipes - Plates - Channels - Sheets - Flats - Chain - Anodes - Tube - Conveyor Belts - Filter Bags - S.S. Structures - Tyres - Rope - Welding Electrodes etc. - period June 2007 to December 2007 - HELD THAT:- The department have erred in relying upon the amended Explanation-II with effect from the year 2009, whereas admittedly the credits in question were taken during period June 2007 to Dec. 2007. We further find that the ruling in the case of VANDANA GLOBAL LTD. VERSUS CCE [ 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] , have been overruled by Hon ble Gujarat High Court in the case of MUNDRA PORTS AND SPECIAL ECONOMIC ZONE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS [ 2015 (5) TMI 663 - GUJARAT HIGH COURT] and by Hon ble Madras High Court in the case of M/S. INDIA CEMENTS LTD. VERSUS THE CUSTOM, EXCISE AND SERVICE TAX THE COMMISSIONER OF CENTRAL EXCISE, [ 2015 (3) TMI 661 - MADRAS HIGH COURT] , wherein it is categorically held that steel items and supporting structures are essential part of the machinery, so as to run the same for manufacture of dutiable finished products. Accordingly, the Hon ble High Court held that the steels items used in the plant and machinery and supporting structures are eligible for Cenvat credit. In the present matter use of the impugned goods were not disputed by the department, further revenue also not disputed the Joint verification report duly signed by the Deputy Commissioner, Central Excise, Gandhidham and representative of assessee. The said verification report has categorically described the usage of the materials under dispute on which cenvat credit has been availed by the assessee. The issue of utilization of goods for repairs and maintenance of capital goods is no longer res integra and the same have been decided in favour of the assessee by number of decisions. If any items is used for repair and maintenance of the plant and machinery, the same would be eligible for Cenvat credit. Whether the disputed items in question are also used for repairs/maintenance of capital goods by way of replacement of old/worn out parts/components of such capital goods? - HELD THAT:- This factual position is to be seen through the verification reports. However, the revenue has proceeded on the premise that the disputed items were used for fabricating/manufacturing of capital goods. If this finding is presumed to be correct for a moment, then there is a prima facie case for holding that the disputed items were used in the manufacture of capital goods and, hence, by virtue of the aforesaid Explanation to the definition given under Rule 2(k), disputed items could be considered as inputs - the credit is admissible on the disputed goods in question. Denial of credit on Aluminium Zinc anodes which was used in laboratory of the factory - HELD THAT:- The said laboratory is functioning in the factory of the appellant for quality checks of raw materials and finished goods. The impugned goods were used in laboratory of appellant, which ultimately used for manufactured goods and satisfy the definition of input, hence the Cenvat credit should not be denied to the assessee. Denial of CENVAT Credit availed on goods which were used in the erection of transmission towers installed from the power plant to the factory for bringing in the electricity - HELD THAT:- The Ld. Commissioner observed that the primary condition in respect of the goods which may qualify the definition of either inputs or capital goods under Cenvat Credit Rules, 2004 is that they have to be used within the factory of manufacture. This criteria has not been satisfied in this matter - In the present matter impugned goods were used in the erection of transmission towers installed from the power plant to the factory of appellant for bringing the electricity, the said electricity undisputedly used in the factory premises of the Appellant for manufacturing their final product which has been cleared on payment of duty - the appellant has correctly availed the credit on disputed goods. Denial of credit availed on furniture - HELD THAT:- There is no dispute that the said furnitures are used in guest house and the guest house is part of factory. In Board s Circular No. 943/4/2011-CX, dated 29-4-2011, it is mentioned that goods such as furniture and stationery used in an office within the factory are goods used in the factory and are used in relation to the manufacturing, business and hence, the credit on the same is to be allowed - Undisputedly, the guesthouse is used for operations of the factory. Nothing is available on record to show that guesthouse is used for any other purpose. In view of this fact, since guesthouse used for operations of factory which has direct nexus with factory which produces excisable goods therefore Cenvat credit is admissible to the appellant on the furnitures used in Guest House of the factory. The Revenue s appeal being devoid of merit is dismissed - Decided against Revenue.
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2022 (5) TMI 474
Rejection of refund claim - deemed export - applicability of time limitation - application for refund was filed beyond the prescribed period of one year - Section 11B of the Central Excise Act, 1944 - HELD THAT:- It is not in dispute that the deemed export did not attract any Excise Duty and hence, it is not the duty of the appellant / taxpayer to repeatedly plead before the authorities that the project in which it was involved was a deemed export. Moreover, the fact that the appellant filed its refund claim immediately, though before a wrong forum, itself proves the bona fides of the appellant and hence, the same establishes the fact that there was an application for refund claim within the limitation period prescribed in the statute, though before a wrong forum. The purchase order coupled with the tax invoice also reflect the position which sufficiently establish the fact that the duty payment, which was not required to be made, but still having been paid, could only be under protest - Further, when the duty itself was not liable to be paid by virtue of N/N. 06/2006, the argument that the appellant was required to make the payment holds no water, as long as the Revenue does not suspect the involvement of the appellant as a sub-contractor. Appeal allowed - decided in favor of appellant.
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2022 (5) TMI 473
Clandestine Removal - MS TM Bars - reliability of statements of appellants - third party evidences - levy of penalty upon the present appellants holding that all of them knew and had reason to believe that they were dealing with the goods which were liable for confiscation for want of deposit of duty for the same - HELD THAT:- The Original Adjudicating Authority Commissioner (A) also relying upon the statements of present appellants, have held that the statements are sufficient admission about the quantities of the MS Ingots, MS Rolls to be sold to M/s. Bhiwadi Rolling Mills through M/s. Rathi Bars Ltd. Without issue of invoice and without payment of duty. Accordingly the allegations of clandestine removal of the goods by M/s. Rathi Bars Ltd. have been confirmed and that the duty was demand was confirmed against the company and the penalty has been imposed upon the present appellants, they being the employee / commission agents for the company. But the allegations of clandestine removal are serious allegations which cannot sustain unless there is clinching evidence. Reverting back to the facts of the present case it is observed that except for the statement of the present appellants there is no investigation on part of the Department either from anyone who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing of excisable goods. Not only this, it is observed that the investigation initially began with the search in the premises of M/s. Bhiwadi Rolling Mills and the show cause notice has been issued based on the documents (soft as well as hard) as were recovered from the factory of M/s. Bhiwadi Rolling Mills as well as the residential premises of its Manager, Sh. Ankit Keriwal - Apparently and admittedly no search was ever got conducted in the premises of M/s. Rathi Bars Ltd. No document has been recovered from the premises of the said company or from the premises of either of these appellants - In such circumstances, it stands apparently clear that the investigation against the present appellants got initiated based upon the third party evidence and it got confirmed also based on third party evidence i.e. the documents as were recovered from the premises of M/s. Bhiwadi Rolling Mills. Since the sole challenge to the order is its reliance upon third party evidence, it is necessary to check the evidentiary value of the third party evidence - Apparently and admittedly there is no evidence of bifurcating the said consignment and bifurcation of the proposed / confirmed demands only on M/s. Rathi Bars Ltd. This lacuna on part of the investigation also hits the very basis of allegations and the demand confirmed against the appellant. In absence of the said corroborating evidence and in the light of apparent fact that the appellants have time and again been requesting for the witnesses to be cross examined but the request had been turned down, it is clear that violation of section 9 D of the Central Excise Rules 2002 is very much apparent on the record. Commissioner (A) has though held that since the witnesses have sufficiently admitted about the alleged guilt the cross examination is not required, the legal concept applied is absolutely correct. The submissions on behalf of appellant is not convincing that since main party has been given a discharge certificate under SVDRL Scheme the penalty on appellants be set aside - it is held that there is no cogent evidence on record to proceed against the appellant so as to penalise them. Hence, it is held that the authority below has wrongly confirmed the demand. Question of imposition of penalty on the present appellants in the given circumstances does not at all arise. Appeal allowed - decided in favor of appellant.
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2022 (5) TMI 472
CENVAT Credit - input services - service tax paid for availing the Goods Transport Agency Service, for despatching their finished goods (outward transportation) on FOR destination basis to their buyers - place of removal - HELD THAT:- In the facts and circumstances of this case, the place of removal is the premises of the buyer, not the factory gate of the buyer, as the finished goods are cleared by the appellant on FOR destination basis . The appellant is entitled to cenvat credit on the GTA service for outward transportation of the goods on FOR destination basis - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (5) TMI 471
Validity of re-assessment order - release of refund claimed in the return filed for 2nd quarter 2016-2017 along with interest - HELD THAT:- It is not in dispute that the four assessment orders dated 18.09.2018 passed in respect of the four quarters of FY 2016-17 were passed by the concerned officer, in exercise of powers conferred under Section 9(2) of the Central Sales Tax Act, 1956 read with Section 32 of the Delhi Value Added Tax Act, 2004 - tax adjustment against refund vis-a-vis the fourth quarter for FY 2016-17 was also made; an aspect which is not disputed. The impugned orders dated 05.10.2019, which concern all the four quarters of the FY 2016-17, issued under the DVAT Act, in exercise of power conferred under Section 32 of the said Act, could not have been passed - the writ petition is allowed.
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2022 (5) TMI 470
Attachment of bank accounts - delayed action in making assessment - It is the Petitioner's grievance that though within the stipulated period of thirty days, he has applied for setting aside the ex-parte orders, however, due to lethargy and negligence on the part of the Respondents, applications remained unattended - repeal of Bombay Sales Tax Act - HELD THAT:- Since two layers of appeal have been provided to challenge the assessment, the said exercise cannot be undertaken under writ Jurisdiction. It is well settled that the writ Court should be slow in interfering into the matters, where alternative remedy of appeal has been provided. Therefore, we deem it appropriate to keep all these points open to be agitated and decided before the appropriate forum. Reverting back, it emerges that the Petitioner has timely applied for setting aside ex-parte assessment orders. There is no justification for the Respondents total inaction of sleeping over the application for long ten years. In other words, ex-parte assessment order needs to be set aside so as to give the Petitioner an opportunity to justify their returns. In view of the matter, it shall be in the tune of situation to set aside ex-parte assessment orders with direction to the Petitioner to appear before the authority, who in turn shall give them hearing and make the assessment in accordance with law. Since the ex-parte assessment orders is set aside, the bank attachment would also remain no longer in force. The ex-parte assessment orders dated 25th March, 2010 are set aside. The consequential bank attachment orders also stands quashed - Petition disposed off.
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2022 (5) TMI 469
Input tax credit - breakage of period of business from 1.2.2014 to 26.2.2014 - purchase effected during the period of transition - HELD THAT:- Going by Rule 19 of KVAT Rules, her application was filed on 20.2.2014, the Registering authority after cancelling the registration ought to have issued the dealer a notice in Form No.5 B and publish the details in at least two dailies in the State and also in the website of the Commercial Tax Department. Cancellation will be effective only from the date on which the copy of the order is served or from the date of publication of such cancellation. So, at no stretch of imagination, it can be taken into consideration that the closure of business is from 31.12.13 when the application itself is only 20.2.2014. At the most the canellation can be effective only from 26.2.2014, the date on which the fresh registration of the partnership form was allowed. According to him, only six days is the period in which there was no registration either for the erstwhile concerned or the present partnership firm. It is true that the registration once cancelled has to be published in two leading daily newspapers at least and the dealer should be informed as per notice in Form No.5 B. Then only the cancellation of registration shall be effective. The respondent does not have a case that prior to 20.2.2014 such an exercise was done. In the absence of the said exercise, the Tribunal was right in entering into a finding that the respondent is entitled to input tax credit. The legal position emerging out is that the respondent was not having any registration from 20.2.2014 to 26.2.2013 and hence, the finding of the Intelligence Officer as well as the First Appellate Authority was interfered by the Tribunal to that extent. Revision is dismissed.
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Indian Laws
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2022 (5) TMI 468
As per MR. AJAY RASTOGI, J. Rights of the contesting Appellants working as Anganwadi workers/helpers to claim gratuity under the provisions of Payment of Gratuity Act, 1972 - ICDS scheme - whether the applicability of gratuity being a social security measure, be extended to the employees who served the establishment in an organized or unorganized sector and, in one way or the other, contributing in the sustainable development of the nation? - HELD THAT:- The time has come when the Central Government/State Governments has to collectively consider as to whether looking to the nature of work and exponential increase in the Anganwadi centers and to ensure quality in the delivery of services and community participation and calling upon Anganwadi workers/helpers to perform multiple tasks ranging from delivery of vital services to the effective convergence of various sectoral services, the existing working conditions of Anganwadi workers/helpers coupled with lack of job security which albeit results in lack of motivation to serve in disadvantaged areas with limited sensitivity towards the delivery of services to such underprivileged groups, still being the backbone of the scheme introduced by ICDS, time has come to find out modalities in providing better service conditions of the voiceless commensurate to the nature of job discharged by them - Appeal allowed. As per Abhay Shreeniwas Oka, J. Whether Anganwadi workers and Anganwadi helpers appointed to work in Anganwadi centres set up under the Integrated Child Development Scheme (ICDS) are entitled to gratuity under the Payment of Gratuity Act, 1972? - HELD THAT:- Anganwadi centres have been entrusted with the onerous responsibility of implementing some of the most important and innovative provisions of the 2013 Act. It can be said that Anganwadi centres perform a pivotal role in discharging the statutory obligation of the State to provide nutritional support to pregnant women, lactating mothers and children in the age group of 6 months to 6 years. A free meal is provided to pregnant mothers during pregnancy and 6 months after childbirth through the Anganwadi centres. In the case of children in the age group of 6 months to 6 years, an age-appropriate free meal is to be provided in Anganwadi centres. In addition, the important duty of providing free meals to the children who suffer from malnutrition has been entrusted to Anganwadi centres. The free meals to be provided through Anganwadi centres must satisfy the nutritional requirements and standards specified in Schedule II of the 2013 Act. Therefore, Under Sub-section (2) of Section 5, there is a provision that every Anganwadi centre shall have a proper facility of cooking meals, drinking water and sanitation - The AWWs and AWHs constitute the backbone of Anganwadi centres and therefore, this onerous responsibility of extending benefits under the 2013 Act to the beneficiaries is on them. Anganwadi centres are responsible for ensuring the healthy growth of the children in the age group of 6 months to 6 years and the children who suffer from malnutrition. One of the important functions of Anganwadi centres is to conduct pre-primary education activities for the children of the age group of 3 to 6 years by following the pre-school timetable and by using the pre-school kit. That is the specific provision in the Government Resolution dated 25th November 2019. It is also provided therein that the Anganwadi children admitted to primary schools shall be issued a certificate of pre-primary education signed by the Child Development Programme Officer - Anganwadi centres are also running pre-primary schools for children in the age group of 3 to 6 years. The educational activity of running pre-school is an integral part of Anganwadi centres. AWWs and AWHs who are managing the Anganwadi centres have a duty to look after pre-primary schools as well. We may also note here that on 8th March 2018, the Government of India has launched the National Nutrition Mission by the name The Prime Minister's Overarching Scheme for Holistic Nourishment . The responsibility of implementing a part of the scheme is of the Anganwadi centres. Under the National Education Policy, 2020, there is a proposal to make available Early Childhood Care and Education (ECCE) to children having socio-economic disadvantaged backgrounds. It is provided that ECCE will be extended through Anganwadi centres. Applicability of decision in the case of STATE OF KARNATAKA AND ORS VERSUS AMEERBI AND ORS [ 2006 (12) TMI 525 - SUPREME COURT] - HELD THAT:- In the case of Ameerbi, this Court dealt with the issue whether AWWs and AWHs were holding civil posts. The issue was whether the original applications filed by AWWs before the State Tribunal established under the Administrative Tribunals Act, 1985 were maintainable. This Court held that the posts of AWWs were not statutory posts and the same have been created in terms of ICDS. Therefore, there was no relationship of employer and employee between the State Government and AWWs. It was held that the AWWs do not carry on any function of the State. It was observed that no Recruitment Rules have been framed for appointing AWWs - the Anganwadi centres established under ICDS have been given statutory status under the 2013 Act. Moreover, Under Sections 4, 5 and 6 of the 2013 Act, the Anganwadi centres perform statutory duties under the 2013 Act. There exists no manner of doubt that the 1972 Act will apply to Anganwadi centres and in turn to AWWs and AWHs - the learned Single Judge was right in holding that the 1972 Act was applicable to AWWs and AWHs. The Controlling Authority has granted simple interest at the rate of 10% on the overdue gratuity amounts. All eligible AWWs and AWHs shall be entitled to the benefit of interest. Appeal allowed.
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2022 (5) TMI 467
Dishonor of Cheque - framing of charges - acquittal of accused - admissibility of evidences - Discharge of existing liability - rebuttal of presumption - HELD THAT:- The allegation in the complaint is that in discharge of their existing liability in respect of a loan taken by the accused company from the complainant, its three Directors, Dinesh Chandra Meheta, Chaner Pal Meheta and Hiten D Meheta in control of the affairs of the company issued a cheque bearing 212779 dated 29.05.2000 for Rs. 5,12,188/- (Exhibit 1) drawn on Bank of India, Calcutta Overseas Branch, in favour of the complainant. The said cheque was presented to Global Trust Bank Chowringhee Branch, Calcutta within its valid period of for encashment but the same was returned dishonoured on 24.08.2000. Demand notice was issued on 02.09.2000 and sent to the accused persons through the advocate of the complainant under registered post with AD and the same was served upon accused no. 1 and 3 on 06.09.2000 and on accused no. 2 and 4 on 15.09.2000 but the accused persons/ respondents did not make any payment. The presumption under Section 139 of the Negotiable Instrument Act which arose against the accused respondents have not been rebutted. It is therefore clear that the cheque (Exhibit 1) was issued by one of the Directors of the company for discharge in whole or in part of any debt of other liability. Learned Magistrate ahs committed an error in law by not placing reliance upon the demand notice and observing in his judgment that the demand has not been proved. Once a document is admitted in evidence without any objection the legal consequence is that reliance has to be placed upon its content unless the same is disputed - omission to raise objection at the time of admission of Exhibit 12 in evidence is fatal to the defence case and there is no reason to relegate the validity of the document as not prove. The evidence on record is cogent and consistent and the same establishes the offence under Section 138/141 of the Negotiable Instrument Act against Respondents no. 2 to 5 beyond reasonable doubt. The judgment of acquittal passed by learned Magistrate suffers from illegality as it is not based upon the evidence on record. Learned Magistrate has failed to appreciate the case in its proper perspective in the light of the evidence on record, consistent with object of legislation, as such the same is liable to be set aside - Appeal allowed.
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2022 (5) TMI 466
Dishonor of Cheque - impleadment of a company before vicarious liability - Section 141 of the N.I. Act - HELD THAT:- In the light of the observations in ANEETA HADA VERSUS GODFATHER TRAVELS TOURS (P.) LTD. [ 2012 (5) TMI 83 - SUPREME COURT] and the reiteration of the view taken in SMS PHARMACEUTICALS LTD. VERSUS NEETA BHALLA [ 2005 (9) TMI 304 - SUPREME COURT] , it is clear that the complaint must aver in clear terms, the commission of an offence by the Company. If such averment was there in the complaint and the only infirmity is the naming of the Company in the memo of parties, it could be said that the infirmity is only a minor infirmity which can be rectified by permitting amendment. But when there is no averment at all in respect of the Company, amendments as sought by the petitioner would be a complete overhauling of the first complaint and a clear attempt to overcome the foundational infirmity of the absence of any offence having been committed by the Company on the averments in the complaint. There is no pleading which suggests that the Company had committed any offence. When no offence is attributable to the Company, it is not possible to attach liability on the Managing Director by the deeming provisions of Section 141 of the N.I. Act. Amendments of simple technical infirmities alone can be allowed but not the filing of a fresh complaint with improved pleadings, in the garb of amendment. Petition dismissed.
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2022 (5) TMI 465
Dishonor of Cheque - Seeking permission for compounding of offences - HELD THAT:- The dispute, in this case, was only the stage at which the parties can appropriately be allowed to compound the offence. In the case of JIK Industries [ 2012 (2) TMI 269 - SUPREME COURT ], however, the precise issue was as to whether the consent of the parties was necessary to compound the offence and it was held that the basic mode and manner of effecting the compounding of an offence under Section 320 Cr.P.C. cannot be said to be not attracted in case compounding of offence under Section 147 of the Negotiable Instruments Act. In fact Section 320 Cr.P.C. enumerates the manner in which the offences are to be compounded whereas Section 147 of the Act makes the offences under the Act compoundable without explaining the manner in which the compounding is to take place. Coming back to the facts of the present case, the cheques pertain to the year, 2011 totalling a sum of Rs.2,24,996/-. As per the learned counsel for the petitioners, the petitioners were willing to make a payment of Rs.4,00,000/-. This payment of Rs.4,00,000/- after ten years of the issuance of the cheques, in the opinion of this Court, is grossly inadequate and is not sufficient to compensate the complainant so as to enable this Court to exercise its discretion to close the proceedings, particularly, in the circumstances, when the complainant is not willing to consent to compounding. Petition dismissed.
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2022 (5) TMI 464
Dishonor of Cheque - Withdrawal of present petition to the extent of quashing of criminal complaint - Section 143(A) of Negotiable Instruments Act, is only directory in nature or not - HELD THAT:- Admittedly, no opportunity was given to the petitioner to file his reply, before passing of the impugned order despite the fact that he had not pleaded guilty to the notice of accusation served upon him under Section 138 of Negotiable Instruments Act - From the perusal of impugned order, it appears that the Trial Court granted interim compensation under Section 143(A) of Negotiable Instruments Act just in a mechanical manner and there is no application of mind as to why the said compensation has to be awarded. The Trial Court misread Section 143(A) of Negotiable Instruments Act and treated the said provision of law as mandatory in nature, whereas the legal position is otherwise. The matter is remanded back to learned Trial Court to dispose of the matter regarding grant of interim compensation to the complainant/respondent under Section 143A, in accordance with law within one month of the receipt of certified copy of this order - Petition allowed by way of remand.
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2022 (5) TMI 463
Dishonor of Cheque - Insufficient Funds - enforcement of legally enforceable debt or not - framing of charges - rebuttal of presumption - section 139 of NI Act - HELD THAT:- The complaint was lodged by one Kishore Kumar, Legal Officer of the respondent company. During trial, another employee from the respondent company viz., Suresh entered into the box and examined himself as PW1. In his evidence, he stated about the issuance of cheque (Ex.P2) and dishonour of the same. But he is unable to give any answer with regard to issuance of cheque (Ex.P2), dishonour of the cheque, issuance of statutory notice (Ex.P5). PW1 not able to give details of transaction. On the other hand, he categorically confirmed that it is only Ravi, Director of the respondent company, would be the right person to give answer for the cheque and its liability. But, in this case, the said Ravi not examined as witness by the respondent company. It is not necessary, in each case, the accused has to get into the box under Section 315 Cr.P.C., and give explanation. From the available materials and by way of cross examination, the accused is only to probablize his defence and disprove his liability. In this case, the petitioner had rebutted by raising probable defence about the existence of a legally enforceable debt or liability. The same was rightly considered by the trial Court in its judgment, dated 09.08.2016 and the same is hereby confirmed. The lower appellate Court finding that the presumption under section 139 of the Negotiable Instruments Act, not rebutted, wrongly convicted and sentenced the petitioner, which needs interference of this Court - the petitioner is acquitted of all charges framed against him - Criminal Revision Case is allowed.
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2022 (5) TMI 462
Dishonor of cheque - cross-examination of witnesses - submission boils down to the counsel who had cross-examined but not effectively cross-examined the complainant and therefore, a further opportunity should be given - HELD THAT:- The provision of law clearly indicates that an application of the kind can be made at any stage of the trial. The trial admittedly is pending and is next posted on 16.04.2022. In the case at hand, the submission of the learned counsel that the cross-examination of P.W. 1 could not be complete in the light of the counsel consequently dying of COVID undoubtedly merits consideration. The petitioner has produced record to demonstrate that the counsel whom he had engaged did die of COVID - it is deemed appropriate to grant one opportunity to the petitioner to further cross-examine P.W. 1, albeit, with imposition of cost. Petition allowed.
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