TMI Tax Updates - e-Newsletter
May 21, 2022

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise Indian Laws

Articles

1. Learning from case of Indus Towers Ltd. Writ petitions - petitioner is expected to approach the Court with clean hands so suppression of facts or wrong facts and statements before Courts must be avoided.

   By: DEVKUMAR KOTHARI

2. WRIT PETITION IS MAINTAINABLE AGAINST THE ORDER OF NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Directorate of Revenue Intelligence (DRI) & Indian Coast Guard (ICG) interdict 218 kg heroin in mid sea drug bust off the coast of Lakshadweep Islands

2. India gets the highest annual FDI inflow of USD 83.57 billion in FY21-22

3. Quick Insight of Income-tax implications for Financial Year 2022-23

4. Finance Minister Smt. Nirmala Sitharaman chairs the 7th Annual Meeting of Board of Governors of New Development Bank via video-conference

Notifications

Customs

1. 43/2022 - dated 19-5-2022 - Cus (NT)

Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Supersession Notification No. 40/2022-Customs (N.T.), dated 5th May, 2022

GST - States

2. 02/2022–C.T./GST - dated 19-5-2022 - West Bengal SGST

Seeks to extend the due date of payment of tax, in FORM GST PMT-06, for the month of April, 2022 by taxpayers who are under QRMP scheme till 27.05.2022

3. 01/2022–C.T./GST - dated 19-5-2022 - West Bengal SGST

Seeks to extend the due date of filing FORM GSTR-3B for the month of April, 2022 till 24.05.2022.

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MIRSD/MIRSD_CRADT/CIR/P/2022/67 - dated 19-5-2022

Revised format of security cover certificate, monitoring and revision in timelines

DGFT

2. 09/2015-20 - dated 20-5-2022

Enlistment of an Agency and amendment in details of an authorized agency under Appendix 2E of FTP, 2015-2020 - authorized to issue Certificate of Origin (Non-preferential)

Highlights / Catch Notes

GST

• Indian Importers Must Pay IGST on CIF Contracts; Separate Levy on Shipping Services Violates CGST Section 8.

  Case-Laws - SC : Levy of IGST - Ocean Freight - scope of supply - composite supply or not - Since the Indian importer is liable to pay IGST on the ‘composite supply’, comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be in violation of Section 8 of the CGST Act. - SC
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• GST Council's Recommendations Are Advisory, Not Binding: Union and States Have Equal Legislative Power Over GST Laws.

  Case-Laws - SC : Levy of IGST - Scope and power of state legislature versus GST Council - The recommendations of the GST Council are not binding on the Union and States - Neither does Article 279A begin with a non-obstante clause nor does Article 246A state that it is subject to the provisions of Article 279A. The Parliament and the State legislatures possess simultaneous power to legislate on GST. Article 246A does not envisage a repugnancy provision to resolve the inconsistencies between the Central and the State laws on GST. The ‘recommendations’ of the GST Council are the product of a collaborative dialogue involving the Union and States. They are recommendatory in nature. To regard them as binding edicts would disrupt fiscal federalism, where both the Union and the States are conferred equal power to legislate on GST. - SC
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• Court Rules Against Conflicting IGST Arguments on Ocean Freight, Clarifies Composite Supply Treatment for Indian Importers.

  Case-Laws - SC : Levy of IGST - Ocean Freight - scope of supply - composite supply or not - The Union of India cannot be heard to urge arguments of convenience – treating the two legs of the transaction as connected when it seeks to identify the Indian importer as a recipient of services while on the other hand, treating the two legs of the transaction as independent when it seeks to tide over the statutory provisions governing composite supply. - SC
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• GST Not Applicable Under Reverse Charge for AGEL Due to Non-Taxable Territory Supply, Per Section 13(8)(b) IGST Act.

  Case-Laws - AAR : Levy of GST - reverse charge mechanism - AGEL is agreed upon that place of supply in present case is determined as per Section 13(8)(b) IGST Act which is the location of Manager. Both the Manager and Place of Supply both being in non-taxable territory, subject transaction is not an import of service as place of supply is outside India. - GST is not leviable on subject transaction under RCM by AGEL. - AAR
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• Fire safety product on trolley classified under HSN 84131990, not as firefighting vehicle under Tariff 8705.

  Case-Laws - AAR : Classification of goods - rate of GST - HSN Tariff - fire safety product assembled on trolley - The subject product is not a Fire fighting vehicle as described at Tariff 8705. The subject goods have ultrahigh pressure pump driven through the engine to discharge water at a specified LPM at specified pressure (bar) and thereby the goods need to be fitted or designed to be fitted with pressure measuring device - the said Fire safety product trolley at HSN 84131990. - AAR
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• Re-gasification Charges and SUG Costs Included in GST Valuation for LNG Imports u/s 15 CGST Act.

  Case-Laws - AAR : Levy of GST - Valuation - inclusion of re-gasification charges - LNG imported by Customers - Section15 of the CGST Act? - the scope of re-gasification services covers not just regasification but an entire gamut of activities from unloading LNG from the Ships, its storage, its re-gasification along with safety measures and thereafter the delivery to the customers. It is found that system use gas charges raised on its customers vide GST Tax Invoices are part and parcel of Re-gasification service supply. The scope of re-gasification service supply cannot be dissected to favour only a portion of invoice charged on its customers as taxable by misreading re-gasification service to mean only re-gasification of LNG into RLNG. - Thus value of SUG is an indispensable part of taxable value, for Re-gasification service supply by M/s Shell and liable to GST. - AAR
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• Anti-Profiteering Rules in Section 171 CGST Act 2017 Not Applicable to River View Heights Flat Purchases.

  Case-Laws - NAPA : Profiteering - purchase of two flats in Project River View Heights - Since the said Phase-I was not in existence in the GST period and the said Phase-III was yet to be started/registered as on 27.08.2020 hence, the Anti-Profiteering provisions under Section 171 of the CGST Act 2017 are not applicable on the said Phase-I and Phase-III of "River View Heights" of the Respondent. - NAPA
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Income Tax

• Commodity Derivatives Trading Losses Are Non-Speculative u/s 43(5), Offset Against Medical Derivatives Business Profits.

  Case-Laws - AT : Addition u/s 43(5) - Loss in commodity derivatives trading business was non-speculative - Reading clause (e) of the first proviso to section 43(5), and sections 70(1) and 73(1) of the I.T. Act together, it emerges that in the assessee’s case, since a derivatives commodity trading transaction is not a speculative transaction, loss arising therefrom can very well be set off against the profit of the medical derivatives business of the assessee. Rather, it is only against such business profit that the business loss from the derivatives commodity trading can be set off. - AT
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• Foreign Tax Credit Claim Valid Despite Delay in Filing Form No. 67, Procedural Delays Shouldn't Affect Substantive Rights.

  Case-Laws - AT : Eligibility of Foreign tax credit - delay in compliance of a procedural provision - delay in filing Form No.67 - Assessee has vested right to claim the FTC under the tax treaty, the same cannot be disallowed for mere delay in compliance of a procedural provision, that is ‘delay in filing Form No.67’. - AT
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• Flawed Reopening of Assessment u/s 147: PCIT's Mechanical Approval Lacks Independent Judgment, Based on AO's Incorrect Records.

  Case-Laws - AT : Reopening of assessment u/s 147 - recording of satisfaction in mechanical manner - PCIT also mechanically issued permission to reopen the assessment without going into the facts available on record. Even in the Form for seeking approval, in Column 8, the AO records that no return has been filed by the assessee even though factually incorrect and the PCIT did not apply his mind while granting approval as he has simply gone by what is recorded by the AO which is factually wrong. - AT
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• Notice u/s 143(2) Invalid Due to Non-Compliance with Clause D of Instruction 13/2013; Assessment Void.

  Case-Laws - AT : Compulsory scrutiny - AO Jurisdiction and authority to take up the case for compulsory scrutiny - Since the conditions as prescribed in Clause D of para 3 of the instruction no. 13/2013 are not satisfied therefore, the Assessing Officer was not having the jurisdiction and authority to take up the case for compulsory scrutiny. Accordingly, the initiation of the compulsory scrutiny proceedings by issuing the notice under section 143(2) dated 11.6.2013 is invalid and consequently the assessment framed by the Assessing Officer is vitiated as invalid in law. - AT
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• Officer Can't Disallow Depreciation Without Proving URD Purchases as Bogus or Inflated Expenses.

  Case-Laws - AT : Depreciation in respect of certain capitalized amount in the nature of URD purchases [unregistered dealers] forming part of the building - the assessing officer did not make any addition with regard to the URD purchases, which were considered to be bogus or inflation of expenses, in the respective years. In our considered view, without making addition of alleged bogus/inflated expenses, the A.O. could not have disallowed the depreciation alone - AT
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• CIT Revises Assessment u/s 263 Due to AO's Non-Speaking Order; Inadequate Inquiry on Refund Interest Issue.

  Case-Laws - AT : Revision u/s 263 by CIT - in the light of non-speaking assessment order touching only interest on refund issues, there was nothing on record that, to showcase the due inquiries into the other issues were made by the Ld. AO and after due application of mind the assessment was culminated. Indeed, the order of assessment is cryptic - revision order sustained - AT
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• Court Affirms Municipal Value as Benchmark for Fair Rent u/s 23 in Non-Rent Control Areas.

  Case-Laws - AT : Income from house property u/s 23 - deemed rental income - estimating the fair market rent - it is a settled proposition that , the places where Rent Control Act is not applicable, the Annual Value decided by Municipal Authorities can be a rational yardstick . In the case under consideration the DR has not brought to our notice any reason for which Municipal Value cannot be considered as Fair Rent u/s 23(1). Neither the AO nor the CIT(A) has discussed why Annual value decided by Municipal Corporation shall not be adopted as Fair Rent for the purpose of section 23(1) in this case. - AT
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• Court Declares Order Null u/s 263; Limits Authority's Role in Advising Commissioner on Next Steps.

  Case-Laws - AT : Revision u/s 263 - When a competent Court or authority holds such an order as invalid or sets it aside, the impugned order becomes null and void. Once it is concluded that the order in question is null and void, it is not for the adjudicating authority to advise the Commissioner as to what should he do - AT
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Corporate Law

• Director's Resignation Withdrawal Valid as Board Reaccepts; Highlights Duomatic Principle on Member Consent in Corporate Governance.

  Case-Laws - SC : Oppression and Mismanagement - validity of Board Meetings - validity of withdrawal of resignation from the post of Directorship - the thrust of the Duomatic Principle is that strict adherence to a statutory requirement may be dispensed with if it is demonstrated otherwise on facts, if the same is consented by all members. In this case at hand, there is overwhelming evidence to show that respondent No. 1 had accepted Mr. G.V. Rao back into the Board and her conduct clearly shows that the resignation dated 06.04.2013 was clearly not accepted. - SC
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Indian Laws

• Court Rules No Personal Liability for Individual Signer u/s 138; Company Liability Not Maintained.

  Case-Laws - HC : Dishonor of Cheque - Insufficient Funds - Since, the drawer of the cheque was the accused Company, solely on the ground that the respondent had signed the cheque, a liability under Section 138 of the NI Act did not arise against him. The complaint was prima facie not maintainable against the Company as drawer of the cheque, the liability towards the respondent also did not arise keeping in view that respondent was acting on behalf of the Company and where the liability against the Company had been discharged, a private and severed liability against the respondent could not have arisen in the circumstances of the instant matter - HC
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IBC

• Debate Over Section 14 IBC: Does Liquidation Order End Moratorium on Recovery of Non-Performing Assets?

  Case-Laws - SC : CIRP in progress - moratorium in effect - recovery of dues from NPA - It is claimed that since the moratorium under Section 14 of the IBC has ceased to subsist after the order directing liquidation was passed under Section 52 of the IBC, the secured creditors were allowed to realise their security interest - In view of the provisions of Section 14(1)(c) of the IBC, which have overriding effect over any other law, any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the SARFAESI Act is prohibited. - SC
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• Non-payment of TDS Not Considered Debt Under Insolvency & Bankruptcy Code, Misuse of Process Highlighted.

  Case-Laws - AT : Pecuniary Jurisdiction - whether non-payment of TDS amount is debt or not - Present is a case where the Operational Creditor has misused the process of I&B Code in filing application for revival of Section 9 Application for non-payment of two TDS amounts. The process of I&B Code cannot be utilized for the above purpose, whereas present is not a case that Corporate Debtor has not paid any amount due to the Operational Creditor. The Operational Creditor has misused the process of I&B Code. - AT
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• Tribunal Rules Converted Loan Not "Financial Debt" for Related Parties, Upholds Adjudicating Authority's Order on CIRP Initiation.

  Case-Laws - AT : Initiation of CIRP - Related Parties - Financial Creditors - the documentary evidence on record clearly establishes that the entire loan was converted into equity and hence no claim is maintainable under the guise that this amount be treated as a ‘Financial Debt’ - this Tribunal holds that the Appellants are ‘Related Parties’ and there are no substantial grounds to interfere with the well-reasoned Order of the Adjudicating Authority - AT
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• NCLT Dismisses CIRP Application Citing Pre-Existing Dispute; Questions Validity of Obstruction to Section 9 Application.

  Case-Laws - AT : Initiation of CIRP - NCLT rejected the application on the ground of pre-existing dispute - the purported dispute considered by the Adjudicating Authority as a result of non-supply of copies of ADMs is more like a sham dispute, and it should not come in the way of admission of Section 9 application. - AT
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• NCLT Approves Insolvency Process for Operational Creditors Despite Dispute Over Equipment Prices; Defense Deemed Frivolous.

  Case-Laws - AT : Initiation of CIRP - NCLT admitted the application - Operational Creditors - pre-existing disputes with respect to the price of the equipment supplied or not - It is seen from the record that there is no ‘disputed questions of fact’ and that the argument raised regarding the existence of a dispute is a patently feeble legal argument unsupported by evidence. The defence is spurious and a plainly frivolous one. - Tri
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• Court Rules Simultaneous Claims Allowed in CIRP for Corporate Debtor and Guarantor Under IBC 2016.

  Case-Laws - Tri : Rejection of the simultaneous claim by the Resolution Professional of the Corporate Debtor - Claim filed by the Applicant with respect to the corporate guarantee given by the Corporate Debtor - the claim can not be rejected merely on the ground that the claim has already been admitted in CIRP of M/s. Sitex. Moreover, there is no bar in the IBC, 2016 to submit the simultaneous claim in the CIRP of the Corporate Debtor as well as in the CIRP of the corporate guarantor. - Tri
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Service Tax

• Service Tax Levied on Employees Seconded by Foreign Companies Confirmed for Normal Limitation Period Under RCM.

  Case-Laws - SC : Levy of service tax - Reverse Charge (RCM) - employees who were seconded to the assessee by the foreign group companies - It is held that the assessee was, for the relevant period, service recipient of the overseas group company concerned, which can be said to have provided manpower supply service, or a taxable service, for the two different periods in question (in relation to which show cause notices were issued) - However, demand is confirmed only for normal period of limitation - SC
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• Refunds for Service Tax Errors Exempt from Section 11B Time Limits, Central Excise Act Clarifies No Time Bar for Deposits.

  Case-Laws - AT : Refund of service tax paid - payment of tax due to mistake in facts or of law - period of limitation - The law with respect to the deposits being made by the assessee due to mistake either of the fact or of law is no more res integra to the effect that section 11B of Central Excise Act is not applicable to such deposits. Time bar of said section cannot be invoked while refunding the amount of deposit. - AT
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Central Excise

• Appellant failed to pay Central Excise duty before availing CENVAT credit on molasses, invalidating their arguments.

  Case-Laws - AT : Failure to pay Central Excise duty while taking CENVAT credit - The fact that appellant had taken the CENVAT Credit without payment of any duty has not been challenged by the appellant. Without any challenge to the said finding that appellant had availed the CENVAT Credit in respect of 3521.565 M.T. of molasses procured from Khandsari Sugar Factories in June and July 2012, without payment of any duty on the same, the entire arguments advanced by the appellant get negated. They are required to pay duty before availing the CENVAT Credit. Subsequent reversal of such credit availed without payment of any duty cannot be termed as payment of duty. - AT
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• Penalty u/r 12(6) for Late ER-1 Returns Deemed Invalid Post-GST Implementation; Order Found Legally Unsound.

  Case-Laws - AT : Levy of penalty under Rule 12 (6) of Central Excise Rules - late filing of Returns (ER-1) for the period July, 2017 to February, 2018 - There is no saving Clause in the said Section, for initiating and imposing penalty for none filing of the returns (ER-1), once the provisions of GST have been imposed w.e.f. 1st July, 2017. Accordingly, the show cause notice in misconceived and the impugned order have been erroneously passed, having no sanctity in law. - AT
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Case Laws:

• GST

• 2022 (5) TMI 968
  Levy of IGST - Ocean Freight - scope of supply - composite supply or not - time and place of supply - whether an Indian importer can be subject to the levy of IGST on the component of ocean freight paid by the foreign seller to a foreign shipping line, on a reverse charge basis? - Scope and power of state legislature versus GST Council - HELD THAT:- The provisions of composite supply in the CGST Act (and the IGST Act) play a specific role in the levy of GST. The idea of introducing composite supply was to ensure that various elements of a transaction are not dissected and the levy is imposed on the bundle of supplies altogether. This finds specific mention in the illustration provided under Section 2(30) of CGST Act, where the principal supply is that of goods. Thus, the intent of the Parliament was that a transaction which includes different aspects of supply of goods or services and which are naturally bundled together, must be taxed as a composite supply. It is true that in this case, the first leg of the transaction between the foreign exporter and the Indian importer is a composite supply, while the second leg, between the foreign exporter and the shipping line may, from a perspective, be regarded as a standalone transaction. Both of them are independent transactions and ordinarily, the IGST could be levied on both sets of transactions- one as supply of goods (under the ambit of composite supply) and the other as supply of services. However, the impugned notifications seek to tax the importer as the deemed recipient of the supply of service - The Union of India cannot be heard to urge arguments of convenience treating the two legs of the transaction as connected when it seeks to identify the Indian importer as a recipient of services while on the other hand, treating the two legs of the transaction as independent when it seeks to tide over the statutory provisions governing composite supply. This Court is bound by the confines of the IGST and CGST Act to determine if this is a composite supply. It would not be permissible to ignore the text of Section 8 of the CGST Act and treat the two transactions as standalone agreements. In a CIF contract, the supply of goods is accompanied by the supply of services of transportation and insurance, the responsibility for which lies on the seller (the foreign exporter in this case) - while the impugned notifications are validly issued under Sections 5(3) and 5(4) of the IGST Act, it would be in violation of Section 8 of the CGST Act and the overall scheme of the GST legislation. Following conclusion is reached: (i) The recommendations of the GST Council are not binding on the Union and States for the following reasons: (a) The deletion of Article 279B and the inclusion of Article 279(1) by the Constitution Amendment Act 2016 indicates that the Parliament intended for the recommendations of the GST Council to only have a persuasive value, particularly when interpreted along with the objective of the GST regime to foster cooperative federalism and harmony between the constituent units; (b) Neither does Article 279A begin with a non-obstante clause nor does Article 246A state that it is subject to the provisions of Article 279A. The Parliament and the State legislatures possess simultaneous power to legislate on GST. Article 246A does not envisage a repugnancy provision to resolve the inconsistencies between the Central and the State laws on GST. The recommendations of the GST Council are the product of a collaborative dialogue involving the Union and States. They are recommendatory in nature. To regard them as binding edicts would disrupt fiscal federalism, where both the Union and the States are conferred equal power to legislate on GST. It is not imperative that one of the federal units must always possess a higher share in the power for the federal units to make decisions. Indian federalism is a dialogue between cooperative and uncooperative federalism where the federal units are at liberty to use different means of persuasion ranging from collaboration to contestation; and (c) The Government while exercising its rule-making power under the provisions of the CGST Act and IGST Act is bound by the recommendations of the GST Council. However, that does not mean that all the recommendations of the GST Council made by virtue of the power Article 279A (4) are binding on the legislature s power to enact primary legislations; (ii) On a conjoint reading of Sections 2(11) and 13(9) of the IGST Act, read with Section 2(93) of the CGST Act, the import of goods by a CIF contract constitutes an inter-state supply which can be subject to IGST where the importer of such goods would be the recipient of shipping service; (iii) The IGST Act and the CGST Act define reverse charge and prescribe the entity that is to be taxed for these purposes. The specification of the recipient in this case the importer by Notification 10/2017 is only clarificatory. The Government by notification did not specify a taxable person different from the recipient prescribed in Section 5(3) of the IGST Act for the purposes of reverse charge; (iv) Section 5(4) of the IGST Act enables the Central Government to specify a class of registered persons as the recipients, thereby conferring the power of creating a deeming fiction on the delegated legislation; (v) The impugned levy imposed on the service aspect of the transaction is in violation of the principle of composite supply enshrined under Section 2(30) read with Section 8 of the CGST Act. Since the Indian importer is liable to pay IGST on the composite supply , comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the supply of services by the shipping line would be in violation of Section 8 of the CGST Act. Appeal dismissed.

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• 2022 (5) TMI 966
  Valuation of supply - diesel filled free of cost by the service recipient in the engaged chartered (dedicated) vehicles - would form part of value of supply of service charged by the Appellant or not - levy of on value of diesel filled free of cost by the service recipient or otherwise under GTA service - difference of opinion - HELD THAT:- The issue is not answered and it is deemed that no ruling is issued under Section 101(3) of the CGST/ CG SGST Act, 2017 because of the divergence of opinion between the two members.

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• 2022 (5) TMI 965
  Classification of goods - rate of GST - Fans used in Poultry House for the purpose of Air circulation - to be classified under HSN 84145930 or not - HELD THAT:- It is found from the submitted brochure that the applicant supplies Industrial grade fans. From the specifications submitted, it is noted that the electric motor of these fans have an output exceeding 125 W. These fans are Industrial fans, attracting HSN 84145930. With effect from 15-11-17, these industrial fans are liable to CGST at 9% vide Sr no. 317B to Schedule III of Notification 1/2017-CT(R) dated 28-6-17.

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• 2022 (5) TMI 964
  Levy of GST - reverse charge mechanism - services of arranging for subscription supplied to the Applicant, by the Managers located in the non-taxable territory - whether the Manager is an intermediary or not - HELD THAT:- AGEL issues Notes which are subscribed by Investors. It is found that the Senior Secondary Notes issued by AGEL are in the nature of securities. The main supply of Notes is between AGEL and investors both acting as Principals and the Manager is supplying ancillary supply of arranging the main supply between the Principals. It is noted that an intermediary includes a person who arranges/ facilitates supply of securities between two or more persons. It is found that Manager has the characteristics of an agent and a broker, performing subsidiary role in arranging the said main supply. We note that Manager s role is supportive in main supply. We find the Manager satisfying the definition of Intermediary as per IGST Act. AGEL is agreed upon that place of supply in present case is determined as per Section 13(8)(b) IGST Act which is the location of Manager. Both the Manager and Place of Supply both being in non-taxable territory, subject transaction is not an import of service as place of supply is outside India. GST is not leviable on subject transaction under RCM by AGEL.

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• 2022 (5) TMI 963
  Classification of goods - rate of GST - HSN Tariff - fire safety product assembled on trolley, consisting of engine operated pump, water tank, hose reel, pipe and gun, operated through electric panel on trolley - to be classified as HSN 84241000 as general firefighting equipment or not - HELD THAT:- On reference of description of the Goods which is a water mist firefighting trolley, it is found that it is an assembly of Pump driven through engine, water tank, hose reel, pipe and gun and these assembled parts are kept on trolley. This firefighting goods sprays water in such a way that a small quantity of water is sprayed at high velocity to make very fine disjointed droplets of water covering an exponentially larger area. The high pressure hose reel is fitted with high pressure fog/ jet gun. The gun has a pistol grip nozzle having discharge of atleast 12-30 lpm at 100 bar (pressure). Thereby subject goods are called water mist firefighting goods. We find that the description of the goods may be categorized as Firefighting pump with internal reservoir and thereby, as per HSN Explanatory Notes does not merit classification at Tariff 84241000. The subject product is not a Fire fighting vehicle as described at Tariff 8705. The subject goods have ultrahigh pressure pump driven through the engine to discharge water at a specified LPM at specified pressure (bar) and thereby the goods need to be fitted or designed to be fitted with pressure measuring device - the said goods have nozzle attached to the water pipe permitting the control of the water mist discharged. It is found that this Tariff item 84131990 satisfying the product description. The HSN explanatory notes to 8424 has excluded such fire extinguishing goods and categorized them under 8413. Thus, the said Fire safety product trolley at HSN 84131990.

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• 2022 (5) TMI 962
  Nature and classification of service - imparting educational training by developing and running Post - graduate fellowship courses diplomas in the field of critical care medicine and providing basic training in intensive care for non-specialists - Service provided by ISCCM to the delegates - Service provided by ISCCM to the exhibitors - nature of service and classification in accordance with Notification No. 11/2017-CT(R), dated 28.06.17 in respect of brand promotion packages - liability of service tax under Reverse Charge Mechanism - admissibility of Input Tax Credit - Services provided by the hotel including accommodation, food beverages - Supply of food and beverages by outside caterers - Services provided by event manager like pickup drop, exhibition stall set-up, tenting, etc. ISCCM supply to delegates - principal supply or composite supply - HELD THAT:- ISCCM supplies a composite package to its delegates, at an all inclusive registration fees, comprising of the following services: Technical Seminars, Access to exhibition, Hotel Room Accommodation, Cultural program, lunch dinner, Airport Pick Up Drop - the principal supply of ISCCM to its delegates attending the conference is imparting knowledge/ workshops on topics of medical field. For this very reason the delegates desire to attend the conference and not merely for supporting services such as hotel accommodation or air port pick up and drop - Professional Service supply is the essence of the package of services supplied by ISCCM to its delegates and is thereby the principal supply by ISCCM to its delegates. ISCCM supply to Exhibitors - HELD THAT:- ISCCM is organizing trade fair and exhibition. Its exhibitors showcase and exhibit their products/ services. The participation fees charged by ISCCM on these exhibitors is for the service of organizing exhibition for the exhibitors which finds entry at SAC 998596 under events, exhibitions, conventions and trade shows organisation and assistance services . Tax Liability for showcasing name/logo/brand of other persons by ISCCM - HELD THAT:- ISCCM supplies Sponsorship services to its respective customers which finds entry at SAC 998397 under the category of Sponsorship services and brand promotion services . We note that with regard to sponsorship service GST liability is on Reverse Charge Mechanism on the service recipient when the recipient is located in the taxable territory, vide Notification 13/2017- CT(R) dated 28-6-17. It is found that the supply in this regard to be Sponsorship service supply and dismiss ISCCM s submission that this supply is brand promotion supply. Admissibility of ITC by ISCCM - HELD THAT:- Hotel s principal supply to ISCCM is Convention Service. ISCCM s submission that hotel s principal supply is accommodation service supply, is dismissed.Either the hotel raises an itemised bill or a single price bill, ITC is admissible on all items such as convention, accommodation, food beverages - ITC of tax paid on food and beverages will be available to ISCCM because as ISCCM receives this service from Hotel/ Caterer, it uses this service for making an outward taxable supply as an element of taxable composite supply to its delegates. Rent-a-cab service ITC to ISCCM - HELD THAT:- The Cabs have approved seating capacity of not more than 13 persons (including the driver). This service is supplied to ISCCM and ISCCM further supplies it as a part of composite supply to the delegates and thereby the proviso to Section 17(5)(b)(i) CGST Act is satisfied for admissibility of this ITC - In terms of Section 16(1) CGST Act, Exhibition stall set-up and tenting is an input service to ISCCM used in its business, thereby its ITC is admissible.

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• 2022 (5) TMI 961
  Maintainability of Advance Ruling application - rate of GST on e-tender floated for purchasing of tailoring Kits consisting 1 set of Sewing Machine, 1 set of Over lock Machine and 1 PVC moulded Stool - ruling sought on behalf of supplier - seeking Ruling, as a supplier itself - HELD THAT:- Section 103(1) CGST Act stipulates that Advance Ruling shall be binding only on the applicant who had sought it and on the concerned officer/ jurisdictional officer in respect of the applicant. Section 95(a) CGST Act defines advance ruling as a decision provided in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant - GRIMCO has not substantiated its locus standi to file said application as per section 95(a) CGST Act. We hold that GRIMCO s supplier is not bound by our Ruling as per section 103(1) CGST Act. The Application is hereby rejected as non-maintainable under Section 95(a) CGST Act.

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• 2022 (5) TMI 960
  Levy of GST - Valuation - inclusion of re-gasification charges - LNG imported by Customers - Section15 of the CGST Act? - HELD THAT:- In GST law, as per Section 17(5)(h) CGST Act, ITC is blocked for goods lost. However, it cannot be ascertained, by cross referencing with M/s Shells customers if the goods(SUG) as cited by M/s Shell are lost as process loss; since LNG being non GST item, the customers( who are the principal) cannot avail ITC under the GST scheme of law on its LNG in toto, therefore reversal of ITC on process loss concept does not arise at all in this case and thereby the checks and balances framed in GST scheme of law for process loss cannot be verified in this case - Though this is not the matter before us, we do note that as Shells customers are not paying the value portion on the SUG invoices, but paying only the tax amounts, the customers cannot avail ITC on the tax portion reflected in the Shell s SUG invoices as per 2nd Provisio to Section 16(2) CGST Act, its customers have not paid the value portion of SUG invoices. This system use gas is- (a) used by M/s Shell as fuel for re-gasification plant (b) retained as its gain (c) used for flaring which is an incidental expensing for the re-gasification procedure and falls within the scope of costs incurred for regasification service. For this, we hold that amount of SUG value charged on its customers vide GST invoices does fall under the cost of provision of service of Re-gasification and thereby an indispensable component of taxable value of re-gasification service supply by M/s Shell - this gas charge which is used by M/s Shell is cost on re-gasification services, to be precise it is an expenses incurred by M/s Shell for the Re-gasification scope of service to be supplied to its customers and as M/s Shell is not purchasing gas from market but made an agreement with customer for a SUG quantity to be provided to customers for the subject service supply, it is found that this SUG quantity to be provided by its customers is now translated into SUG value by M/s Shell invoices raised on its customers. The literal meaning of the phrase System Use Gas has been justified as the gas has been used by system. Now the scope of re-gasification services covers not just regasification but an entire gamut of activities from unloading LNG from the Ships, its storage, its re-gasification along with safety measures and thereafter the delivery to the customers. It is found that system use gas charges raised on its customers vide GST Tax Invoices are part and parcel of Re-gasification service supply. The scope of re-gasification service supply cannot be dissected to favour only a portion of invoice charged on its customers as taxable by misreading re-gasification service to mean only re-gasification of LNG into RLNG. Thus value of SUG is an indispensable part of taxable value, for Re-gasification service supply by M/s Shell and liable to GST.

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• 2022 (5) TMI 959
  Classification of supply - supply of goods or supply of services - contract with Airbus Defence and Space, S.A.U., Spain (Airbus) for manufacture and supply of MW transport aircraft with associated equipment under its C295 aircraft programme - classification - rate of tax - value to be adopted for the purpose of payment of GST - time of supply for payment of GST - HELD THAT:- The subject Application premature at this stage. Any change in the place of the Orders must be notified to the Purchaser in writing by the Supplier with sufficient prior notice - No such intimation for change in the place of the Orders notified to the Purchaser in writing by TASL, as per said clause 2.2.1 at page number 14 of the said Contract, has been placed/ produced. The Application is rejected as non-maintainable under Section 95(a) CGST Act.

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• 2022 (5) TMI 958
  Profiteering - purchase of two flats in Project River View Heights - it is alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in price - contravention of section 171 of CGST Act - penalty - HELD THAT:- The Respondent had three Phases viz. Phase-I, Phase-II and Phase-III comprising building Nos. A-J-K-L-M, B1-B2-H1-H2-I and C1-C2-D1-D2-E1-E2-F1-F2 respectively in River View Heights . Out of these three Phases, Phase-I was completed by August 2014, which is well before the implementation of GST and Phase-III had not been started uptil 27.08.2020. Further, in respect of Phase-II, it is on record that, it has already been investigated vide Order No. 51/2019 dated 21.10.2019 passed by this Authority under Rule 133 of the CGST Rules 2017 read with section 171 of the CGST Act 2017, vide which profiteered amount of Rs. 2,13,468/- (including GST @12%) for the period 01.07.2017 to 31.10.2018, has been confirmed in relation to 26 home buyers. It is found that no grounds, in the present case, to differ from the Report of the DGAP. Since the said Phase-I was not in existence in the GST period and the said Phase-III was yet to be started/registered as on 27.08.2020 hence, the Anti-Profiteering provisions under Section 171 of the CGST Act 2017 are not applicable on the said Phase-I and Phase-III of River View Heights of the Respondent. The instant case does not fall under the ambit of the Anti-Profiteering provisions of Section 171 of the CGST Act, 2017. As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this Order was required to be passed within a period of 6 months from the date of receipt of the Report from the DGAP under Rule 129 (6) of the above Rules. Since, the present Report has been received by this Authority on 31.08.2020, the Order was to be passed on or before 01.03.2021.

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• 2022 (5) TMI 957
  Profiteering - construction service - Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price - contravention of Section 171 of the CGST Act, 2017 - penalty - HELD THAT:- It is noticed that the Respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his Project JMD Imperial Suits/Suburbio-67 (Suburbio-1)in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act. Section 171 (3A) of the CGST Act, 2017 has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. As the period of investigation was 01.07.2017 to 31.05.2020, therefore, the Respondent is liable for imposition of penalty under the provisions of the above Section. Accordingly, notice be issued to him to explain why penalty as prescribed under Section 171 (3A) should not be imposed on him. The concerned jurisdictional CGST/SGST Commissioner is also directed to ensure compliance of this Order. It may be ensured that the benefit of ITC is passed on to each homebuyer as per this Order along with interest @18%. In this regard an advertisement of appropriate size (visible enough to public at imminent page) may also be published by the concerned Commissioner in minimum of two local Newspapers/vernacular press in Hindi/English/local language with the details i.e. Name of builder (Respondent) - JMD Limited, Project- JMD IMPERIAL SUITS Location- Gurugram. Haryana and amount of profiteering Rs. 33,35,330/- so that the concerned homebuyers can claim the benefit of ITC if not passed on. This Order having been passed today falls within the limitation prescribed under Rule 133 (1) of the CGST Rules, 2017.

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• Income Tax

• 2022 (5) TMI 969
  Order passed following due procedure of law - argument of violation of principles of natural justice - availability of the alternative remedy - petitioner has challenged the impugned show cause notice giving opportunity to the petitioner to file any objection to the draft assessment order before passing final assessment order under Section 143(3) in order to give effect to the order passed by the Commissioner u/s 263 and the petitioner did not avail the said opportunity - also filed a supplementary affidavit challenging the impugned final assessment order under Section 143(3) dated 30th March, 2022 which has been passed during the pendency of the writ petition - HELD THAT:- The impugned assessment order which has been challenged by way of supplementary affidavit is an appealable order before the Commissioner of Income Tax (Appeal). It also appears that the aforesaid impugned order was passed after following due procedure of law by issuance of notice and giving opportunity of hearing from time to time to the petitioner and it has been recorded in the assessment order that petitioner s reply was also taken into consideration. It has been specifically recorded in the assessment order that a letter was issued on the petitioner on 19th January, 2022 but no reply was filed by the petitioner and further a notice under Section 142(1) of the Act was issued to the petitioner on 15th February, 2022 requiring it reply on or before 20th February, 2022. So, this cannot be a case of violation of principles of natural justice and petitioner has participated in the assessment proceeding and now when it has gone against him he wants to challenge the assessment order before this Writ Court and want this Court to act as an appellate authority by going into the merit of the assessment which is the job of the CIT (Appeal). This is not that categories of cases where the proceeding has been initiated by an officer having inherent lack of jurisdiction since in this case assessing officer being subordinate to the Commissioner is bound to give effect to the order by his higher authority which is the Commissioner of Income Tax who had passed order under Section 263 of the Act which is not even subject matter of challenge before this Court. We are not inclined to entertain this writ petition and the same is accordingly dismissed without going into the merit of the assessment only on the ground of availability of the alternative remedy.

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• 2022 (5) TMI 956
  Reopening of assessment u/s 147 - Validity of order passed by the Respondent under Section 148A(d) - Petitioner states that in the present case notice under Section 148A is not warranted as it is a case of Section 153C of the Act to which proviso (c) of Section 148A applies - HELD THAT:- Since the case of the petitioner is admittedly covered by proviso (c) to Section 148A, this Court is of the view that the impugned order and notice are untenable in law. Accordingly, both the impugned order and notice dated 9th April, 2022 are set aside and the matter is remanded back to the Assessing Officer to pass a fresh reasoned order in accordance with law.

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• 2022 (5) TMI 955
  Reopening of assessment u/s 147 - information received from ITO [I CI] - II, Pune - capital gain on sale of land - applicability of Section 50C - HELD THAT:- Different parcels of lands were purchased by the said Director as an Agriculturist and thereafter sold/transferred to Zuari Cements Limited. It is not clear that how the funds of the petitioner could have been used to finance the purchase by its Director. The sale is also by the said Director in his individual capacity as an Agriculturist on 30.07.2011 to Zuari Cements Limited - income from the land development cost has been shown as Rs.7,08,39,862/- during the previous year. Further, a sum of Rs.2,98,97,357/- has been shown as expenses incurred towards land development charges. Further, the land sold during the relevant year was only for Rs.97,37,500/-. There is no clarity on this aspect. The guideline value of the property sold during the period in dispute was Rs.3,21,61,000/-. Therefore, Section 50C of the Income Tax Act was invoked, as if the land was a capital asset of the petitioner company. The Department wanted to include an amount of Rs.2,24,23,500/- [Rs.3,21,61,000 Rs.97,37,500] as income having escaped assessment during 2013 to 2014, it is however not clear which the entire parcel of land was sold or only an extent of land was sold during the previous year for Assessment Year 2013-2014. It is also not clear how the land can be treated as a capital asset of the petitioner company when the land was neither purchased nor sold by the petitioner Company. These aspects are not forthcoming clearly either in the reply of the petitioner or in the orders passed by the respondent earlier on 22.11.2018 which was earlier quashed by an order dated 12.12.2018 or in the impugned orders dated 17.12.2018 disposing objection of the petitioner against reopening of the assessment under Section 148 of the Income Tax Act, 1961 and the consequential assessment order passed on 20.12.2018 impugned in this writ petition. Thus while upholding the impugned order overruling the objection against re-opening the assessment, we are inclined to set aside the consequential assessment order dated 20.12.2018, passed by the first respondent and remit the case back to the first respondent to pass a de novo orders on merits

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• 2022 (5) TMI 954
  Addition u/s 43(5) - Loss in commodity derivatives trading business was non-speculative - Addition invoking the provisions of clause (e) of the first proviso to section 43 (5) holding that derivatives trading in commodities is a kind of speculation in commodity trading business and that loss suffered in derivatives commodity trading can be set off only against its own head, and not against the business head - CIT(A) erred in confirming the action of the Assessing Officer in not setting off the same against other business income - HELD THAT:- As per the details of loss from derivatives business incurred by the assessee, such derivatives were with regard to Crude oil, Nickel, etc., and Currency derivatives. The confirmations from the recognised Associations were filed, as previously noted. Nowhere have the authorities below denied that the commodity derivatives are commodity derivatives as prescribed under Chapter VII of the Finance Act, 2013. In this regard, clause (i) of Explanation 2 to section 43(5) specifically states that for the purposes of clause (e) of the first proviso of section 43(5), the expression commodity derivatives shall have the meaning as assigned to it in Chapter VII of the Finance Act, 2013. In the impugned order, the ld. CIT(A), without considering this aspect of the matter, has confirmed the Assessing Officer s observations, holding that the assessee could do two businesses, but the accounts should have been maintained separately; that the assessee has wrongly set off loss of speculative business with regular business; and that the assessee does not have the expertise of doing trading in commodities. Firstly, no case of intermingling of expenses stands made out. The loss from trading in commodity derivatives has been identified to the last rupee. The issue is as to whether such loss can be set off against other business loss. Next, as discussed herein above, in keeping with clause (e) of the first proviso to section 43(5), the loss incurred is not a speculative loss. Now, coming to the issue as to whether the loss from trading in commodity derivatives, which, as above, is not a speculative loss, has rightly been set off by the assessee against regular business profits from medical derivatives business. Reading clause (e) of the first proviso to section 43(5), and sections 70(1) and 73(1) of the I.T. Act together, it emerges that in the assessee s case, since a derivatives commodity trading transaction is not a speculative transaction, loss arising therefrom can very well be set off against the profit of the medical derivatives business of the assessee. Rather, it is only against such business profit that the business loss from the derivatives commodity trading can be set off. Clause (e) of the first proviso to section 43(5) of the I.T. Act was inserted by the Finance Act, 2013, w.e.f. 1.4.2014. The assessment year under consideration is 2015 16. Thus, this provision is squarely applicable to the assessee s case. None of the case laws relied on by the ld. CIT(A) is applicable to the present case, since they do not relate to clause (e) of the first proviso to section 43(5) of the I.T. Act. Thus the grievance of the assessee is found to be justified and is accepted as such. The Grounds raised are, hence, accepted. The addition made by the Assessing Officer, as confirmed by the ld. CIT(A), is cancelled. Appeal of assessee allowed.

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• 2022 (5) TMI 953
  Eligibility of Foreign tax credit - delay in compliance of a procedural provision, that is delay in filing Form No.67 - Assessee has not filed Form 67 within the due date of filing original return of income u/s 139(1) - HELD THAT:- Assessee has vested right to claim the FTC under the tax treaty, the same cannot be disallowed for mere delay in compliance of a procedural provision, that is delay in filing Form No.67 . Therefore, respectfully following the judgment in the case of Ms. Brinda Rama Krishna [ 2022 (2) TMI 752 - ITAT BANGALORE] we direct the Assessing Officer to examine the quantum of Foreign Tax Credit claimed by the assessee and allow the Foreign Tax Credit in accordance with law - Appeal of the assessee is treated to be allowed.

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• 2022 (5) TMI 952
  Penalty u/s 271(1)(c) - amount offered by the assessee in the return of income pursuant to survey -voluntary/ suo motu offer of income - During the course of survey proceedings, the assessee surrendered income which was promptly included in the return of income filed afterwards - HELD THAT:- A particular income can be added only when it is not offered in the return of income. If it is offered in the return of income, then that cannot be said to be added by the AO for the purposes of Explanation 1 to section 271(1). Explanations 5 and 5A of section 271(1) deal with the imposition of penalty under this provision even where the income in the given circumstances is declared in any return of income. The Explanations apply only in the case of search u/s.132 and not the survey u/s.133A of the Act. If the Explanations are excluded from the purview, which are applicable only in search cases and not otherwise, then, addition to income is sine qua non for imposition of penalty u/s.271(1)(c) of the Act. In the absence of any addition or disallowance made by the AO in the computation of total income, there can be no question of any penalty on the income suo motu offered by the assessee in his return of income. As found that the reported income and the assessed income of the assessee remain same except for minor disallowance of expenses. AO has imposed penalty only with reference to the amount of Rs.50.00 lakh and odd which was suo motu declared by the assessee in the return. In that view of the matter, the ratio laid down in MAK data Pvt. Ltd. [ 2013 (11) TMI 14 - SUPREME COURT] has no application to the facts of the extant case as the income under consideration forming the foundation for the penalty is not the one which was added by the AO beyond the income returned. Assessee voluntarily offered the income, declared in the survey, in the return of income and the assessment was made without making any addition on that score, we hold that such an income cannot constitute the bedrock for the imposition of penalty u/s.271(1)(c) of the Act. We, therefore, order to delete the penalty. - Decided in favour of assessee.

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• 2022 (5) TMI 951
  Revision u/s 263 - As per CIT deduction claimed by the assessee u/s. 80IC has been wrongly allowed by AO - HELD THAT:- CIT has not rebutted the facts as stated by the assessee in its submissions 22.03.2021 in reply to show cause notice u/s. 263 of the Act. In the aforesaid reply the assessee has clearly explained the nature of enquiries made by the AO before concluding the assessment on all the aspects that are set out in the show cause notice u/s. 263. Suffice it to say the AO had made due enquiries and applied his mind on all the aspects that are set out in the above show cause notice. We also find that the issue is covered in favour of the assessee by its own case for the AY 2013-14 [ 2019 (11) TMI 798 - ITAT KOLKATA] As decided in own case we are of the considered opinion that while passing the assessment order allowing the deduction u/s 80IC in respect of items of other income and export incentives, the AO did not follow a view which can be said to be unsustainable in law . In the circumstances therefore, the jurisdictional facts for usurping the jurisdiction, being absent, we hold that the action of Ld. Pr. CIT was without jurisdiction and all subsequent actions are null in the eyes of law. In the appeal before us and in the decision of the coordinate bench of ITAT, Kolkata in assessee s own case (supra), the issue of revisionary proceedings u/s. 263 of the Act is challenged on account of excess deduction claimed u/s. 80IC of the Act in relation to items of other income and export incentives. Each item of other income and export incentives has been elaborately dealt in the decision of the coordinate bench in assessee s own case (supra). We note that this issue is covered in favour of the assessee by the decision cited supra and the Ld. DR could not point out any change in facts or law which would have warranted any interference on our part to take a view divergent from that taken by the coordinate bench of ITAT, Kolkata in the case of assessee itself. Accordingly, we set aside/quash the order of the ld. Pr. CIT restoring the assessment order passed u/s. 143(3) - Decided in favour of assessee.

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• 2022 (5) TMI 950
  Reopening of assessment u/s 147 - recording of satisfaction in mechanical manner - unexplained money u/s 69 A - reopening based on AIR/CIB Information that the assessee had deposited cash in his Bank account - Independent application of mind by AO or not? - HELD THAT:- It is pertinent to mention that the AO has not analyzed the information in right perspective and sought to reopen by conceiving a wrong fact that the assessee did not file return of income and, as such, the bank deposit represents unexplained investment. The mere information from annual information returns which is made as the basis for reopening without describing the contents of information i.e. when was the statement received, the bank account details and most importantly copy of bank account which is made as the basis of reopening was never gone through by the AO while recording the reasons. This is very much clear from the reassessment order that the AO recorded a finding that during the course of assessment proceedings information u/s 133(6) of the Act were called from HDFC Bank Ltd. and ICICI Bank and there was no compliance made by both the banks till date. Therefore, the AO never had with him any copy of bank statement before recording of reasons for reopening of assessment and issue of notice u/s 148. Therefore, without going to the contents of the entries in the bank accounts merely deposits cannot be treated as income escaping assessment. There is no nexus between the prima facie inferences arrived in the reasons recorded and the information . The information was restricted to cash deposit in bank account but there was no material much less tangible, cogent, credible and relevant material to form a reason to believe that cash deposits represented income of the assessee. The reasons recorded in the present case at best can be treated to be reasons to suspect which is not sufficient for reopening the assessment u/s 148 of the Act. The requirement of application of mind is missing in the present case on the face of it in the reasons recorded. PCIT also mechanically issued permission to reopen the assessment without going into the facts available on record. Even in the Form for seeking approval, in Column 8, the AO records that no return has been filed by the assessee even though factually incorrect and the PCIT did not apply his mind while granting approval as he has simply gone by what is recorded by the AO which is factually wrong. The satisfaction recorded by the PCIT is in mechanical manner and without application of mind. Thus reassessment made u/s 144 r.w.s. 147 by the AO is bad in law - Decided in favour of assessee.

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• 2022 (5) TMI 949
  Deduction u/s 80IA(8) - profits derived from the captive power plant/ undertaking - HELD THAT:- As decided in own case [ 2019 (10) TMI 991 - ITAT DELHI] for assessment year 2013-14 has already been dealt and decided by the co-ordinate Bench of this Tribunal and the same has been confirmed by the jurisdictional Hon ble High Court [ 2019 (3) TMI 1886 - DELHI HIGH COURT] - Decided in favour of assessee. MAT computation u/s 115JB - Disallowance of depreciation while calculating book profit under Section 115JB - HELD THAT:- The similar issue has already been dealt and decided by the co-ordinate Bench of this Tribunal for assessment year 2009-10 in the own case find no infirmity in the order of the Id. CIT(A) directing the Assessing Officer to delete the various additions for computation of book profit u/s 115JB - We find the id. CIT(A) while directing the Assessing Officer to delete the various additions/disallowances made by him for computation of book profit u/s 115JB has relied on the decision of Apollo Tyres Ltd [ 2002 (5) TMI 5 - SUPREME COURT] DR ould not bring any material before us so as to take a contrary view than the view taken by the ld. CIT(A) on this issue. We, therefore, do not find any infirmity in the order of the Id. CIT(A) directing the Assessing Officer to delete the various additions/disallowances for computation of book profit u/s 115JB of the I.T. Act. We, therefore, uphold the order of the Id. CIT(A) on this issue and the grounds raised by the Revenue are dismissed. Additional depreciation on plant and machinery claimed under Section 32(1)(iia) - HELD THAT:- We have perused the assessee s own case while dealing with the same issue for the assessment years 2006-07 to 2009 held that the amendment which has been brought in by the Finance (No.2) Act, 2012 e.w.f. assessment year 2013-14 whereby the assessee engaged in the business of generation or distribution of power have specifically been included and held eligible for claim of additional depreciation. It has been held by the Co-ordinate Benches of the Tribunal that even prior to the amendment brought in by the Finance Act. 2012, the assessee s engaged in generation or generation or distribution of electricity were held to be eligible for additional depreciation. It was accordingly held that the assessee is entitled to additional depreciation. It was accordingly held that the assessee is entitled to additional depreciation on the power plant and the windmill installed during the year. In view of the above, we hold that the assessee is entitled to additional depreciation on account of production/generation of power. Rate of depreciation from 10% to 15% in respect of purchase of railway sidings by the assessee during the year under consideration - HELD THAT:- It is not in dispute that the assessee has claimed depreciation at 10% on the railway siding and during the assessment proceedings, claimed depreciation at 15% on the ground that railway sidings were used by the assessee for the purpose of the business ie: transporting raw-material machinery etc. The Assessing Officer has not dealt with the said issue, therefore, in our considered opinion; the said issue deserves to be remanded to the file of the Assessing Officer for fresh consideration by verifying all the records produced by the assessee. Accordingly, we allow the grounds of appeal No. 2 to 2.2 for statistical purposes

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• 2022 (5) TMI 948
  Allowability of exemption on long term capital gains u/s 10(38) - characterization of the securities sold i.e. investments converted into stock-in-trade - difference between the market value of the investments as on date of conversion - HELD THAT:- There is no dispute with regard to the computation of capital gains under the provisions of section 45(2) - The dispute is only with regard to the characterization of the securities sold i.e. investments converted into stock-in-trade. The fact that the securities are held as investments prior to conversion as on 30.11.2007 subsequent to the conversion of such investments into stock-in-trade as on 30.11.2007 is also undisputed. From reading of the assessment order, it appears that the AO was under-impression that the Commissioner of Income Tax-II, Nashik in the order of revision held that the assessee was not eligible for exemption u/s 10(38), as mere reading of the order of revision, it would clearly indicate that it is open remained before the Assessing Officer as free to examine of the issue de-novo on merits. Therefore, the ld. CIT(A) rightly held that the respondent-assessee is entitled to the exemption on capital gains u/s 10(38) as claimed by the respondent-assessee. Thus, we do not find any illegality in the order of the ld. CIT(A). Therefore, we do not find merits in the grounds of appeal raised by the Revenue. Accordingly, the grounds of appeal raised by the Revenue stand dismissed.

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• 2022 (5) TMI 947
  Reopening of assessment u/s 147 - eligibility of reason to believe - addition of bogus purchases - HELD THAT:- CIT(A) had confirmed the action with regard to initiation of proceedings under Section 147 of the Act by holding that the Assessing officer had received report of the Investigation Wing, Mumbai that the assessee was beneficiary of accommodation entry operators. Before us the ld AR for the assessee has not made specific submissions in challenging the reopening except making general submissions that no notice of reopening was received. We find that otherwise the issue of reopening is against the assessee by the decision of Jurisdictional High Court in Priya Blue Industries (P) Ltd [ 2021 (8) TMI 486 - GUJARAT HIGH COURT] wherein held that where the assessing officer has reason to believe that income chargeable to tax had escaped assessment as the assessee was beneficiary of accommodation entries and basis of belief were several inquiries and investigation by investigation wing that there had been escapement of income of assessee from assessment because of his failure to disclose fully and truly all the material facts, reopening is justified. Thus, considering the above law, coupled with facts of this case, we affirm the action initiated under Section 147 of the Act. In the result, ground No. 1 2 of the appeal is dismissed. Bogus purchases - The assessee has shown gross profit at 3.42% and net profit at 1.98%, thus the assessee was shown an extremely low profit. The combination of this bench in other similar cases wherein the purchases are shown from Bhanwarlal Jain or Rajendra Jain or Gautam Jain group have restricted or enhanced the addition to the extent of 6% of such amount or disputed purchases. Therefore, taking a consistent view, the disallowance which was confirmed to the extent of 100% by learned CIT(A) are restricted to 6% of the impugned purchases - grounds of appeal raised by the assessee are partly allowed.

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• 2022 (5) TMI 946
  Belated deposits of PF and ESIC contributions - Addition under section 36(1)(va) r/w section 2(24) - intimation under section 143(1) - HELD THAT:- As relying on KALPESH SYNTHETICS PVT LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CPC BENGALURU. [ 2022 (5) TMI 461 - ITAT MUMBAI] 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. Adjustment in the course of processing of return under section 143(1) is vitiated in law, and we delete the same. As we hold so, we make it clear that our observations remain confined to the peculiar facts before us, that our adjudication is confined to the limited scope of adjustments which can be carried out under section 143(1) and that we see no need to deal with the question, which is rather academic in the present context, as to whether if such an adjustment was to be permissible in the scheme of Section 143(1), whether the insertion of Explanation 2 to Section 36(1)(va), with effect from 1st April 2021, must mean that so far as the assessment years prior to the assessment years 2021-22 are concerned, the provisions of Section 43B cannot be applied for determining the due date under Explanation (now Explanation 1) to Section 36(1)(va). That question, in our humble understanding, can be relevant, for example, when a call is required to be taken on merits in respect of an assessment under section 143(3) or under section 143(3) r.w.s. 147 of the Act, or when no findings were to be given on the scope of permissible adjustments under section 143(1)(a)(iv). That is not the situation before us. - Decided in favour of assessee.

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• 2022 (5) TMI 945
  Revision u/s 263 - AO had not carried out requisite inquiry regarding advances from customers and also introduction of fresh capital - Assessee had simply submitted a verbal narration without furnishing any documentary evidence in support of its claim as further observed that assessee did not submit copy of bank statement reflecting the repayment of liabilities due to M/s Maa Kaila Foundries Private Limited in support of the confirmation of accounts - HELD THAT:- As per clause (a), if the order is passed without making inquiries or verification which should have been made, shall be deemed to be erroneous in so far as it is prejudicial to the interests of the Revenue, if so opined by the Pr.CIT. In the present case, in the opinion of Pr.CIT, the assessment order was passed without making requisite inquiries/ verification which should have been made. As per Pr.CIT, AO failed to make necessary inquiry. It is also recorded that the assessee has simply submitted verbal narration without furnishing any documentary evidence. Hence, it was held that the assessment order dated 31.05.2017 passed u/s 143(3) was erroneous and also prejudicial to the interest of revenue - we find that the AO issued a questionnaire along with notice u/s 142(1) dated 19.12.2016. In response thereto, the assessee had filed his reply regarding the queries raised by the AO. It is also transpired from record that notices u/s 133(6) of the Act were issued. Thereafter, he framed the assessment. We find that the assessee in response to notice u/s 263, had duly explained the transaction related to M/s Maa Kalika Foundaries Pvt. Ltd., introduction fresh capital and also description CAS CHQ XFER WD . Looking to the material placed before us, the Pr.CIT has not made out a case of any prejudice caused to the Revenue. The law is well settled that for exercising power u/s 263 twin conditions are required to be satisfied (i) that the order should be erroneous and; and (ii) it should cause prejudice to the interests of Revenue. It is not the case where the assessee failed to substantiate his claim, rather the explanation along with supporting evidences were placed before the assessing officer and the learned Pr.CIT. In our considered view merely on the basis of suspicion, invoking of powers u/s 263 would not be justified. The concluded assessment should be revised where there is blatant error committed by the assessing officer, which culminated into the prejudice to the interest of Revenue. But where the Assessing Officer made necessary inquiry and satisfied itself about the explanation offered to him, revising such an order is highly unjustified and contrary in the case of M/s Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] . Therefore, in the present case the action of the learned Pr.CIT is unjustified and the same is hereby set aside and the assessment is restored.- Decided in favour of assessee.

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• 2022 (5) TMI 944
  Additions towards on money received from sale of land - undisclosed income on account of sale of property - HELD THAT:- Although, the assessee had admitted on money received from sale of land and further, explained cash found during the course of search, out of on money received from sale of property, but the assessee never disclosed consideration received for sale of property in his return of income filed for the relevant assessment year - additional consideration, if any, including on money also partakes the nature of consideration received from sale of property, but such conclusion can be withdrawn only in a case, if assessee disclose on money received from sale of property in his return of income filed for the relevant assessment year. In this case, the assessee never disclosed consideration received for sale of property in his return of income. Further, the assessee had admitted undisclosed income on account of sale of property. Further, although buyer of the property denied having paid on money, but the documents found during the course of search indicate receipt of on money. Therefore, we are of the considered view that explanation of the assessee is that on money received from sale of property partakes the nature of capital receipt which is exempt u/s.2(14)(iii) of the Act, cannot be accepted. Hence, we are inclined to uphold the findings recorded by the AO as well as the Ld.CIT(A) and sustain the additions made towards on money received from sale of property. Additions towards unaccounted income from unregistered chit and finance business - HELD THAT:- As during the course of post search investigation, he could able to explain certain papers and also filed details of loans and advances outstanding as on date of the search at Rs.3.14 Crs. and also agreed to disclose additional income of Rs.3.2 Crs. for the AY 2017-18. However, in the return of income filed for the AY 2017-18, the assessee has offered income from chit and commission interest, income from money lending business at Rs.93,10,180/- and claimed that balance amount has been reconciled with books of accounts maintained for chit and finance business. CIT(A) has allowed relief to the assessee to the extent of Rs.93,10,180/- out of total addition made by the AO at Rs.3.2 Crs. The balance amount of Rs.2,26,89,820/- remains unexplained. Even before us, the assessee neither explained the loose sheet found during the course of search, which contain chit and finance business transactions nor reconcile total loans and advances outstanding as on date, even though, he himself quantified outstanding loans and advances at Rs.3.14 Crs. Therefore, we are of the considered view that there is no error in the reasons given by the Ld.CIT(A) to sustain additions made by the AO towards undisclosed income from chit and finance business amounting to Rs.2,26,89,820/-. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the assessee. Unexplained expenditure u/s.69C - HELD THAT:- AO has made addition as unexplained expenditure u/s.69C on the basis of admission of the assessee. Except this, no other evidence was brought on record to substantiate the findings of the AO to make addition of Rs.15 lakhs u/s.69C of the Act. Therefore, on this count itself, the additions made by the AO towards unexplained expenditure on account of gift/assistance given to beneficiaries, cannot be sustained. Be that as it may. The assessee had admitted undisclosed income of Rs.3.2 Crs. from chit and finance business and out of said business income, the assessee can easily explain so called Rs.15 lakhs gift/assistance given to beneficiaries. Therefore, even if addition is made on account of gift/assistance given to beneficiaries, the AO as well as the Ld.CIT(A) ought to have telescoped said expenditure out of additional income offered by the assessee from chit and finance business. Hence, we direct the AO to telescope unexplained expenditure incurred towards gift/assistance given to beneficiaries out of undisclosed income offered from chit and finance business and delete additions made u/s.69C of the Act. Expenditure towards alleged distribution of cash for votes - AO has erred in making additions towards unexplained expenditure u/s.69C of the Act, towards alleged distribution of cash for votes. The Ld.CIT(A) without appreciating the fact simply sustained additions made by the AO and hence, we reverse the findings of the Ld.CIT(A) and direct the AO to delete the additions made towards unexplained expenditure u/s.69C of the Act, amounting to Rs.17 Crs. towards alleged distribution of cash for votes.

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• 2022 (5) TMI 943
  Compulsory scrutiny - Assessment pertaining to survey under section 133A - AO Jurisdiction and authority to take up the case for compulsory scrutiny - Procedure and criteria for selection of scrutiny cases under compulsory manual - requirement of impounding of books of accounts only in the survey proceedings - HELD THAT:- A plain reading of Clause (d)of para 3 of the instruction no. 10/2013 will lead to the only inference that all assessment pertaining to survey under section 133A are falling in the category of compulsory scrutiny subject to the exceptions provided therein. Thus, the impounding of books of accounts and documents as mentioned in Clause (d) as a direct nexus with the survey under section 133A and therefore, we do not find any substance in the contention of the learned DR that what is required is impounding of books of accounts not necessarily in the survey. Powers under section 131 cannot be linked with the powers to carry out the survey under section 133A of the Act and hence, the books of accounts impounded by the Assessing Officer under section 131(3) cannot be regarded as impounding of the books of accounts in the proceedings under section 133A of the Act. Once there is no impounding of the books of accounts during the survey under section 133(A) of the Ac and the returned income of the assessee for the year under consideration is not less than the returned income of the immediate preceding year then the case would not fall in the category of compulsory scrutiny. AO has not taken any prior approval for issuing the notice under section 143(2) it is also pertinent to note that the notice under Section 143(2) was issued by the Assessing Officer on 11.6.2013 which is prior to the instruction no. 10/2013 dated 5.8.2013. The timing of issuing the instructions by the CBDT for the scrutiny of the cases is very relevant as the earliest limitation for issuing the notice u/s143(2) expires on 30th September, as per the proviso to section 143(2) being other within six month from the end of the financial year in which the return was filed. The instructions were issued by the CBDT well in time and the AO was having the sufficient time even after the instructions dated 5.8.2013 to issue notice under section 143(2) however, the AO issued notice under section 143(2) on 11.6.2013 which is much prior to the CBDT instructions issued for taking up the compulsory scrutiny during the financial year 2013-14. Even the criteria for selection of the returns/cases for scrutiny during the financial year 2012- 13, there is no much difference so far as the conditions prescribed in Clause (d) of the said instruction. Accordingly, the notice issued by the AO under section 143(2) on 11.6.2013 is not in conformity with the criteria provided by the CBDT in the instruction no. 10/2013 as well as in the earlier instructions for the financial year 2012-13 because the mandatory conditions are not satisfied. The case was fixed for the hearing and disposal on the additional ground challenging the jurisdiction and powers of the Assessing Officer to initiate the compulsory scrutiny proceedings by issuing notice under section 143(2) of the Act. Since the conditions as prescribed in Clause D of para 3 of the instruction no. 13/2013 are not satisfied therefore, the Assessing Officer was not having the jurisdiction and authority to take up the case for compulsory scrutiny. Accordingly, the initiation of the compulsory scrutiny proceedings by issuing the notice under section 143(2) dated 11.6.2013 is invalid and consequently the assessment framed by the Assessing Officer is vitiated as invalid in law. Hence, the impugned assessment framed by the Assessing Officer is liable to be quashed being passed without jurisdiction. Appeal of assessee allowed.

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• 2022 (5) TMI 942
  Disallowance u/s 40(a)(i) - tds liability on reimbursement of expenses to appellant s associated enterprises - HELD THAT:- The Tribunal in assessee s own case for assessment year 2011-2012 [ 2022 (5) TMI 846 - ITAT BANGALORE] on identical facts had held that license fees has been paid for the use of software. It was further held by the Tribunal that the assessee s holding company procures software from third party and shared the cost with the assessee along with other group companies on a proportionate basis without any mark up. Therefore, it was concluded by the ITAT that the reimbursement of such expenses by the assessee cannot be held liable for TDS. Thus we hold that the assessee is not liable for TDS in respect of payment to M/s.Brand Union Worldwide Limited, London. Therefore, the expenditure cannot be disallowed by invoking the provisions of section 40(a)(ia) - assessee appeal allowed. Write back of excess provision towards additional salary - HELD THAT:- In view of the remand report, it is clear that for the current assessment the assessee had added back the provision on salary and offered the same as income. In the meanwhile the A.O. for assessment year 2008-2009 had disallowed the said expenses as provision and added back the same to income, which tantamount to double taxation of provision of additional salary. Since the A.O. in the remand report has clearly stated that the assessee s claim is correct, we direct the A.O. to delete a sum of Rs.10 lakh from the taxable income for the relevant assessment year, since the same had suffered tax in previous assessment year, namely, A.Y. 2009-2010. It is ordered accordingly. Allowability of education cess paid as a tax deductible expenditure - HELD THAT:- As relying on decision of Kolkata bench of Tribunal in the case of Kanoria Chemicals Industries Ltd [ 2021 (10) TMI 1153 - ITAT KOLKATA] we hold that payment of education cess including secondary and higher education cess is not allowable as deduction. Therefore, we reject ground 3 raised by the assessee.

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• 2022 (5) TMI 941
  Reopening of assessment u/s 147 - Notice beyond period of four years - disallowance of prior period expenses and MAT - Whether the assessee disclosed fully and truly all material facts necessary for the assessment? - HELD THAT:- In the present case, the financial statements for year ended March 31, 2010 disclosed the prior period expenses on the face of the profit and loss account itself as well as the break- up of the same is depicted at Schedule 16 of the financial statements - Tax Audit Report (TAR) in Form 3CD for AY 2010-11 of TAR and attachment 9 of TAR depict the prior period expenses -. A copy of the TAR has been duly furnished before the AO vide Annexure-4 of submission dated May 30, 2013. The computation of Income including the MAT ( Minimum Alternative Tax ) computation under section 115JB of the Act along with Form 29B for AY 2010-11 depicts that the Company had disallowed the prior period expense in the normal computation of income. Further, the same is not disallowed in the MAT computation in line with Form 29B for the subject year. The said documents been duly furnished before the AO vide Annexure-2 and Annexure-3A of the submission dated May 30, 2013. Thus, in the present case, there is no failure on the part of the Appellant to file its Return of Income. Further, the Appellant has disclosed fully and truly all material facts necessary for his assessment. The facts have been duly disclosed in the Tax Audit Report and vide the Profit and Loss Account. Hence keeping in view the proviso to the section 147, the reassessment proceedings initiated under section 147 of the Income Tax Act 1961 beyond a period of four years are bad in law and deserve to be quashed. Appeal of assessee allowed.

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• 2022 (5) TMI 940
  Disallowance of depreciation on plant and machinery installed by the appellant company - HELD THAT:- In the absence of necessary details, we are inclined to give one more opportunity to the assessee to raise its point of contention before the AO in support of its arguments. It is also seen that the assessee has filed additional papers demonstrating the list of villages where RO Plant has been installed, charts of parties with details remark of Wasmo Project and 9 bills of machineries of WASMO project which are available in the paper book. These papers are necessary to be considered by the AO for adjudicating the issue on hand. Thus in the interest of justice and fair play, we set aside the issue to the file of the AO for fresh adjudication as per the provisions of law. The assessee is also at the liberty to furnish the necessary details before the AO and should extend the full cooperation without fail. Hence the ground of appeal of the assessee is allowed for the statistical purposes. Disallowance of the depreciation claimed with respect to the additions of 5 cars in the block of assets - whether the assessee is eligible to claim the depreciation on the purchase of cars in the manner as provided under section 32? - HELD THAT:- We are of the view that there cannot be any disallowance on adhoc basis as far as depreciation is concerned. In view of the above and after considering the facts in totality, the ground of appeal of the assessee is partly allowed for the statistical purposes. Addition u/s 68 - liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties - HELD THAT:- We find the assessee in order to establish the genuineness of the transaction and credit worthiness of the directors furnished necessary detail but the revenue authority without pointing any defect in the submission of the assessee treated the amount of share and premium as unexplained cash credit merely on the basis of individuals who lend fund to the directors were not able to explain the sources of funds in their hand. Therefore, we are of the view that assessee had been able to explain the sources of credit of share capital and premium in its books of account. The assessee cannot be made suffer due to some third parties who provided fund to the investor was not able to properly explain the sources fund in their hands. Hence, considering the fact in totality we hereby direct the AO to delete the addition made under section 68 -Thus the ground of appeal raised by the Assessee is hereby allowed. Addition under the provisions of section 40A(2)(b) - AO treated the salary paid to the employee being the relative of the director as excessive and unreasonable in pursuance to the provisions of section 40A(2)(b) - HELD THAT:- As nothing has been brought on record by the authorities below by making the comparison of the salary of the employee after having regard to the market which was one of the precondition for invoking the provisions of section 40A(2)(b) of the Act. On this reasoning only, the case of the revenue fails and assessee succeeds. It is also important to note that the amount of salary was accepted by the revenue in the subsequent year. This contention of the learned AR was not doubted by the learned DR appearing on behalf of the Revenue. Thus, we are of the view that the revenue cannot take different stand for different assessment years. In other words, once the revenue has accepted the salary to the employee reasonable to the tune of Rs.18 lacs, the same cannot be disturbed in the year under consideration. Accordingly, we set aside the finding of the learned CITA, and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Disallowance being 20% of legal and miscellaneous expenses - HELD THAT:- We are of the opinion that such expenses cannot be disallowed as the assessee has already paid the taxes in the form of fringe benefit tax to the revenue. For the balance amount of the expenses being legal and miscellaneous expenses we note that the assessee failed to discharge the onus imposed upon it. However, the fact that the relevant supporting documents were seized by the VAT department cannot be ruled out. It is for the reason that it was not possible for the assessee furnish the necessary details. Therefore it was prayed by the assessee to the AO and learned CIT-A for collecting the necessary details from the VAT department. But we note that the Revenue has not exercised its powers granted under the statute. However to meet the end of justice and to put the end of the ongoing litigation, we are of the view that disallowance of 5% of the legal and miscellaneous expenses will render the justice to the assessee and the Revenue. Hence, the ground of appeal of the assessee is partly allowed whereas ground of appeal the Revenue is dismissed. Addition after rejection the books of the accounts - AO, in the absence of necessary documents/records/informations which were to be furnished by the assessee, doubted on the genuineness of the transactions shown by the assessee in the financial statements - HELD THAT:- As we find that the AO has rejected the books result declared by the assessee mainly for the reason that supporting document were not provided as required by the AO. At this juncture it is necessary to note that there was search and seizer operation conducted by the VAT department which prevented the assessee to file necessary supporting evidences during the assessment proceeding. It pertinent to highlight that books account of the assessee has been duly audited by the auditor and there was upward trend in GP ratio and in previous year as well in subsequent year, the book results were accepted by the Revenue. Therefore, without bringing any corroborative material on record suggesting books result in the year under consideration not representing true the book result cannot be rejected merely for not providing the confirmation of the suppliers and supporting bills and voucher with respect to closing stock. See AWADHESH PRATAP SINGH ABDUL REHMAN AND BROTHERS [ 1993 (12) TMI 28 - ALLAHABAD HIGH COURT] We also find pertinent to note that even assuming the closing stock declared by the assessee is undervalued, then also it has tax neutral effect. It is for the reason that such closing stock shall become the opening stock in the next year and therefore there will not be any impact on the income of the assessee except the income of one year will shift to the income of another year. On this reasoning as well, we do not find any merit in the order of the AO. In view of the above and after considering the facts in totality, we do not find any infirmity in the order of the learned CIT (A). Accordingly, we uphold the same. Hence the ground of appeal of the revenue is dismissed. Difference between the income shown by the assessee viz a viz reflected in TDS certificate - HELD THAT:- The above difference was treated as income of the assessee and therefore the same was added to the total income of the assessee. However, the assessee has not challenged the impugned addition before the learned CIT-A. The assessee has raised the ground of appeal before us. However, at the time of hearing the learned AR has not advanced any argument or pointed out any infirmity in the order of the AO. Thus in the absence of any argument from the side of the learned AR of the assessee, we do not find any reason to interfere in the finding of the AO. Hence we confirm the same. Thus the ground of appeal of the assessee is hereby dismissed. Disallowance of EMD expenses - HELD THAT:- We find that there is no issue to the fact that such forfeiture of the EMD is a business loss which is eligible for deduction - CIT-A has disallowed the same on the reasoning that the assessee failed to furnish the necessary details about the EMD. Indeed, it is the onus upon the assessee to furnish the necessary details for the claim made by it in the income tax return. The assessee has only filed the copy of the ledger which is placed. To our understanding, the copy of the ledger is not sufficient enough to admit the claim of the assessee until and unless it is supported by the documentary evidence. However at the same time, we find that generally these EMD s are provided by way of fixed deposits which are made through the banking channel. It is also a normal practice if the contract is not awarded to the party, the same is returned back to the assessee. But all these details are not available on record. However in the interest of justice and fair play we are inclined to give one more opportunity to the assessee to furnish the necessary details before the AO for fresh adjudication as per the provisions of law. The assessee is at the liberty to furnish the necessary details without delay. It is also directed to the assessee to extend full cooperation during the assessment proceedings. Hence the ground of appeal of the assessee is allowed for the statistical purposes.

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• 2022 (5) TMI 939
  Assessment u/s 153A - amount at the time of search u/s. 132(4) - incriminating material found during the course of search or not? - addition on the basis of alleged statement recorded in search which has even being retracted by the assessee - HELD THAT:- We find that the statement u/s. 132(4) has been recorded on 27.04.2012. The assessee has filed letter of retraction on 09.07.2012 before the ADIT(Inv.), Unit-II, Dehradun. We have endeavoured to examine any material that was found and seized with regard to disclosure of income and we find that no details about the seizure of any documents has been mentioned in the Assessment Order or the order of the Ld. CIT(A). The assessment has been concluded solely based on the statement recorded during the search which was also retracted before the authorities. Thus, we find that the assessment has been made solely based on the bare statement of the assessee. The various discrepancies confronted to him in the documents found at the time of search as mentioned in the Assessment Order have not brought to the fore. The revenue record is silent as to what are these documents and what are the discrepancies found and confronted to the assessee. Hence, keeping in view the retraction of the assessee, the circular of the CBDT, non-availability of the relevant seized material, judgments of the various Courts with regard to the validity of the statement and validity of the retraction thereof, we hereby hold that the addition made based on the statement u/s. 132(4) cannot be sustained. Unexplained cash u/s. 69A - AO held that the assessee has not furnished any evidence to prove the status of cash flow in the entire family between period 31.03.2013 to 26.04.2013 as on the date of search and the amount found at the premises was added as undisclosed income of the assessee - HELD THAT:- We find that the cash in hand of Rs. 14,06,524/- has been determined by the AO who however chose to treat the cash of Rs. 4,58,700/- as undisclosed is contradictory as no evidence was found or could be gathered that the amount of Rs. 14,06,524/- stands spent or used for incurring any expenditure or for any other purpose. Since, the cash in hand has not been in dispute in the absence of any evidence contra, no addition is called for. Undisclosed jewellery - HELD THAT:- We find that the assessee owns jewellery worth Rs. 60,000/- in the financial year 2006-07 which could prove that the assessee had jewellery of approximately 85 gms till the year 2007. The remaining 72 gms of jewellery has been acquired in a span of 5 years period which could be by the way of purchases or by the way of customary gifts. The gross total income of the assessee for Financial Year 2011-12 of Rs. 10,50,000/- and for the Financial Year 2012-13 of Rs. 7,00,000/-. The average price of the 72 gms of gold would be approximately Rs. 1,50,000/- over a period of five years. Keeping in view, the returned income and the general financial affairs of the assessee, customs practices of the geographical area and in the special peculiar circumstances of the case, we hold that the assessee can be deemed to have acquired 72 gms of gold by purchase and customary gifts. The circular of the CBDT and the various judgments of the Courts consider upto 100 gms of gold to a male member. Hence, keeping in view the entire facts and circumstances and in peculiarities of the case, we direct that the addition made on this head is liable to be deleted. Appeal of assessee allowed.

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• 2022 (5) TMI 938
  Revision u/s 263 by CIT - assessment of trade discount received by the assessee - HELD THAT:- According to the PCIT, although the assessee had received Rs. 23,16,261/- as trade discount, the AO has estimated gross profit @ 5.4% and made addition of Rs. 1,25,000/-, instead of making addition towards entire amount of trade discount amounting to Rs. 23,16,261/-. The assessee neither appeared nor filed any details. PCIT left with no choice disposed off the case and passed order u/s. 263 and set aside the assessment order passed by the Assessing Officer. No doubt, when the assessee was not responding to show-cause notice issued by the authorities, the authorities are bound to dispose off proceedings in accordance with law, but such proceedings should be completed, after affording reasonable opportunity of hearing to the assessee. It is well settled law of principles of natural justice that before taking any decision, a reasonable opportunity must be given to the other side. In this case, the learned PCIT had passed order u/s. 263 by giving one date of hearing to the assessee. In our considered view, the order passed by the PCIT u/s. 263 without observing principles of natural justice is contrary to law. Therefore, we are of the considered view that appeal filed by the assessee needs to go back to the file of the learned PCIT and thus, we set aside order passed by the learned PCIT and restore the issue back to the file of PCIT to reconsider the issue afresh in accordance with law, after affording reasonable opportunity of hearing to the assessee. Appeal filed by the assessee is treated as allowed for statistical purposes.

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• 2022 (5) TMI 937
  Depreciation in respect of certain capitalized amount in the nature of URD purchases [unregistered dealers] forming part of the building - HELD THAT:- We find that the assessment order is silent as to the quantum of alleged bogus/inflated expenses. As pointed out by Ld A.R, there are technical specifications regarding the quantum of consumption of various materials in the construction of a building. The moot question is, if the alleged bogus/inflated purchases are removed from the value of construction, whether the same would meet the technical specifications relating to quantum of usage of various materials required for construction of building. Admittedly, this exercise has not been carried out. There was no occasion for the assessee to carry out the said exercise, since it has maintained its stand that all URD purchases are genuine. However, the AO has not done the same. We also notice that the AO has also not effectively dealt with legal effect of the retraction of the sworn statement given by Shri Shyama Raju. However, we do not find it necessary to deal with these questions for the reasons discussed in the ensuing paragraphs. Be that as it may, we noticed that the assessing officer did not make any addition with regard to the URD purchases, which were considered to be bogus or inflation of expenses, in the respective years. In our considered view, without making addition of alleged bogus/inflated expenses, the A.O. could not have disallowed the depreciation alone in A.Y. 2014-15. Accordingly, we are of the view that the disallowance of depreciation made by the A.O. in assessment year 2014-15 is not justified in the facts and circumstances of the case. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete the disallowance of depreciation made in A.Y. 2014-15. Since no addition was made in other years, there is no issue on merits requiring adjudication on merits. Disallowance u/s 14A for making addition to the net profit under clause (f) of Explanation 1 to sec. 115JB - HELD THAT:- We notice that the Ld CIT(A) has followed the decision rendered by Delhi Special Bench of Tribunal in the case of Vireet Investments Pvt Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] - However, we notice that the Ld CIT(A) has deleted the addition made to book profit u/s 115JB of the Act. The special bench has only said that the disallowance computed u/s 14A of the Act cannot be adopted straight away for the purpose of clause (f) of Explanation 1 to sec.115JB of the Act, meaning thereby, the amount to be added under clause (f) of Explanation 1 to sec.115JB of the Act has to be computed independently having regard to the books of account. Accordingly, we modify the order passed by Ld CIT(A) on this issue in AY 2012-13 to 2014-15 and restore this issue to the file of AO with the direction to compute the addition to be made clause (f) of Explanation 1 to sec.115JB of the Act independently on the basis of books of accounts.

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• 2022 (5) TMI 936
  Revision u/s 263 - exemption u/s 11 - Non - compliance of clause 2(i) of explanation 1 to section 11(1) at the relevant time - HELD THAT:- In response to notices issued u/s 143(2), the appellant made written submission inter-alia copy of income tax return accompanying statement of computation of total income, audited financial statements, copy of audit report issued in form No 10B r.w.r. 17B of the Act etc. And after considering the same, the claim of exemption u/s 11 was worked out by the Ld. AO. Insofar as the exercise of option is concern, the disclosure with their respect was first made in the computation of total income (placed at page 1 of P/B), followed by return of income at clause 6(iii) of Part-B-TI (placed at page 6 of P/B) and further in Form No 10B (audit report) Clause 2 of Annexure to audit report 2 (placed at page 33 of P/B). Nota bene, these all evidential documents were submitted during the course of original assessment proceedings and invariably part of assessment records. This establishes that, during the course of assessment proceedings, explicit queries were raised, and unreserved submission were matured before the Ld. AO, consequent to which inquiries into the claims u/s 11 were conducted in the light of documentary evidence and thereupon in the light of supportive material, drawing even-handed conclusions, the assessment was carried out, leaving no air in the assessment. Revisionary action and order u/s 263 of the Act, both entirely marshal out of a Revenue Audit Objection communicated and there was complete material absentia supporting the assumption of revisionary jurisdiction vis- -vis conclusion reached by Ld. CIT(Exemption). It is trite law that, while exercising revisional jurisdiction, it must be bear in mind that, the principles of natural justice do not permit the decision of a revisionary authority to be influenced by any other authority or agency, which indeed unfortunately the case squarely is, therefore, we are of the view that, this revisionary proceedings initiated on the thin ice of revenue audit objection report and concluded in absence of deprecative material, is untenable in law. In no case, mere audit information renders the order of assessment erroneous, and the very absence of material before the revisionary authority itself sufficient to hold the action as unsustainable in law and our view is invigorated by the Hon ble Kolkata High Court in Jeewanlal limited Vs ACIT [ 1975 (12) TMI 34 - CALCUTTA HIGH COURT] - Further the Hon ble High of Court of Bombay in CIT Vs Gabriel India Ltd [ 1993 (4) TMI 55 - BOMBAY HIGH COURT] has also taken similar view that, unless the revisionary authority forms a conclusion on the basis of concrete evidential material, it cannot reach to the conclusion rendering the order of assessment erroneous and prejudicial to the interests of the Revenue. In the light of aforestated reasoning, since the Ld. CIT(Exemption) solely acted upon the audit objection in absentia of contrary material, we neither find any infirmity with the order of assessment nor any merits in the revisionary order, ergo we quash the revisionary order, thus the legal ground of the appellant is answered in favour of assessee and against the revenue.

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• 2022 (5) TMI 935
  Revision u/s 263 by CIT - validity of assumption of revisionary jurisdiction alleging on twofold grounds namely; non-satisfaction of necessary twin conditions and non-applicability of provisions for the reasoned order of assessment - HELD THAT:- Upon careful consideration of factual matrix as enumerated in the proceeding paragraphs, the adjudication calls to examination of multiple issues which were brought on record by Ld. PCIT such as verification of interest expense on borrowed capital / loans vis- -vis interest free loans advances advanced to person other than debtors, verification of interest payment without deducting tax at source and allowability of related expense connected therewith, verification of taxation interest on refund, verification of sale of plots consequent capital gain, verification of claim of interest expense, verification of brought forward losses for there being set-off etc. In the absence of any reply from the appellant even after according several opportunities, the Ld. PCIT concluded the proceedings on the basis of available records and ultimately directed the Ld. AO to decide the issues raised on merits. However during the course of hearing, the Ld. AO taken us through the submission made during the course of original proceedings, to the extent establishing on records the submission were made and verified, however in the light of non-speaking assessment order touching only interest on refund issues, there was nothing on record that, to showcase the due inquiries into the other issues were made by the Ld. AO and after due application of mind the assessment was culminated. Indeed, the order of assessment is cryptic which ended before it started and in this context it mindful to judgement rendered in the light of re-opening of assessment in the case of ITO Vs M/s Techspan India Pvt Ltd 2018 (4) TMI 1376 - SUPREME COURT] Before the Ld. PCIT there was same tangible material in the form of assessment records, verification of which revealed the absence of necessary and adequate inquiries into the issues of limited scrutiny which remained unattended by the Ld. AO and hence the action of Ld. PCIT also find force by negative application of decision rendered in the case of CIT Vs Gabriel India Ltd [ 1993 (4) TMI 55 - BOMBAY HIGH COURT] We are of the considered view that, the action of Ld. PCIT is perfectly sustainable in law, to the effect holding the order of assessment as erroneous prejudicial to the interest of revenue in the absence of necessary inquiries into issues, ergo we find no infirmity with the direction of 263 revisionary order, thus the grounds raised by assessee are dismissed.

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• 2022 (5) TMI 934
  Nature of expenditure - Expenditure on prepayment for leased line - whether one-time prepayment for leased line of enduring benefit for a term of three years, can be treated as revenue in nature or deferred revenue or qualifies for depreciation u/s. 32 being a capital in nature? - HELD THAT:- As held by the Hon ble Supreme Court, in the case of Kedarnath Jute Manufacturing Co. Ltd. Vs CIT [ 1971 (8) TMI 10 - SUPREME COURT] the allowability of a particular deduction depends on the provisions of law relating thereto and not on the basis of entries made in the books of account, which are not decisive or conclusive in this regard. Expenditure in the nature of subscription of lease line on onetime payment for three year is of revenue in nature and allowable fully in the year in which it was incurred. Concededly, there is no advantage which has accrued to the assessee in the capital field, au contraire, the expenditure was incurred to facilitate the assessee s operations and no fixed tangible asset vis- -vis intangible assets is created by this expenditure. We may also add here that in the Income Tax laws, there is no concept of deferred revenue expenditure, therefore once the assessee claims the deduction for whole amount of such expenditure, even in the year in which it is incurred, and expenditure if fulfils the test laid down u/s. 37 of the Act, it has to be allowed. The only in exceptional cases, the nature mentioned in Madras Industrial Corporation [ 1997 (4) TMI 5 - SUPREME COURT] the expenditure can be allowed to be spread over, that too, when the assessee chooses to do so. Ergo, we hold that both the tax authorities below erred in disallowing the revenue expenditure incurred by the appellant, and is hereby overturned the same for the aforestated reasons. - Decided in favour of assessee.

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• 2022 (5) TMI 933
  Assessment u/s 153C - incriminating material found in search or not? - HELD THAT:- We are of the view that the order of the CIT(A) does not call for any interference. Admittedly, none of the additions made in these 4 appeals are based on any incriminating material found in the course of search in the case of M/s. Srinivasa Trust on 23.09.2016. In such a scenario, the additions made in the order of Assessment cannot be sustained. As far as the decision in the case of Canara Housing Development Co. Ltd. [ 2014 (8) TMI 642 - KARNATAKA HIGH COURT] in the decision rendered in the case of M/s. Delhi International Airport Pvt. Ltd. [ 2021 (11) TMI 928 - KARNATAKA HIGH COURT] wherein the law was explained that in an unabated assessments completed prior to search, there can be no addition in an Assessment under section 153C without material having been found in the course of search. The earlier decisions rendered by the Hon ble Karnataka High Court and other High Courts were duly considered and there is no dispute on this aspect and the fact that the said decision is the law as of today on the subject rendered by the Hon ble Karnataka High Court. We find no grounds to interfere in the order of the CIT(A). Consequently, these appeals by the Revenue are dismissed. In view of the above conclusions, we do not deem it necessary to examine whether the initiation of proceedings under section 153C

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• 2022 (5) TMI 932
  Income from house property u/s 23 - deemed rental income - estimating the fair market rent in respect of two properties owned by the assessee - Municipal Ratable Value of the impugned property or the actual rent offered by the assessee in the return of income - whether said properties were held by the assessee for its business purposes and hence, the deemed rental income thereon was no assessable as income from house property u/s 23 - HELD THAT:- AO has merely relied on the report submitted by the Assessing Officer, which is based on hearsay opinions. AO was duty bound to conduct proper investigation before rejecting the assessee s claim of deciding Annual value based on the Annual rateable value decided by Municipal Authorities. AO has also not given any specific reasons for rejecting the Rent claimed to be earned by the assessee from the impugned flat in Siddhivinayak Park. Thus, it is a settled proposition that , the places where Rent Control Act is not applicable, the Annual Value decided by Municipal Authorities can be a rational yardstick . In the case under consideration the DR has not brought to our notice any reason for which Municipal Value cannot be considered as Fair Rent u/s 23(1). Neither the AO nor the CIT(A) has discussed why Annual value decided by Municipal Corporation shall not be adopted as Fair Rent for the purpose of section 23(1) in this case. As already discussed why the report submitted by the Inspector cannot be considered. Therefore, we are of the opinion that , in this case the Municipal Ratable Value of the impugned property or the actual rent offered by the assessee in the return of income , whichever is higher, shall be adopted as fair rent u/s 23(1)(a) of the Act. Assessee appeal allowed.

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• 2022 (5) TMI 931
  Revision u/s 263 - initiation of revisional proceedings and consequential order under Section 263 is in the name of a deceased person - HELD THAT:- The issue of validity of a notice and proceedings held subsequent thereto against a dead person is no longer res integra - in the case of Dharamraj [ 2022 (1) TMI 844 - DELHI HIGH COURT] has examined the issue in length and held that the notice issued against a death person is null and void and all consequent proceedings/orders being equally tainted are liable to be set aside. We find considerable merit in the plea on behalf of the legal heir for the assessee that the entire proceedings beginning from issue of show cause notice and culminating in revisional order u/s 263 is a non-est exercise and cannot be given effect in law regardless of the fact whether the revenue was privy to death or otherwise. When a competent Court or authority holds such an order as invalid or sets it aside, the impugned order becomes null and void. Once it is concluded that the order in question is null and void, it is not for the adjudicating authority to advise the Commissioner as to what should he do Hence, in the absence of any opportunity to the assessee, for which the fault is attributable squarely to the PCIT is fatal and such defect being incurable, the revisionary order passed under Section 263 of the Act is also required to be quashed independently on this ground also - Decided in favour of assessee.

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• 2022 (5) TMI 930
  Allowable business expenses - Addition made as expenses were not incurred wholly and exclusively for the purpose of the business - Labour charges, freight inward expenses, freight outward expenses, loading unloading expenses, stores and spares and packing materials - HELD THAT:- We note that the AO has made the disallowance of the expenses for various reasons. One of the reason was that the details were not furnished by the assessee whether the expenses were paid through the banking channel or in cash. We disagree with the finding of the AO for the reason that the assessee has duly furnished the copies of the expenses ledgers and the ledger of all the parties to whom the payments of such expenses were made which are placed on paper book. The party wise ledgers contains the details of the mode of payment which is through banking channel. Similarly, the assessee has also filed the copy of the bank statement which is placed. Likewise there were addresses furnished by the assessee of all the parties to whom the payment was made against the expenses. However, the AO has not verified from any of the party despite having the power under the statute under the provisions of section 131(1)/133(6). Assessee has not furnished the details of the TDS - On perusal of the paper book filed by the assessee, particularly pages 693 to 724, we note that the assessee has furnished details of TDS deducted and the copies of the TDS return acknowledgment. Assessee has not furnished the bills of the parties as well as the copies of the vouchers for payment - On perusal of the paper book, we also note that such details were not furnished by the assessee. However, in our considered view in the absence of such details, there cannot be any disallowance of the expenses. It is for the reason that the AO was provided the addresses of the parties to whom the payment was made, their ledger accounts showing the amount was paid through the banking channel after the deducting the TDS against such exp.nses. If the AO had any doubt on the genuineness of the expenses in the absence of the bills and vouchers, the AO was very much empowered to call for the details from the respective parties. But he has not done so. Moreover, there were other details which were available on record wherein no defect was pointed out by the AO. Thus, in our considered view there cannot be any disallowance of the expenses in the given facts and circumstances in ad hoc manner. Assessee failed to furnish the copy of the bank book and the bank statement - With respect to the cash book, the learned AR before us contended that the copy of the cash book was never demanded by the AO during the assessment proceedings. Accordingly, the assessee has not furnished the same. This contention of the learned AR was not controverted by the learned DR at the time of hearing. Accordingly, we note that the assessee cannot be penalized on account of nonfurnishing the cash book in the given facts and circumstances. Disallowance of testing charges - Assessee has filed the necessary details of such expenses. The details include the ledger copies of the parties and the major bills issued by the parties which are placed on pages 207 to 249 of the paper book. The AO has not pointed out any defect in the details furnished by the assessee. In the event, the AO had any doubt on the genuineness of such expenses, he was empowered under section 133 (6)/131 of the Act to carry out the necessary verification. But he has not done so. Ad hoc disallowance towards bank commission/bank guarantee expenses - We note that the assessee has furnished the copies of the ledger of such expenses. The assessee in support of its expenses has also filed the bank statements which are placed on pages 251 to 438 of the paper book. The details of such expenses were very much available during the remand proceedings before the AO. Therefore the same cannot be disallowed on adhoc basis. Disallowance of brokerage expenses - We note that all the necessary details along with the bills were filed by the assessee which are placed along with the copy of the ledger. But the AO has not doubted on the genuineness of such details filed by the assessee. Thus we are of the view that the impugned expenses incurred by the assessee were genuine. However, the same cannot be allowed in the under consideration for the reason that the assessee failed to deduct the TDS in the year under consideration. Disallowance of depreciation - We note that the assessee has furnished the details of the bills of the major assets which are placed. However, no defect of whatsoever has been pointed out by the AO in these details. Accordingly we are of the view that there cannot be any disallowance of depreciation as alleged by the AO. DR at the time of hearing has not brought anything on record contrary to the finding of the learned CIT (A). In view of the above and after considering the facts in totality, we do not find any reason to interfere in the finding of the learned CIT (A). Accordingly we uphold the same. Hence the ground of appeal of the Revenue is dismissed. CIT (A) has admitted the additional evidences in contravention to the provisions of rule 46A of income tax rule - On perusal of the above provisions, we note that the learned CIT (A) has been empowered to admit the additional evidences. In the present case, the learned CIT (A) has exercised his power granted to him under section 250 of the Act and sub rule 4 of rule 46A of Income Tax Rule and therefore has admitted the additional evidences. Thus, we do not find any merit in the ground of appeal raised by the Revenue. Hence, we dismiss the same. Revenue appeal dismissed.

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• 2022 (5) TMI 929
  Understatement of turnover - overlapping of turnover reported in service tax return and VAT return due to comprehensive nature of AMC contracts undertaken by the assessee - HELD THAT:- The assessee is in the business of sales and service of computer hardware products and the assessee has also taken AMC contracts. The comprehensive AMC contracts are liable for VAT as well as service tax at respective rates as per rules prescribed for levy of tax on turnover. Accordingly, the assessee has charged VAT and service tax on 70% basic value, which resulted in overlapping of turnover in both VAT and service tax returns. AO on the basis of returns filed by the assessee under VAT and service tax opined that the assessee has understated turnover without appreciating fact that there is overlapping of turnover in both returns. CIT(A), after considering relevant facts and also taking note of reconciliation filed by the assessee explaining turnover declared in service tax return and VAT return has rightly deleted additions made by the AO towards estimation of gross profit on difference in turnover. Assessee has filed reconciliation statement explaining turnover reported in service tax return and VAT return as well as financial statement filed for relevant assessment year. From the above, what we could notice is that there is no difference between financial statement, when compared to turnover reported in service tax return and VAT return filed for relevant assessment years. Therefore, there is no error in the reasons given by the learned CIT(A) to delete additions made by the Assessing Officer towards estimation of gross profit on turnover. Hence, we are inclined to uphold findings of the learned CIT(A) and reject grounds taken by the revenue.

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• 2022 (5) TMI 899
  Unexplained cash deposits in the Bank account - gain from sale of agricultural land - Assessee giving evidences that the cash deposits are out of sale consideration of agricultural land of assessee s mother - what should be the sale consideration? - HELD THAT:- The source of money cannot be out of assessee s meagre source of income i.e., agricultural income out of agricultural activity carried out, electrical repairs or plumbing works. Admittedly the sale agreement, although not registered and assessee one of the party to agreement to sell, the total sale consideration fixed at Rs.2,80,75,800/- which is dated 14.08.2014. The sale deed of this agricultural land was executed on 22.09.2014 and as per sale deed, the assessee s mother along with her other son and two daughters executed the sale deed in favour of SRM Institute of Science and Technology, Trichy Campus through Dr.R. Sivakumar. But sale consideration as per cheque received by the vendors was Rs.60,75,800/- on that very date i.e., 22.09.2014. The assessee deposited this amount of Rs.2.20 crores in his bank account maintained with Punjab National Bank and the inference in which the normal man will draw is that the amount cannot be from any other source except from the transaction of sale of land because it is common in the transactions of immovable properties that there is under hand transactions. The presumption goes in favour of assessee that the cash deposit in bank account of assessee maintained with PNB on 22.09.2014 amounting to Rs.2.20 crores is coming from the sale transaction of agricultural land by the mother and the legal heirs of the mother including the assessee. The assessee produced a definite evidence i.e., sale agreement which is entered into for an amount of Rs.2,85,00,000/- on 14.08.2014 for sale of this agricultural land. The assessee has fairly established the fact that the cash deposits are out of sale consideration as recorded in the agreement of sale. In view of the above given facts and circumstances of the case, we are of the view that the cash deposit made by assessee amounting to Rs.2.20 crores are arising out of sale of agricultural land by the assessee s mother including assessee and hence, this cannot be treated as unexplained cash deposit. This issue, we concluded. Whether the land sold by assessee s mother is agricultural land or not? - The Revenue has raised no objection on the same rather accepted that the land sold is agricultural land and once it establishes that the land sold is agricultural land, no dispute remains. The amount deposited by assessee in PNB account is out of sale of agricultural land and source is established. Hence, the same cannot be assessed in the hands of the assessee as unexplained cash deposit. We reverse the orders of lower authorities and delete the addition. Appeal of assessee allowed.

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• 2022 (5) TMI 898
  Addition u/s 68 - unexplained cash deposited in bank account - HELD THAT:- In the present case, certain aspects were neither properly examined by the Assessing Officer during assessment as well as remand proceedings nor were considered by the learned CIT(A), which making / upholding the addition under section 68 - We find that the Assessing Officer as well as learned CIT(A) on merits merely rejected the contention of the assessee in respect of cash withdrawn by Shri Nandaram Chavan without calling him for examination and recording his statement in this regard. Even the assessee has neither produced Shri Nandaram Chavan nor requested for same during proceedings before lower authorities, and merely furnished the bank statement of Shri Nandaram Chavan in support of his submission that the amount withdrawn was not utilised by the bearer. We further find that though the learned CIT(A) has recorded the submission of the Assessing Officer on the additional evidence produced by the assessee in respect of interest free loans taken from 85 farmers, however, did not admit the additional evidence so produced by the assessee under Rule 46A. We deem it appropriate to remand this issue to the Assessing Officer for de novo adjudication after appropriate examination of Shri Nandaram Chavan and after consideration of all the documents as may be filed by the assessee, including the additional evidence filed before the learned CIT(A). The Assessing Officer shall have the liberty to call any person/document for examination, as may be required for complete verification of all facts and adjudication of this issue. Accordingly, issue No. 1 raised in assessee s appeal is partly allowed for statistical purpose. Disallowance of interest claimed under section 24 - assessee availed loan which will be utilised by him for the purpose of developing and renovating the property to be leased out - CIT(A) upheld the disallowance of deduction under section 24(b) of the Act claimed by the assessee in the absence of any documentary evidence to substantiate the claim of major repairs in the aforesaid 5 shops before giving the same on rent - HELD THAT:- In the present case, though the assessee has claimed that the loan was availed for the purpose of renovation of the aforesaid 5 shops, however, no documentary evidence was furnished to substantiate the fact of renovation of the aforesaid 5 shops. The learned AR only referred to the certificate issued by Vijaya Bank in support of its submission. As is evident, the purpose of the said certificate is only to certify the interest charged by the bank on the loan provided to the assessee. Though, the certificate also records the declaration of the assessee that the loan will be utilised for the purpose of developing and renovating the property to be leased out, no documentary evidence was furnished by the assessee to substantiate the said claim. We find from the material available on record that such information was also not directed to be produced by the Revenue. The claim of deduction was disallowed by the Assessing Officer only on the basis that the loan money was not utilised for the purpose of acquisition of property. Even in its remand report filed before the learned CIT(A), the Assessing Officer only submitted about the difference in amount of rent payable and doubted the bona fide of availing the loan of Rs. 52 lakhs. As under section 24(b) of the Act, deduction is available on payment of interest on loan availed, interalia, for the purpose of repair/reconstruction of the property, we deem it appropriate to remand this issue to the Assessing Officer for de novo adjudication. Thus issue No. 2 raised in assessee s appeal is allowed for statistical purpose.

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• 2022 (5) TMI 897
  Disallowance of employee s contribution of PF and ESI deposited after the due date under the specified act but before due date of filing of return of income U/s 139(1) - HELD THAT:- Respectfully following the order of this Bench in the case of Shri Sanjay Porwal [ 2022 (4) TMI 898 - ITAT JAIPUR] disallowance made on account of employees contribution towards PF ESI deposited before due date of filing of return of income u/s 139(1) of the Act is deleted and thus, the appeal of the Assessee allowed.

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• 2022 (5) TMI 896
  Income deemed to accrue or arise in India - Receipts of assessee in nature FTS - principle of mutuality - source of generating funds for the assessee - Whether the assessee received any payment from non-resident in connection with business of non-resident in India? - news reports that the Verein (Association) got converted into the Private Limited UK Company as limited by guarantee and thus the ld. AO taxed all receipts in the hands of assessee on gross basis as fee for technical services - test of commonality of identity between the members or participators in the mutual concern and the beneficiaries - HELD THAT:- As relevant Articles of the Verein and principles of law as with regard to the question as to if the assessee was operating on the concept of mutuality, the first thing that can be observed is that the Tax Residency Certificate in favour of the assessee issued by authorities specifically mention that the source of income of the assessee is subscription fee. The Collins dictionary defines Subscription as A subscription is an amount of money that you pay regularly in order to belong to an organization, to help a charity or campaign, or to receive copies of a magazine or newspaper. The Black s Law Dictionary defines Subscription as The act of writing one s name under a written instrument; the affixing one s signature to any document, whether for the purpose of authenticating or attesting it, of adopting its terms as one s own expressions, or of binding one s self by an engagement which it contains. Thus without importing any other meaning and rational to the meaning of subscription and same being the only source of income of the Verein, as recognized by the relevant tax authorities, it can be concluded that the only source of generating funds for the assessee was the subscription amount from its members determined on the basis of proposed annual expenditure, which were paid by member firms, being subscribers to the Articles of Verein. Then the invoices for the relevant year placed on record also show that the invoices were primarily raised for subscription according to Articles of Verein on account of operating expenditure, technology subscription or miscellaneous expenditure. The invoices are also raised for specific events organised and conducted by the assessee in furtherance of its recognised scope of activities and for the benefit of the Member Firms or the profession itself as a whole. These have been duly considered by the ld. F.A.A. while holding that no services were specifically provided by the assessee to its member in the nature of trading and the receipts were not in the nature of trading receipt. The Bench is of the considered opinion that the contributions in the form of Operational Subscription, Technology subscription and Miscellaneous subscription, were only indicative of the three heads of subscription. The contributions were to be made by Member Firms for total budgeted operating expenses . Mere name of a head for contribution is not consequential to term the activity for which such contribution is made to be in nature of services as trading or technical services. It is the prospective beneficiaries and the benefit that is relevant. The prospective beneficiaries here were only the Member Firms of the Verein and tangible benefit derived from activities for which contribution was received was merely pursuit of excellence of the Member Firms in professional field. FAA has rightly concluded that these contributions were in the nature of reimbursements. As, they were pre determined on basis of budgeted expenditure. There is certainly force in the contention of Ld Senior Counsel for the assessee that in any case allowing the contributions as reimbursement should have been a separate ground of challenge in appeal which has not been taken by the Revenue. AO failed to appreciate that the Section 1 of the Verein, document defined international name , international practice name , related names and Section 2.1 gave Member firms right to use these names and Section 2.2 provided certain responsibilities. These clauses establish that the Verein was formed for the benefit of the members to allow them being identified as member of the Verein in assuring their clients of certain professional standards being followed by the Member Firm. The only benefit members drive by way of paying subscription is to have benefit of the goodwill of the Verein as a whole, to which they are also members and adding to the goodwill, in terms of professional excellence on basis of shared information and experiences in the field of profession. The only objective of the Verein thus was to benefit its member in the professional field and to evolve better professional practices. Verein was established for specific purposes mentioned in Article 1.2 and they nowhere indicate that any element of commerciality between the members themselves or by the members of the Verein and Verein itself with any outside members or clients was directly possible. Special reference can be made to Article 7.5 which provides that Verein shall not provide services to clients or direct or control the manner in which each member firm provides audit for other services to its clients and the Verein shall not share in the profit and losses of the member firms. The manner in which the funds for the activities of the Verein were to be collected by way of contribution as per article 7.1, limiting financial obligations of the member firms to the Verein to the extent of annual contributions towards budgeted operating expenses as per article 7.4 and the distribution of funds on dissolution of the Verein or withdrawal or expulsion of the member firm from the Verein as per Article 11.2 firmly indicate that the Verein was working on principles of mutuality and not in a commercial venture on quid pro quo basis.. As with regard to the findings of the ld. AO on the basis of news reports that Verein has converted into the private company with limited guarantee the same being on hearsay had no evidentiary value. Though, on behalf of the assessee it has been submitted that another entity has come into existence for the purpose of certain local laws which has no concern with the present assessee. The activities of the Verein were certainly not for social cause and cultural cause but pursuit of excellence in professional field is no less a noble cause. The services may be customized and focused but are not special services in the sense that their utility is not restricted to few beneficiaries but across board all the member firms and substantially the profession as a whole is the beneficiary. The use of technology for benefit of all member firms commensurate with the scope and objectives of the Verein. The subscription charges cannot be said to be consideration for any specific service performed or for some specific members. Hon ble Madras High Court in the case of South Indian Films Chambers of Commerce [1981, 129 ITR 22 (Madras)] has held that provisions of Section 28(iii) of the Act will not be attracted in a case where profit making was only incidental and not the means of achieving the main objects. In the case in hand rather there is no element of profit making by the assessee from its member firms or non-members. Verein was functional on the principles of mutuality which Ld. Assessing Officer failed to appreciate while Ld. Ld. First Appellate Authority corrected the same in appeal. The element of commonality of identity between the Member Firms, in the mutual concern to evolve better professional practices. The completeness of identity between the member Firms due to contributions of Member Firms being only source of meeting expenditure for running the Verein and for activities of Verein and Non-profiteering, while obedience to mandate of the Verien are established from the matter on record. Thus no fault can be found, on facts or law, in the findings of Ld FAA and there is no substance in the grounds of appeal raised by the Revenue.

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• 2022 (5) TMI 895
  Revision u/s 263 - Reliance on audit objection raised by the Audit Wing of the Department - As per CIT no due enquiry and due application of mind by the AO - increase in the valuation of stock as on the date of survey - HELD THAT:- As gone through the paper book filed by the assessee wherein the assessee has sought to demonstrate with evidence that the AO had already made requisite enquiries on the issues raised by the Ld. PCIT during the course of assessment proceedings and also the assessee had duly complied with the enquiries made made by the AO by replying in details and by furnishing various documents and evidences in support of its claim. We have also gone through the surrender letter, as submitted by the assessee during the course of survey conducted on it on 13.11.2014 and 14.11.2014. We have also gone through the reply dated 29.11.2019 given by the assessee with respect to the audit objection. We find it difficult to accept the finding of the PCIT that the AO had not applied his mind to the issue of increase in the stock valuation of Rs. 2.45 crore which had not been reflected while filing the return of income. It is also worth our observation that the AO was conscious of the fact that non-declaration of Rs. 2.45 crore would result in the fall in the gross profit/net profit and the same was enquired into by the AO by requiring the assessee to explain the reason for the fall in gross profit/net profit. Apparently, based on the submissions made by the assessee in this regard, the AO agreed with the claim of the assessee that the offer of increase in the valuation of stock made on 14.11.2014 got subsumed while preparing the financial result for the year ending 31.03.2015. Although, the AO might not have recorded his satisfaction in as many words but looking into the record before us, we can safely conclude that the AO had given a thoughtful consideration to the issue and had accepted the assessee s contention only after adequate enquiry and due application of mind. Also gone through the audit objection , copy of which was furnished before us and for which there is a reply furnished by the assessee on 29.11.2019 and it has been rightly contended by the Ld. AR that the same has to be considered for the purposes of the record as per clause (b) to Explanation 1 of Section 263. AO made the requisite enquiries, therefore, it is not a case of no enquiry and if the Ld. Pr. CIT was not satisfied with the enquiries made by the AO, he should have conducted the enquiries himself to record the findings that the assessment order was erroneous and he should not have simply set aside the order passed by the AO directing him to conduct the further enquiries. Thus no hesitation in holding that the assumption of jurisdiction u/s 263 of the Act on the ground that there was no enquiry by the AO and on the ground of non-application of mind by the AO is bad in law and cannot be upheld - PCIT was not justified in exercising his power to invoke the provision of Section 263 of the Act on the basis of audit objection raised by the Audit Wing of the Department.- Decided in favour of assessee.

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• 2022 (5) TMI 892
  Validity of Reopening of assessment u/s 147 - as argued case re-opened on the basis of borrowed satisfaction by simply relying upon the information flagged by the Risk Management Strategy of the Income Tax Department - also detailed replies of the Petitioner-Company were not taken into consideration by Respondent No.1, and therefore, the Order under Section 148A(d) and the consequential Notice under Section 148 of the Act should be set aside - HELD THAT:- On the last date of hearing respondent-revenue had sought time to obtain instructions. Today, he prays for further time to obtain instructions. However, this Court is of the view that the respondent-revenue has had adequate time to obtain instructions. Consequently, this Court has no other option but to believe the averments in the writ petition. Believing the averments in the writ petition to be true, the impugned order and notice under Section 148 of the Act are set aside on the ground that the Assessing Officer has not taken into consideration the replies along with the documents/evidences filed by the petitioner. Accordingly, the Assessing Officer is directed to pass a fresh reasoned order under Section 148A(d) of the Act after taking into account the submissions/contentions advanced by the petitioner in its replies as well as documents/evidences filed along with the said replies.

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• Customs

• 2022 (5) TMI 894
  Classification of imported goods - Hexane Liquid Chemical - utilized for Industrial purpose as well as for Food Grade purpose or not - it is claimed that what has been imported in the name of Hexane Liquid Chemical, to be utilized for Industrial purpose, is actually Hexane Liquid Chemical for Food Grade purpose - HELD THAT:- First of all, it is needed to be understood whether these two products are different or distinct or is it the case that the Hexane Liquid Chemical can be used for Industrial purpose also as well as for Food Grade purpose. If this chemical can be used for both the purpose as aforesaid then the writ applicants undertake that they will use it only for the Industrial purpose - It is to be understood further on what basis the CRCL has said that the samples analyzed are not Hexane Liquid Chemical meant for Industrial purpose but, it is for Food Grade purpose. In this regard, CRCL is directed to file a affidavit through a responsible officer along with the necessary test reports. Let these matters come up on 05.05.2022 on top of the Board. One set of the entire reply along with the documents shall be furnished by 04.05.2022 to the learned advocate appearing for the writ applicants - Notify these matters as item No.1 on 05.05.2022.

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• Corporate Laws

• 2022 (5) TMI 928
  Oppression and Mismanagement - validity of Board Meetings - validity of withdrawal of resignation from the post of Directorship - Invocation of jurisdiction of this Bench under Section 397/398 and other provisions of the Companies Act, 1956 - requisite qualification as contemplated under Section 399 of the Companies Act, 1956 - any case has been made out even under Section 111 A of the Companies Act, 1956 or not - validity of Board Meetings - transmission of Equity Shares - validity of AGM conducted - failure to adhere to the request of the petitioner regarding furnishing the documents and inspection of bock s and accounts of the R 1 Company - HELD THAT:- There is no doubt that on 06.04.2013, G.V. Rao addressed a letter to the Board resigning from the post of Directorship. The letter explicitly indicated that his resignation should be acknowledged and Form 32 be filed with the Registrar of Companies. Further, on 09.04.2013, G.V. Rao himself wrote a letter seeking withdrawal of his resignation, which was placed in the meeting of the Board on 09.04.2013. In the resolution passed therein, there is no protest by the respondent No.1 regarding attendance of Mr. G.V. Rao. Moreover, Dr. Renuka Datla, by letter dated 15.04.2013, which was addressed to the employees of the Company, welcomed the appointment of appellant Mahima Datla as its Managing Director and appointment of others as Directors. In the case at hand, the respondent No. 1 has not proved that the transfer of shares based on the Will dated 14.02.2005 was a fraud played on her as well as the Company. From the narration of the circumstances, wherein appellant Mahima Datla was groomed by her father to carry the operations of the Company clearly points out to his intention to make such Will. In light of the fact that no allegation of fraud or dishonesty is noticeable in this case, there is no way to ignore the application of this well settled principle - the thrust of the Duomatic Principle is that strict adherence to a statutory requirement may be dispensed with if it is demonstrated otherwise on facts, if the same is consented by all members. In this case at hand, there is overwhelming evidence to show that respondent No. 1 had accepted Mr. G.V. Rao back into the Board and her conduct clearly shows that the resignation dated 06.04.2013 was clearly not accepted. The impugned order passed by the High Court on 17.11.2017 is hereby set aside being contrary to the provisions of the 1956 and 2013 Acts and the order of the CLB dated 30.05.2016 is restored with modifications and by adding the following conditions (1) Dr. Renuka Datla shall be appointed as Emeritus Consultant of the Company. (2) Dr. Renuka Datla will be paid a sum of Rs.65 lakhs per month w.e.f. 01.04.2022 regularly month by month on or before 7th of each month. The payment for current month (April, 2022) may be made by 30th of this month. (3) A further lump sum payment of Rs.10 Crore shall be made to Dr. Renuka Datla by 31.05.2022, which shall be in lieu of all payments, if any, that may be due to her till date and also in lieu of any further increase in monthly payments. (4) Other facilities to Dr. Renuka Datla will also be provided to her, which include her medical expenses, security, residence, maintenance of cars, club memberships etc., the expenses for which shall also be borne by the Company. (5) The learned counsel for the appellants in these three appeals have undertaken that they shall get a resolution passed to the above effect by the Board of Directors of the Company and the General Body of shareholders, within one month. (6) Ms. Sarada Devi, learned counsel for the respondent no.1 Dr. Renuka Datla has stated that Dr. Renuka Datla is present today whom she has consulted, and in lieu of the aforesaid payments to be made and facilities to be provided by the Company, Dr. Renuka Datla as well as the appellants, undertake to put a quietus to the entire litigation between them, which is pending and also undertake not to initiate any further civil or criminal proceedings against each other. Appeal disposed off.

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• 2022 (5) TMI 927
  Restoration of name of the Company in the Register of Companies - Section 252 of the Companies Act, 2013 - HELD THAT:- After perusal of material document on record, the report of the Respondent and after going through the provisions of Section 252(3) of the Act, 2013, this Tribunal is of the view that the Applicant Company was in existence and it is a going concern and name of the Company is to be restored in the Register of Companies as maintained by the Respondent. The application is allowed.

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• Insolvency & Bankruptcy

• 2022 (5) TMI 926
  CIRP in progress - moratorium in effect - recovery of dues from NPA - It is claimed that since the moratorium under Section 14 of the IBC has ceased to subsist after the order directing liquidation was passed under Section 52 of the IBC, the secured creditors were allowed to realise their security interest - HELD THAT:- After the CIRP is initiated, there is moratorium for any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the SARFAESI Act. It is clear that once the CIRP is commenced, there is complete prohibition for any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property. The words including any action under the SARFAESI Act are significant. The legislative intent is clear that after the CIRP is initiated, all actions including any action under the SARFAESI Act to foreclose, recover or enforce any security interest are prohibited - It could thus be seen that the provisions of the IBC shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. It has been consistently held by this Court that the IBC is a complete Code in itself and in view of the provisions of Section 238 of the IBC, the provisions of the IBC would prevail notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Undisputedly, in the present case, the balance amount has been accepted by the appellant Bank on 8th March 2019. The sale under the statutory scheme as contemplated under Rules 8 and 9 of the said Rules would stand completed only on 8th March 2019. Admittedly, this date falls much after 3rd January 2019, i.e., on which date CIRP commenced and moratorium was ordered. As such, we are unable to accept the argument on behalf of the appellant Bank that the sale was complete upon receipt of the part payment - In view of the provisions of Section 14(1)(c) of the IBC, which have overriding effect over any other law, any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the SARFAESI Act is prohibited. The appellant Bank could not have continued the proceedings under the SARFAESI Act once the CIRP was initiated and the moratorium was ordered. No case is made out for interfering with the concurrent orders passed by the learned NCLT dated 15th July 2020 and learned NCLAT dated 26th March 2021 - Appeal dismissed.

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• 2022 (5) TMI 925
  Pecuniary Jurisdiction - TDS amount come within the pecuniary jurisdiction of this Adjudicating Authority or not - whether non-payment of TDS amount is debt or not - HELD THAT:- In non-payment of the TDS amount by the Corporate Debtor there was no occasion for admitting Section 9 Application by the Adjudicating Authority. The Adjudicating Authority committed serious error in admitting Section 9 Application on the aforesaid submission of the Operational Creditor that non-payment of the TDS amounts is default. The consequences of non-payment of TDS are provided under Income Tax Act, 1961 and income tax authorities have ample powers to take appropriate action. Learned counsel for the Appellant submits that both the TDS amounts has already been made, which is disputed by learned counsel for the Respondent. Regarding non-payment of TDS, we are of the view that it is not for us to consider whether TDS amount have been paid or not although it has been clearly submitted at the Bar by the Appellant that they have been paid - the Adjudicating Authority has committed serious error in admitting the Section 9 Application on the ground of nonpayment of two TDS amounts. Thus, the order of the Adjudicating Authority admitting Section 9 Application is unsustainable and deserves to be set aside. Present is also a case where the Operational Creditor has misused the process of I B Code in filing application for revival of Section 9 Application for non-payment of two TDS amounts. The process of I B Code cannot be utilized for the above purpose, whereas present is not a case that Corporate Debtor has not paid any amount due to the Operational Creditor. The Operational Creditor has misused the process of I B Code. Appeal allowed with a cost of Rs.1 Lakh on the Operational Creditor i.e. Respondent which shall be paid within a period of one month to the Corporate Debtor.

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• 2022 (5) TMI 924
  Initiation of CIRP - Application filed by the Appellants/Applicants rejected on the ground that the Appellants were Related Parties and cannot be treated as Financial Creditors within the meaning of Section 5(7) of the Code - HELD THAT:- It is an undisputed fact that the Appellants together hold about 48% of the shareholding of the Company. It is the main contention of the Appellants that the Master Data of the Corporate Debtor was not updated in the Ministry of Corporate Affairs MCA Website and that they were never Directors of the Company and were only Additional Directors, which designation, also ceased as the Annual General Meeting contemplated under Section 161(1) of the Act was never conducted inducting them as Directors. A brief perusal of the Master Data of the Corporate Debtor reflects the fact that Appellants 2 3 continue to be Directors. It is also seen that the second Appellant Mr. Sushil Govindrao Uttarwar is the common Director of the Corporate Debtor as well as the present Appellant No. 1 Company. Further in the Application filed by the Appellants herein seeking intervention in the Section 7 Petition filed by SIDBI, it is submitted that they have acquired 44% shareholding of the Corporate Debtor Company in November 2018 and arrayed themselves as Directors . It is significant to mention that a copy of the Master Data of the Corporate Debtor Company as per the records of the MCA Website was annexed to the said Application, in support of their locus standi for intervening in the matter. Therefore, the contention of the Appellants herein that they were not Directors of the Corporate Debtor Company , is untenable. This Tribunal is of the considered view that the documentary evidence on record clearly establishes that the entire loan was converted into equity and hence no claim is maintainable under the guise that this amount be treated as a Financial Debt - this Tribunal holds that the Appellants are Related Parties and there are no substantial grounds to interfere with the well-reasoned Order of the Adjudicating Authority - Appeal dismissed.

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• 2022 (5) TMI 923
  Initiation of CIRP - NCLT rejected the application on the ground of pre-existing dispute - the six ADMs received by the Operational Creditor, which had made flight bookings on behalf of the Respondent, but the requisite payments were not made by the Corporate Debtor - HELD THAT:- On perusal of the Respondent s reply to Section 9 notice, it is found that the Respondent had communicated to the Operational Creditor vide email dated 10.01.2018 (reproduced at pg. 297 of the appeal paper book) stating very clearly that they would be in a position to make any payment against ADM only with respect of the same . The details of the ADMs, as sought by the Corporate Debtor vide email dated 10.01.2018, were supplied to the Corporate Debtor vide email dated 19.01.2018 sent by Sunita Nair of Tek Travels Pvt. Ltd. to Meera Kashyap with copy to Travel Markers alongwith copies of the ADMs (attached at pg. 359 of appeal paper book), and again vide email dated 24.03.2018 (attached at pp. 369-377 of the appeal paper book) details of ADMs receipt for Married Segments Policy violation were sent by the Operational Creditor. The ADMs were issued by Air France/KLM and Turkish Airlines, in the present case the Travel Boutique Online which are the brand name of the Operational Creditor. Thus, the primary responsibility for responding to the ADMs is of the ticketing agency Travel Boutique Online . Since, the Adjudicating Authority has primarily looked at the non-supply of ADMs to the Corporate Debtor in support of the contention regarding pre-existing dispute, we are of the view that it has committed an error by not considering the fact that the Operational Creditor had supplied the copies of the ADMs which is evidenced by emails dated 19.01.2018 and 24.03.2018 - the purported dispute considered by the Adjudicating Authority as a result of non-supply of copies of ADMs is more like a sham dispute, and it should not come in the way of admission of Section 9 application. Section 9 application of the Operational Creditor should be admitted. The case is remanded to the Adjudicating Authority for passing necessary order which should include order regarding all consequential actions which should follow upon admission of Section 9 application within 15 days of this judgment.

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• 2022 (5) TMI 922
  Initiation of CIRP - NCLT admitted the application - Operational Creditors - pre-existing disputes with respect to the price of the equipment supplied or not - HELD THAT:- The issue whether the dispute raised is an assertion of fact has to be decided on the touchstone of the ratio laid down by the Hon ble Apex Court in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [ 2017 (9) TMI 1270 - SUPREME COURT] where it was held that Going by the test of existence of a dispute , it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defense is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defense as vague, got-up and motivated to evade liability. It is significant to mention that the Corporate Debtor does not deny the issuance of three cheques totalling to Rs.35,54,755/-. It is their only case that there was a pre-existing dispute between the parties. It is pertinent to note that the Corporate Debtor has not raised any pre-existing dispute in reply to the Demand Notice under Section 8 of the Code. Be that as it may, the contention of the Learned Counsel that the MOU expired on 30.09.2016 and, therefore, the amounts raised for the invoices for the subsequent period is not payable, is unsustainable as the documentary evidence establishes that the claims made by the Operational Creditor were against the invoices for the period 10.03.2017 to 15.09.2018 and have no nexus with the MOU - It is seen from the record that there is no disputed questions of fact and that the argument raised regarding the existence of a dispute is a patently feeble legal argument unsupported by evidence. The defence is spurious and a plainly frivolous one. There is no material on record to establish that there was any dispute prior to the issuance of the Section 8 Demand Notice or that there was any assertion of fact supported by any evidence to establish the existence of dispute - Appeal dismissed.

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• 2022 (5) TMI 921
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- In the instant case there is an operational debt and there has been a default in repayment of the same and that this Adjudicating Authority is satisfied that the Operational Creditor has proved its case by placing evidence that default has occurred for which the Corporate Debtor was liable to pay. Hence, the contentions of the Corporate Debtor are overruled - the Operational Creditor has fulfilled all the stipulations as required under the provisions of the IB Code, 2016 for the purpose of initiating Corporate Insolvency Resolution Process. In these circumstances, having satisfied with the submissions made by the Petitioner/Operational Creditor, this Adjudicating Authority is inclined to admit the instant Application. Petition admitted - moratorium declared.

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• 2022 (5) TMI 920
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - only contention of the Corporate Debtor is that the Application herein has not accounted for the amounts received by way of sale of various assets of the Corporate Debtor and therefore the Application lacks merit - HELD THAT:- In the instant case there is a financial debt and there has been a default in repayment of the same and the said default is far more than Rs. 1 Crore. Thus, this Adjudicating Authority is satisfied that the Financial Creditor has proved its case by placing evidence that default has occurred for which the Corporate Debtor was liable to pay. Hence, the contentions of the Corporate Debtor are overruled - Further the Financial Creditor has fulfilled all the stipulations as required under the provisions of the IB Code, 2016 for the purpose of initiating Corporate Insolvency Resolution Process. In these circumstances, having satisfied with the submissions made by the Petitioner/Financial Creditor, this Adjudicating Authority is inclined to admit the instant Application. The instant application is hereby admitted and this Adjudicating Authority orders the commencement of the Corporate Insolvency Resolution Process (CIRP) which shall ordinarily be completed within the timelines stipulated in the IB Code, 2016 (as amended), reckoning from the day of this order is passed.

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• 2022 (5) TMI 919
  Seeking to stay the further proceedings and to declare the 3rd E-auction process initiated under invitation for expression of interest to submit bid in respect of sale of IVRCL Ltd. under liquidation as going concern - relation of the Auction purchaser herein with that of the Corporate Debtor - auction purchaser is a related party or not - 2nd Respondent herein accepting the bid of Sri Ponguleti Prasad Reddy, Promoter of M/s. Raghava Water and Raghava Constructions and directing him to deposit the balance of bid amount is arbitrary, illegal, and violative of Section 29(A) of Insolvency and Bankruptcy Code, 2016 or not - seeking to direct the 2nd Respondent to issue a fresh e-auction process taking all steps germane for the purpose of perfect competition in the bidding process - HELD THAT:- It is seen that Sri Ponguleti Prasad Reddy does not fall within ambit of ineligibility as per the provisions of the Section 29A of the IB Code, 2016. Here, the Applicant herein has moved the instant Application upon having failed to submit the requisite documents and EMD within the stipulated time and now by virtue of this Application is trying to make a back door entry by making frivolous allegations and also with an intention to stall the process of Liquidation - In a nutshell, it is clear that the successful bidders are individuals and the next point is that they are not covered under Section 29A of the Code. Application dismissed.

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• 2022 (5) TMI 918
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of dispute between the parties prior to the issuance of the Demand Notice or not - Whether the applicant is an Operational Creditor and the debt is Operational Debt? - HELD THAT:- The Hon ble Supreme Court while interpreting the definitions of Operational Creditor and Operational Debt, in the case of SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT ] has held that Operational Creditors are relatable to supply of goods and services in the operation of business . Thus, it is manifestly clear that the Applicant had supplied goods to the Corporate Debtor in terms of the Seller s Contract and therefore, the Applicant is an Operational Creditor and the debt owed to it is an Operational Debt. Whether there exists any dispute between the parties prior to the issuance of the Demand Notice? - HELD THAT:- On perusal of the counter filed by the Corporate Debtor, it is seen that the Corporate Debtor, throughout the averments made in the counter, seems to have only alleged that there exists a dispute between the parties. Further as per the contention of the Corporate Debtor, if the shipment was dispatched by the Applicant in violation to the seller s contract, the Corporate Debtor ought to have at least raised the objection at the point in time when the shipping company had sent a mail to the Corporate Debtor to clear the consignment. However, no documentary evidence or proof has been filed by the Corporate Debtor to show that it had objected to the shipment - the Operational Creditor has also filed an Affidavit under Section 9(3)(b) of IBC, 2016 wherein it has been stated that the Demand Notice has been served. Further in relation to the Pecuniary Jurisdiction the total amount claimed to be defaulted exceeds Rs. 1 crore and as such this Tribunal has the Pecuniary Jurisdiction to entertain this Petition, as filed by the Operational Creditor. The Petition as filed by the Operational Creditor, is required to be admitted under Section 9(5) of the IBC, 2016 - Application admitted - moratorium declared.

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• 2022 (5) TMI 917
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It is noted that the Corporate Debtor has taken the building for lease and had defaulted in paying the rents as per the agreement entered between them - a demand notice was issued to the Corporate Debtor and the same was delivered to the registered office of Corporate Debtor and Corporate Debtor has come up for clearing dues and underwent an MOU, but failed to pay the debt in spite of receipt of demand notice and no dispute was raised - the Adjudicating Authority directed the operational creditor to issue notice to the corporate debtor on 16.02.2022 and 01.03.2022. The notice which was sent to the respondent got returned twice with endorsement Addressee Refused . Thus this Adjudicating Authority set the Corporate Debtor ex-parte vide order dated 30.03.2022. The claim amount is more than Rs. One Lakh and the Petition is filed before the notification dated 24.03.2020, hence, it is clear that the company petition is admissible. Petition admitted - moratorium declared.

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• 2022 (5) TMI 916
  Liquidation of the Corporate Debtor - Section 33(2) of I B Code, 2016 - HELD THAT:- The Applicant/RP has complied Compliance Certificate in Form-H with all the mandatory requirements of CIRP of the Corporate Debtor as provided under the I B Code, 2016 and its allied Regulations, 2016. The Corporate Debtor is ordered to be liquidated - application allowed.

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• 2022 (5) TMI 915
  Seeking revision of timeline for completion of the works of dismantling, removing and lifting of the plant and machinery from Block B of the Lanco Babandh Power Limited - effective and peaceful possession of the site without any hindrances - HELD THAT:- In view of the averments made both by the Applicant and the Learned Liquidator, it is observed that due to unruly incidents of trespass and assault on the security personnel deployed at the power plant premises of the Corporate Debtor, the Applicant has not been able to avail peaceful possession of the Plant and Machinery purchased through public auction conducted by the Liquidator, until the issue was resolved with the help of the officers of the District Administration and the Police authorities on the basis of our order in IA 600/2021. It is admitted by the Liquidator that the matter was finally resolved on 09.11.2021 with the help of the District Magistrate and SP of Dhenkanal district. The period of 9 months for dismantling and removal of the plant machinery by the Applicant shall be computed from the date of handing over of peaceful possession of the site by the Liquidator - Application disposed off.

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• 2022 (5) TMI 914
  Seeking winding up of the Respondent/Corporate Debtor - Section 433(e) and Section 433(f) r/w. Section 434 of the Companies Act, 1956 - HELD THAT:- It is seen from the records that already a Settlement Agreement was entered into between the parties on 25.07.2017 in and by which the Corporate Debtor is liable to pay a sum of 65,000,000 JPY on or before September 2018. There is no dispute in relation to the same. However, it is seen from the record of proceedings that the Corporate Debtor has violated the terms of the said settlement Agreement and seeking time to settle the matter. Hence, the debt and default on the part of the Corporate Debtor is proved beyond reasonable doubt and under the said circumstances, there are no other option available, than to initiate Corporate Insolvency Resolution Process as against the Corporate Debtor. Since the present Petition is admitted, the restraining order passed against the property situated Arcot Road, comprised in T.S. No. 5/11, stands intact. Application admitted - moratorium declared.

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• 2022 (5) TMI 913
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not, before issuance of SCN or not - HELD THAT:- On perusal of the records it is found that the corporate debtor has brought on record letters dated 08.05.2015, 15.10.2016, 16.01.2017, 24.07.2018 and email dated 09.12.2016 sent to the applicant - right from the year 2015 the corporate debtor has been complaining about the poor quality of goods supplied by the applicant. The corporate debtor has brought on record documents to substantiate its arguments that before issuance of demand notice dated 24.02.2020, there were genuine disputes with regard to quality and quantity of the goods supplied by the applicant. Hon ble Supreme Court in the matter of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [ 2017 (9) TMI 1270 - SUPREME COURT ] that in case of genuine dispute raised by the corporate debtor, the application cannot be admitted. Application dismissed.

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• 2022 (5) TMI 912
  Rejection of the simultaneous claim by the Resolution Professional of the Corporate Debtor - Claim filed by the Applicant with respect to the corporate guarantee given by the Corporate Debtor - whether a simultaneous claim can be submitted by the financial creditor in the CIRP initiated against the Corporate Debtor as well as against the Corporate Guarantor? - HELD THAT:- Section 60(2) of the IBC, 2016 empowers the Financial Creditor to initiate the CIRP against the Corporate Debtor as well as the corporate guarantor of the Corporate Debtor. If, the financial creditor is entitled to initiate a CIRP against the Guarantor during the pendency of CIRP or liquidation proceeding pending against the Corporate Debtor. Thereby, the claim can not be rejected merely on the ground that the claim has already been admitted in CIRP of M/s. Sitex. Moreover, there is no bar in the IBC, 2016 to submit the simultaneous claim in the CIRP of the Corporate Debtor as well as in the CIRP of the corporate guarantor. The Hon ble NCLAT in STATE BANK OF INDIA, STRESSED ASSET MANAGEMENT BRANCH VERSUS ATHENA ENERGY VENTURES PRIVATE LIMITED [ 2020 (11) TMI 800 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI] has upheld that when the principal borrower and surety are undergoing CIRP the creditor is entitled to file a claim in CIRP on both of them. It is directed to the RP of the Corporate Debtor to verify and admit the claim submitted by the applicant with respect to the corporate guarantee executed by the Corporate Debtor for the credit facilities as well as Bank Guarantee Given to M/s. Sintex - the present application is allowed.

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• 2022 (5) TMI 911
  Seeking Liquidation of Corporate Debtor - seeking appointment of Liquidator for initiation of Liquidation process of the Corporate Debtor - Prescribed period for filing application - applicability of Section 33(1) or Section 33(2) of IBC - HELD THAT:- In the present case, the Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 was admitted on 02.08.2019 and the period of 180 days were completed on 28.01.2020. As per Order dated 14.01.2020 in IA No. 23/2020 this Adjudicating Authority has allowed to extend the CIRP period by 90 days till 27.04.2020. Due to Covid-19 pandemic, lock down was imposed from 25.03.2020 till 31.05.2020 in Bengaluru, thus the CIRP was extended to expire on 04.07.2020. The IA No. 240/2020 filed by the Resolution Professional seeking to extend the CIRP period by 30 days, thus the CIRP has expired on 04.09.2020. The present application is filed on 09.09.2020 i.e., after the expiry of the CIRP period. Hence, this application shall be considered under Section 33(1), but not under Section 33(2). Appointment of Liquidator - HELD THAT:- Section 34(1) of the Code provides that where the Adjudicating Authority passes an order for liquidation of the Corporate Debtor under Section 33, the Resolution Professional appointed for the CIRP shall, subject to submission of written consent, act as the Liquidator for the purpose of Liquidation. Section 34(4)(a) of the Code states that the resolution plan submitted by the resolution professional was rejected for failure to meet the requirements, the Adjudicating Authority shall by order replace the RP - In the present case, it is stated in the application that the plan submitted by the Resolution Professional was not approved in the CoC meeting and the final Resolution Plan was rejected by the CoC on 02.09.2020. Sub Section (7) of Section 34 of the Code says that the Adjudicating Authority shall, on receipt of the proposal of the Board for the appointment of an Insolvency Professional as Liquidator by an order appoint such Insolvency Professional as Liquidator. Application admitted.

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• 2022 (5) TMI 910
  Maintainability of application - initiation of CIRP - Corporate Debtor faield to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- On perusal of the records it is found that as per the terms and conditions of purchase order dated 26.05.2018 issued by the applicant, the corporate debtor had delivered Waste Water Recycling Plant (800 m3/day) at the site of the applicant vide different delivery challan/packing slip during the period from 08.08.2018 to 16.12.2018 and the applicant has made total payment of Rs. 1,68,20,000/- to the corporate debtor. The corporate debtor has furnished copies of email/WhatsApp communications and correspondences between the corporate debtor and applicant, during the period between 23.12.2019 and 22.03.2020, much prior to the receipt of demand notice which substantiates that there exists a genuine dispute between the parties. As per the purchase order, the applicant had delivered and commissioned the machinery at the site of the corporate debtor as per the schedule and had redressed all the technical service issues faced by the corporate debtor, even after successful commissioning of the RO Plant. The corporate debtor has brought on record documents to substantiate its arguments that before issuance of demand notice dated 04.12.2020, there were genuine disputes with regard to operation of the plant supplied by the corporate debtor. Hon ble Supreme Court in the matter of Mobilox Innovative Private Limited vz. Kirusa Software Private Limited [ 2017 (9) TMI 1270 - SUPREME COURT ] held that in case of genuine dispute raised by the corporate debtor, the application cannot be admitted. The instant application deserves to be dismissed - Application dismissed.

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• 2022 (5) TMI 893
  Constitutional validity of provisions of Section 3(10) of the Insolvency and Bankruptcy Code, 2016 read with Regulations 9A - claims filed under a CIRP by decree holder under Regulation 9(a) of the CIRP Regulations, be considered at par with claims filed by financial creditors - HELD THAT:- Imougned Order need not be interfered with - SLP dismissed.

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• Service Tax

• 2022 (5) TMI 967
  Levy of service tax - Reverse Charge (RCM) - taxability of the cross charge, which is primarily based on who should be reckoned as an employer of the secondee - Manpower Recruitment Agency Service - employees who were seconded to the assessee by the foreign group companies - CESTAT set aside the demand - Extended period of limitation - HELD THAT:- During the arrangement, the secondees work under the control and supervision of the Indian company and in relation to the work responsibilities of the Indian affiliate. Social security laws of the home country (of the secondees) and business considerations result in payroll retention and salary payment by the foreign entity, which is claimed as reimbursement from the host entity. The crux of the issue is the taxability of the cross charge, which is primarily based on who should be reckoned as an employer of the secondee. If the Indian company is treated as an employer, the payment would in effect be reimbursement and not chargeable to tax in the hands of the overseas entity. However, in the event the overseas entity is treated as the employer, the arrangement would be treated as service by the overseas entity and taxed. Section 65 (44) excludes from its sweep [by clause (b)], a provision of service by an employee to the employer in the course of or in relation to his employment. The assessee contends that the secondment agreement has the effect of placing the overseas employees under its control, so to say, and enables it to require them to perform the tasks for its purposes. It emphasizes that the real nature of the relationship between it and the seconded employees is of employer and employee, and outside the purview of the service tax regime - It is evident, that prior to July 2012, what had to be seen was whether a (a) person provided service (b) directly or indirectly, (c) in any manner for recruitment or supply of manpower (d) temporarily or otherwise. After the amendment, all activities carried out by one person for another, for a consideration, are deemed services, except certain specified excluded categories. One of the excluded category is the provision of service by an employee to the employer in relation to his employment. A vital fact which is to be considered in this case, is that the nature of the overseas group companies business appears to be to secure contracts, which can be performed by its highly trained and skilled personnel. This business is providing certain specialized services (back office, IT, bank related services, inventories, etc.). Taking advantage of the globalized economy, and having regard to locational advantages, the overseas group company enters into agreements with its affiliates or local companies, such as the assessee. The role of the assessee is to optimize the economic edge (be it manpower or other resources availability) to perform the specific tasks given it, by the overseas company - This court is not concerned with unravelling the nature of relationship between the overseas company and the assessee. However, what it has to decide, is whether the secondment, for the purpose of completion of the assessee s job, amounts to manpower supply. It is held that the assessee was, for the relevant period, service recipient of the overseas group company concerned, which can be said to have provided manpower supply service, or a taxable service, for the two different periods in question (in relation to which show cause notices were issued). Invocation of the extended period of limitation - HELD THAT:- The fact that the CESTAT in the present case, relied upon two of its previous orders, which were pressed into service, and also that in the present case itself, the revenue discharged the later two show cause notices, evidences that the view held by the assessee about its liability was neither untenable, nor mala fide. This is sufficient to turn down the revenue s contention about the existence of wilful suppression of facts, or deliberate misstatement. For these reasons, the revenue was not justified in invoking the extended period of limitation to fasten liability on the assessee. The assessee was the service recipient for service (of manpower recruitment and supply services) by the overseas entity, in regard to the employees it seconded to the assessee, for the duration of their deputation or secondment. Furthermore, the invocation of the extended period of limitation in both cases, by the revenue is not tenable. The appeals are partly allowed.

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• 2022 (5) TMI 909
  Classification of services - Man Power Recruitment or Supply Agency Service or not - contracts with various persons for supply of man power for utilizing such man power in their factory - period involved from April 2008 to March 2013 - penalty - HELD THAT:- The Tribunal in similar cases, wherein contactors had provided services to TAFE and income was received on piece rate, had observed that the contractors were liable to execute the work for TAFE and are responsible for the defect, if any. It was held that the activity would not fall within the definition of Man Power Recruitment or Supply Agency Services - In similar matters in G. RAMAKRISHNAN, K. BALAKRISHNAN, P. KANNUSAMY, M. ARULPRAKASAM, R. ATHINARAYANAN, S. SUBBURAYALU VERSUS CCE ST MADURAI [ 2019 (3) TMI 42 - CESTAT CHENNAI] where the period involved is prior to June 2012, the Tribunal had set aside the demand relying upon the decision in the case of BHAGYASHREE ENTERPRISES, SONAWANE INDUSTRIAL VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I [ 2017 (3) TMI 786 - CESTAT MUMBAI] . There is change of law with effect from 01.07.2012. It is submitted by the Ld. Counsel for appellants that appellants have obtained registration with the department and has started paying service tax. In similar matters for the period after June 2012, the Tribunal in K. BALAKRISHNAN AND N. RADHAKRISHNAN VERSUS COMMISSIONER OF GST CENTRAL EXCISE, MADURAI [ 2021 (9) TMI 181 - CESTAT CHENNAI] has remanded the matter to the adjudicating authority for re-computation of the service tax after granting cum tax benefit. Penalty - HELD THAT:- The issue being purely interpretational and the appellants having taken registration after 2012, the penalty imposed is unwarranted - In the remand proceedings, the adjudicating authority shall look into as to whether the demand of service tax is legal and proper and also the correctness of the quantification. The appeals for the period prior to June 2012 are allowed - for the period after June 2012, the matter is remanded to the adjudicating authority and penalties imposed are set aside - appeal allowed in part and part matter on remand.

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• 2022 (5) TMI 908
  Refund of service tax paid - payment of tax due to mistake in facts or of law - period of limitation - whether the amount of Rs.4,78,222/- as was deposited by the appellant on 14.3.2016 was the amount of duty/tax? - HELD THAT:- Apparently and admittedly the said amount was deposited under the wrong impression of appellant being the liable to Service Tax for providing the construction service to M P Police Housing Corpn. Ltd. There is no denial to the fact that these services were exempted from the tax liability till March 2015 under Notification No. 06/2015 dated 1.3.2015. There is also no denial to the fact that the exemption was removed only for the period of one year i.e. from March 2015 to March 2016. From the notification No. 06/2015 vide Notification No. 9/2016 dated 1.3.2016, the retrospective exemption for the construction services provided under contract prior to 1.3.2015 was announced. There is no denial to the fact that service in question were rendered by the appellant in favour of the contract with M P Police Housing Corpn. Ltd. dated 30.6.2014 i.e. the contract was prior to 1.3.2015. Hence, irrespective the construction was raised during the year 2015-16, the exemption to the liability as introduced vide Notification No. 9/2016 is very much applicable to the impugned service. This perusal makes it abundantly clear that the appellant was not liable to pay Service Tax for rendering the services in question. Consequently, it is held that the amount of Rs.4,78,222/- was not the amount of Service Tax. It was merely a deposit being made by the appellant in view of the ongoing confusion about the liability. The law with respect to the deposits being made by the assessee due to mistake either of the fact or of law is no more res integra to the effect that section 11B of Central Excise Act is not applicable to such deposits. Time bar of said section cannot be invoked while refunding the amount of deposit. Appeal allowed - decided in favor of appellant.

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• 2022 (5) TMI 907
  Refund claim of unutilized CENVAT Credit - Input services or not - partial refund also denied on the ground of nexus between the services received and the services exported - HELD THAT:- From the orders of the lower authorities, it is found that there are no objection was taken when the said input services were consumed, but only when it came to the granting of refund did the Revenue raise the objection that the services did not qualify as input service and that there was no nexus between the services received and services exported. This defeats the very purpose of the CENVAT scheme. The rejection of the refund claims is not sustainable - Appeal allowed.

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• Central Excise

• 2022 (5) TMI 906
  Levy of penalty - appellant had paid the duty with interest even prior to issuance of the Show Cause Notice - suppression of facts or not - intent to evade duty or not - HELD THAT:- The appellant paid the duty with interest even prior to issuance of Show Cause Notice. If that is so, the authorities had no jurisdiction to initiate proceedings at all and consequently the question of payment of penalty would not arise at all. The Ld.Commissioner(Appeals) s observation that had the department not pointed out the discrepancy the deficit amount would not have been paid, is an inference not supported by allegation in the notice nor any evidence leading to the conclusion that the Appellant had suppressed the facts. In these circumstances the penalty imposed under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002, cannot be sustained and is therefore set aside. The impugned order-in-Appeal is set aside to the extent of confirmation of penalty - Appeal allowed.

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• 2022 (5) TMI 905
  Failure to pay Central Excise duty while availing the benefit of CENVAT Credit - molasses - Rule 4(2) of Central Excise Rules read with Rule 8(1) of the Rules - period October 2012, December 2012 and February 2013 - levy of interest and penalty - HELD THAT:- Undisputed fact is that appellant had received molasses from three khandsari units and in terms of Rule 4 (2) read with Rule 5 of the Central Excise Rules, 2002 was required to pay the Central Excise Duty due on the said goods treating them as if the said goods have been manufactured by them. Rule 4 (2) and Rule 5, creates the liability to pay the Central Excise Duty on the recipient of the goods by treating them as deemed manufacturer of the impugned goods. These rules do not provide for the manner of payment of the duty in respect of these goods. To reject the contention in respect of the utilization of the available CENVAT Credit for payment of the duty on the molasses procured by the Appellant from the Khandsari unit, Commissioner (Appeals) has referred to Rule 2 (nna) of the CENVAT Credit Rules. In his view this rule provides for the case where the facility of payment has been extended by declaring certain process as the process of deemed manufacture for the purpose of utilization of the CENVAT Credit - From the Rule 4 (1A) and Rule 12AA (1), reproduced it is quite evident that these rules in respect of the duty payment on the job work done in respect of the specified goods. These rules do not create the liability to pay the central excise duty on the goods got processed from the job worker. These rules provide the option to pay the duty either to the job worker or to the person who gets the goods job worked. There is no aspect of the deemed manufacture described as per the said rules and the liability to pay the duty by the person getting the goods processed by the job worker is purely optional. The fact that appellant had taken the CENVAT Credit without payment of any duty has not been challenged by the appellant. Without any challenge to the said finding that appellant had availed the CENVAT Credit in respect of 3521.565 M.T. of molasses procured from Khandsari Sugar Factories in June and July 2012, without payment of any duty on the same, the entire arguments advanced by the appellant get negated. They are required to pay duty before availing the CENVAT Credit. Subsequent reversal of such credit availed without payment of any duty cannot be termed as payment of duty. The fraudulent intentions of the appellant to avail credit without payment of duty cannot be justified on the basis of the legal, submissions made by the appellant - It is settled by the decisions of this tribunal and courts that interest liability is associated with the delay in payment of duty. Appeal dismissed.

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• 2022 (5) TMI 904
  CENVAT Credit - input services - freight charges for the outward transportation of finished products upto the buyers premises as well as the dealers - place of removal - HELD THAT:- From the definition of input service, it can be seen that prior to 1.4.2008, in sub-clause (ii) any service used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal, will fall within the definition of input service - After 1.4.2008, the definition has been amended so that any service used for clearance of final products upto the place of removal will fall within the definition of input service. The department has taken a view that outward transportation of the goods is a post-sale expenditure and thus is an activity after manufacture. That therefore the credit in relation to the outward transportation of finished products upto the buyers premises / dealer s premises is not eligible. In all these appeals the period of dispute is prior to 1.4.2008. The Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, BELGAUM VERSUS M/S. VASAVADATTA CEMENTS LTD. [ 2018 (3) TMI 993 - SUPREME COURT] had considered the very same issue and held that the expression used in the definition is from the place of removal . It has to be from the place of removal upto a certain point. Therefore, tax paid on the transportation of the final products from the place of removal upto the that point whether it is depot or the customers premises has to be allowed. It was further held that the amendment carried out in the definition with effect from 1.4.2008 substituted the words from the place of removal with upto the place of removal . Thus, from 1.4.2008, CENVAT credit would be available upto the place of removal. The credit on outward transportation from the place of removal upto the buyers premises / dealers for period upto 31.03.2008 is eligible - Appeal allowed - decided in favor of appellant.

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• 2022 (5) TMI 903
  Interest on delayed refund - relevant time for calculation of interest - entitlement to interest from the date of expiry of three months till the date of refund of said amount from the date of communication of the order or not - HELD THAT:- It is observed that the concept of three months has come under section 11BB of Central Excise Act which talks about the interest on delayed refunds. The pending amount of said provisions makes it clear that section 11B is applicable for such amount which was the amount of duty but was subsequently ordered to be refund. Commissioner (Appeals) himself has admitted the applicability of section 35FF, for the amount paid to be refunded being the amount of pre-deposit. However has invoked the pre-amended provision as was in existence prior to August 06, 2014. However the admitted fact of the present case is that the appellant become entitled for the refund pursuant to the order of this Tribunal dated 9.1.2017 i.e. the cause of action to claim the impugned refund arose in favour of the appellant after 6.8.2014 when section 35 FF got amended. A perusal of Section 35FF makes it clear that the amount of pre-deposit is to be refunded along with the interest which was not below 5 % and shall not exceed 36%. No concept of any time limit is being mentioned in the said provision. Hon ble Apex Court also has settled this issue in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] holding the assessee entiled for interest along with the refund of the amount which he was not liable to pay to the Department. The appellant was entitled for the disbursement of entire amount of Rs.60 lakh being the amount of pre-deposit. The adjustment of Rs.38,79,769/- was absolutely unreasonable and unjustified for being not pertaining to the impugned issue. Appellant is simultaneously entitled for the interest to be calculated at the rate of 12% from the date of payment of the said amount to be calculated in accordance with the table showing date of deposit - Appeal allowed.

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• 2022 (5) TMI 902
  Levy of penalty under Rule 12 (6) of Central Excise Rules - late filing of Returns (ER-1) for the period July, 2017 to February, 2018 - ex-parte order - violation of principles of natural justice - case of appellant is that it was filing their returns under the GST provisions w.e.f. 01/07/2017, they were under bona fide belief that they are no longer required to file returns under the erstwhile Central Excise Act - HELD THAT:- This cogent explanation was given before the learned Commissioner (Appeals), but the Commissioner (Appeals) failed to record any findings on the said contention. It is further found that the Court below have passed the order with reference to Section 174 of the CGST Act, which provides for repeal and savings. There is no saving Clause in the said Section, for initiating and imposing penalty for none filing of the returns (ER-1), once the provisions of GST have been imposed w.e.f. 1st July, 2017. Accordingly, the show cause notice in misconceived and the impugned order have been erroneously passed, having no sanctity in law. The imposition of penalty for non-filing of returns for the period under dispute, July 2017 to February 2018, is bad and not called for - appeal allowed - decided in favor of appellant.

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• 2022 (5) TMI 901
  Job-Work - benefit of SSI Exemption by Notification No. 1/93-C.E., if manufactured on job work basis - demand based upon the loose papers/ despatch bills recovered from the factory of the appellant - Whether the substantial condition for the exemption notification No. 83/94-CE dated 11.4.1994 has been complied with by the appellant with respect to the raw material supplied by Shri Mohan Lal Barfa? - Extended period of limitation - HELD THAT:- There are no infirmity in the conclusion arrived at by the Commissioner (Appeals) that Shri Mohan Lal Barfa had sent scrap to the appellant and received back lead powder manufactured on the job work basis which has been sold to his brother Shri Laxman Barfa and other traders. Learned Counsel for the appellant could not produce any such documents which may prove that job work goods had been sent to the factory of Shri Mohan Lal Barfa itself to be used in or in relation to the manufacture of such specified goods as are exempted from whole duty of excise leviable thereon under Notification No. 8/2003. Extended period of limitation - HELD THAT:- Though the learned Counsel has impressed upon several case laws impressing upon that there was no suppression on the part of the appellant but it is observed that appellant was entitled to SSI exemption only in terms of Notification No. 8/2003-CE and Notification No. 83/94. It has already been observed that substantial condition of said exemption notification has not been duly complied with by the appellant. Absence thereof is opined to be correctly held as suppression on the part of the appellant extending the Department to invoke the extended period of limitation. Appeal dismissed.

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• Indian Laws

• 2022 (5) TMI 900
  Dishonor of Cheque - Insufficient Funds - It is submitted that the respondent was not able to establish the status and role in the accused Company or in what capacity he issued the cheques in question - who was the drawer of the cheque in question? - HELD THAT:- Although the cheque was the signed by the respondent, the cheque issued to the petitioner bore the name of the accused Company as the account holder, being a separate entity from its members, and not of the respondent. Moreover, as a requirement under Section 138 of the NI Act, the holder of the cheque that is dishonoured has to make a demand for the payment of the contested amount of money by giving a notice, in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. It is an admitted fact that the cheque presented by the petitioner was returned dishonoured and the petitioner, as per the mandate of Section 138 of the NI Act, issued a notice intimating the dishonour of cheque solely to the respondent. It was only at the stage of complaint proceedings that the petitioner impleaded the accused company as a party. In the present case, the accused Company was made a party to the complaint case without being furnished a notice, thereby, without it an opportunity to defend itself. In such a situation, had the Company been held guilty of the offence under Section 138 of the NI Act, it would have been without giving it a fair an equitable opportunity of defending itself, since, the fact remains that it was never intimated about the dishonour of the cheque, as per requirement of the Act. The perusal of the cheque also reveals that although it was signed by the respondent, it bears the name of the accused Company and not the respondent, hence, being a separate entity, the prime liability also pertained to the Company as the drawer of the cheque. At the outset, the complaint against the Company, hence, was not maintainable. Since, the drawer of the cheque was the accused Company, solely on the ground that the respondent had signed the cheque, a liability under Section 138 of the NI Act did not arise against him. The complaint was prima facie not maintainable against the Company as drawer of the cheque, the liability towards the respondent also did not arise keeping in view that respondent was acting on behalf of the Company and where the liability against the Company had been discharged, a private and severed liability against the respondent could not have arisen in the circumstances of the instant matter - this Court does not find any error, illegality or impropriety in the impugned order dated 13th September, 2017 passed by learned Additional Sessions Judge, Tis Hazari Courts, New Delhi. Petition dismissed.

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