TMI Tax Updates - e-Newsletter
May 25, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Law of Competition Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. Impact of Tax Collection at Source on the Withdrawal of International Credit Card from Exemption of LRS

   By: Devan Gupta

2. Penalty notice u/s 271(1)(c) is distinct from the assessment

   By: Vivek Jalan

3. No service tax leviable on user development fees collected by Airport authority, being a statutory levy

   By: Bimal jain

News

1. National e-Vidhan Application is a testament to commitment of Govt. leveraging latest technological advancements for public good: Shri Piyush Goyal

2. Guided City Bus Tour ‘The Bengaluru Story’ and Cultural Programme organized for G20 Delegates of 2nd Trade and Investment Working Group (TIWG) Meeting.

3. India being looked upon as the bright spot by the world: Shri Piyush Goyal

Notifications

Customs

1. 38/2023 - dated 23-5-2023 - Cus

Seeks to amend Australia FTA notification to make changes in tariff preference given to Coking Coal and Raw Cotton arising out of Finance Act, 2023

GST - States

2. 02/2023-State Tax (Rate) - dated 23-5-2023 - Delhi SGST

Amendment in Notification No. 13/2017- State Tax (Rate), dated the 30th June, 2017

3. F. 3(27)/Fin.(Exp-I)/2022-23/DS-I/285 - dated 5-4-2023 - Delhi SGST

Corrigendum - Notification No. 3/2019- State Tax (Rate), dated the 22nd October, 2019

4. S.R.O. No. 552/2023 - dated 6-5-2023 - Kerala SGST

Amendment in Notification G.O. (P) No.24/2018/TAXES dated 9th March, 2018

SEBI

5. SEBI/LAD-NRO/GN/2023/130 - dated 23-5-2023 - SEBI

Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2023

Circulars / Instructions / Orders

Income Tax

1. 06/2023 - dated 24-5-2023

Clarification regarding provisions relating to charitable and religious trusts

Customs

2. Instruction No. 17/2023 - dated 18-5-2023

Requirement of EPR registration certificate for import of battery as well as equipment containing battery

3. Instruction No. 16/2023 - dated 17-5-2023

E-waste (Management) Rules 2022 - regarding release of imported consignments of producers of 85 EEEs items (ITEW 17 to ITEW 27, CEEW 6 to CEEW 19, LSEEW 1 to LSEEW 34, EETW 1 to EETW 8, TLSEW 1 to TLSEW6, MDW 1 to MDW 10 and LIW1 to LIW 2)

Highlights / Catch Notes

GST

• Court Remands Case for Fair Hearing After Circular Violation in Levy of Interest and Penalty on Delayed Response.

  Case-Laws - HC : Levy of Interest and penalty - extension of time to reply the queries raised - The circular of the respondent clearly stipulates that the communication granting time or refusal to grant time, shall also be sent to the assessee. - it is clear that there is a clear violation of the circular of the respondent themselves and it would be just and proper that the petitioner is afforded a fair opportunity to submit its explanation in respect of three pending queries within a reasonable time - Matter restored back - HC
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• High Court Dismisses Writ Petition on Goods Detention; Questions on UP Authorities' Jurisdiction and Trade Authenticity Remain Unresolved.

  Case-Laws - HC : Detention of goods - Territorial Jurisdiction - Authority of the U.P. State authorities - Since in the present case, facts are in dispute, as would require consideration amongst other as to existence or otherwise of the consigner/dealer, genuineness of the transaction of insterstate trade, we would not like to hasten to a conclusion of inherent lack of jurisdiction. - Writ petition dismissed - HC
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• GST Not Applicable on Advances for Supply of Goods in Works Contracts, Confirms AAR; Each Milestone is Separate.

  Case-Laws - AAR : Levy of GST of advances received - time of supply - supply of goods and supply of services of works contract - the supply/ service under second contract commences commences only on completion of all the milestone activities of first contract (supply of goods). Therefore, it is evident that each Contract is independent and every milestone supply made from the individual contract is, an independent transaction. - benefit of Notification No. 66/2017 available to the assessee - No GST to paid at the time of advance received in respect to supply of goods - AAR
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Income Tax

• High Court Quashes Tax Reassessment Notice Due to Inadequate Authorization u/s 151(1) of Income Tax Act.

  Case-Laws - HC : Validity of Reopening of assessment - Sanction / Satisfaction of the proper authority u/s 151(1) - it prima facie appears that in view of the prescription of Section 151(1) by necessary implication, the "Additional Commissioner of Income Tax" would not be same as "Principal Chief Commissioner" or "Chief Commissioner" or "Principal Commissioner" or "Commissioner" of Income Tax. - the proceeding initiated against the petitioner company by issuance of notice u/s 148 is held to be not in accordance with law. - Quashed - HC
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• Taxpayer Penalized u/s 271(1)(c) for Undisclosed Investment; Section 69B Additions Confirmed During Assessment Proceedings.

  Case-Laws - AT : Levy of penalty u/s 271(1) (c) - undisclosed investment - Since the assessee could not explain the source of the purchase of the property and the payment towards interiors of villa the additions were made u/s. 69B confirmed - The addition so made was not voluntary but on being confronted during the assessment proceedings on the basis of seized material. - Levy of penalty confirmed - AT
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• Investor's Share Sale Gains Classified as Capital Gains, Exempt u/s 10(38) of Income Tax Act.

  Case-Laws - AT : Gain on sale of shares - Business income or Capital Gains - Adventure in the nature of trade - Just because the assessee has shifted from the IPOs and has made a purchase of the shares in M/s Panchshul Marketing Ltd., would not shift the head of income from “capital gains” to the “Adventure in the nature of trade”, insofar as the assessee is an investor in the shares and is not in the business of dealing in shares. - Benefit of exemption u/s 10(38) allowed - AT
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• Addition Based on Director's Statement in Section 153A Assessment Invalid Without Incriminating Documents Found at Assessee's Premises.

  Case-Laws - AT : Assessment u/s 153A - addition was made based on the statement of director of investing companies recorded in an independent proceedings u/s 132/133A/131(1) and the finding of inquiry or investigation was carried in case of investing companies without referring to incriminating document found from the premises of the assessee in this regard which would have made basis for the addition in the assessment. - No additions - AT
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• Assessing Officer Cannot Determine Notional Long-Term Capital Gains on Deemed Jewellery Sale in Wealth Tax Cases.

  Case-Laws - AT : LTCG on deemed sale of jewellery - Shortage in Jewellery detected during search and quantity declared in wealth tax return - whether the AO can resort to determination of notional LTCG or not? - HELD No - AT
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• Penalty u/s 271AAA Not Imposable Without Statement or Query on Undisclosed Income Source During Assessment.

  Case-Laws - AT : Penalty u/s 271 AAA - source and manner in which the undisclosed income was derived - where no statement u/s 132(2) of the Act is recorded or specific query is made during assessment, for the purpose of Section 271AAA of the Act, then no inference can be drawn that assessee failed to specify the manner in which such income has been derived or substantiates the manner in which the undisclosed income was derived, so as to levy the penalty. - AT
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• Court Sets Aside CIT's Section 263 Order Due to Inadequate Verification of Assessee Documents; Remands Case to AO.

  Case-Laws - AT : Revision u/s 263 by CIT - Without proper verification of documents of the assessee, only to remand the matter to the ld. AO ‘for verification’ which is vitiated the order u/s 263 - Revision order set aside - AT
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• Audit Order Invalid: AO Ordered Special Audit Without Examining Books of Accounts for 2007-2012 u/s 142(2A).

  Case-Laws - AT : Special audit report u/s 142(2A) - An admitted fact on record that the AO had no occasion to examine the books of accounts furnished by the assessee, which were actually furnished for A.Y. 2007-08 to 2011-12 on 04.10.2013 whereas order for special audit was passed on 22.03.2013 and pursuant thereto special auditor furnished report on 16.09.2013. - it goes to prove that the order for special audit has been passed in these cases merely on the basis of surmises by the AO as well as the Ld. CIT even without having a look into the books of accounts furnished by the assessee - The assessment order is bad in law - AT
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• Protective Additions in Bank Accounts Deemed Unjustified by CIT(A), Violating Section 3 of Black Money Act.

  Case-Laws - AT : Addition on protective basis - credits in the bank accounts of the assessee and foreign company - The separate addition made in the respective years on protective basis and the appeal filed by the department against the finding of the ld. CIT(A) for these years is not maintainable and has rightly held by the ld. CIT(A) that the protective addition for the year under consideration is not warranted as the same is entirely contrary to the provision of section 3 of the Black money Act. - AT
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• Foreign Exchange Losses Included in Operating Expenses for Transfer Pricing Adjustments, Confirms Dispute Resolution Panel Decision.

  Case-Laws - AT : TP adjustment - foreign exchange loss - part of operating expenses or not - Sales and forex losses incurred by the assessee are closely interlinked for this reason. Assessee in the sale price also giving AE benefit of forex fluctuation also. No infirmity in the direction of the LD DRP by including forex loss in the PLI computation of Assessee. - AT
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• New Guidelines Clarify TDS on Online Game Winnings u/s 194BA of Income-tax Act, 1961 for Easier Compliance.

  Circulars : TDS on Winnings from online games - Guidelines for removal of difficulties under sub-section (3) of section 194BA of the Income-tax Act, 1961 - Circular
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Customs

• Court's Order to Return Seized Goods in Smuggling Case Overturned Due to Customs Act Oversight.

  Case-Laws - HC : Validity of order of lower court for release of goods / return of goods to the accused - Smuggling - yellow coloured metallic bars believed to be gold of Foreign origin - The Learned Court also without appreciating the provision of Customs Act has wrongly passed the order on 05.04.2018, though, the show cause notice had been issued prior to that of the order passed by the Learned Court proposing confiscation of the goods as well as imposition of penalty, therefore, the Learned Court on 05.04.2018 ought not to have passed such order for return of the seized goods when the same has been taken care of by the adjudicating authority in terms of the Customs Act. - HC
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• Inflatable Party Items Exempt from BIS Registration, Says Indian Ministry of Commerce and Industry; Revenue Report Lacks Basis.

  Case-Laws - AT : Classification of imported goods - Inflatable Party Items - Requirement for any BIS Registration - As it is clarified that the impugned goods are out of preview of BIS Registration by Ministry of Commerce and Industry, Govt. of India, in that circumstances, it was held that the items in question are not in the scope of BIS Standard and the report sought from NCTC by the Revenue is without any basis. - AT
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• Imported Aluminous Cement to Be Classified Under CTH-25233000, Eligible for Exemption Benefits.

  Case-Laws - AT : Classification of imported goods - aluminous cement - the correct classification of the impugned goods is under CTH-25233000 and the respondent is entitled the benefit of exemption - AT
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• No Penalties for Misdeclaration Under Customs Act Sections 112(a) & 112(b) Due to Bona Fide Belief in IEC Use.

  Case-Laws - AT : Levy of penalty u/s 112 (a) and 112 (b) of the Customs Act, 1962 - import by misdeclaration of description and value of the consignments using the IEC registered in the name of other person and shell companies - The act of action of the appellant is only under bonafide belief. - No penalty - AT
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Corporate Law

• Court Rules Accused Exceeding Directorship Limit Entitled to Benefits Under Explanation-II, Section 165(1) of Companies Act.

  Case-Laws - HC : Holding Directorship of companies in excess of the limits prescribed (29 Companies) u/s 165 - Applying the above principles to the instant case on hand, it is found that the Parliament had made amendments for the purpose of easing the doing of business and also for reduction of prosecution that are filed in the Special Court - there is no reason why the said Amendment cannot be applied in favour of the accused in the pending prosecution. The accused shall also be entitled to the benefit of Explanation-II to Section 165(1) of the Companies Act. - HC
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Indian Laws

• Accused Acquitted in Cheque Dishonor Case; Fails to Rebut Debt Presumption u/s 138 of Negotiable Instruments Act.

  Case-Laws - HC : Dishonour of Cheque - acquittal of accused - legally enforceable debt or not - an accused person is presumed to be innocent unless proved guilty and an order of acquittal strengthens such presumption in favour of the accused person but the same rule cannot be made applicable with same rigour while dealing with an offence under section 138 of the NI Act, where a presumption is available that the holder of the cheque received the cheque for the discharge of any debt or liability either wholly or in part. This presumption is rebuttable. The accused person has failed to rebut such presumption. - HC
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IBC

• Court Rules Money Paid to Bank Not Financial Debt Without Loan Component or Fixed Repayment Time in CIRP Case.

  Case-Laws - AT : Initiation of CIRP - Financial Debt or not - money had been disbursed by the Appellant on behalf of Corporate Debtor to SBI towards loan repayment is undisputed. It is also an admitted fact that no interest was either claimed by the Appellant nor paid by the Corporate Debtor. - The misconceived finding of the Adjudicating Authority cannot be accepted that simply because the instant transaction was bereft of loan component and no time was fixed for repayment, it did not qualify to be a financial debt. - However, unless the entire payment was made, no right would accrue to the Appellant to enter into the shoes of SBI and have right to title and possession of the subject property. - AT
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Central Excise

• Court Rules Excise Duty Refund Claim Not Time-Barred Despite Late Application; Interest Denied for July 2010-Dec 2011 Payments.

  Case-Laws - HC : Refund of central excise duty paid ignoring the benefit of exemption notification - Merely because the assessee submitted the application for eligibility on 08.01.2012, the claim for duty refund could not be defeated as being time barred. At best, the assessee could be denied the interest, if any accrued on the excise duty paid for the period from July, 2010 to December, 2011. - Non-following of procedural requirement cannot deny the substantive benefit otherwise available to the assessee. - HC
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• Benefit Denied Due to Supplier's Failure to File Declaration; Appellant Not Accountable for Supplier's Lapse.

  Case-Laws - AT : Job work - The only reason for denial of the benefit of this notification as referred above is that the principal manufacturer i.e. the raw material supplier has not filed any declaration as required. The appellant in the present case could not have been held responsible for the failure of the supplier of raw material to give the undertaking as ascribed to the proper officer having jurisdiction over the factory of the job worker/supplier. - AT
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Case Laws:

• GST

• 2023 (5) TMI 967
  Seeking grant of refund of Input Tax Credit - export of services - Zero Rated Supply - period October, 2017 to March, 2018 - HELD THAT:- Concededly, the respondent has taken no steps to secure any order with regard to the stay of the Order-in-Appeal pursuant to which the petitioner is now entitled to the claim of refund. We are unable to accept that the Revenue can ignore the Order-in- Appeal and deny the benefits of the same on the ground that it seeks to appeal the said order. In the present case, the petitioner has been denied the benefit of the order in its favour for over two years. Clearly, the same cannot be countenanced. The said issue is also covered by an earlier decisions of this Court in Zones Corporate Solutions Pvt. Ltd. v. Commissioner of Central Goods Services Tax Delhi East Anr. [ 2020 (7) TMI 287 - DELHI HIGH COURT] and Alex Tour and Travel Private Limited v. Assistant Commissioner, CGST, Division-Janakpuri [ 2023 (5) TMI 505 - DELHI HIGH COURT] . The respondent is directed to disburse the petitioner s claim for refund with applicable interest as expeditiously as possible and, in any event, within a period of four weeks from today - Petition allowed.

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• 2023 (5) TMI 966
  Levy of Interest and penalty - respondent has not adverted to the petitioner s request with regard to extension of time in respect of three of the queries - Circular No.12/2022 dated 26.09.2022 - HELD THAT:- It is crystal clear that reasonable opportunity ought to be given to a person to show cause and depending upon the facts of each case, even further extension of time can be granted by the Assessing / Adjudicating Officer. In any event, the decision to refuse or extend time ought to be exercised with sound reasons and not in an arbitrary or capricious manner. The circular dated 26.09.2022 of the respondent also clearly stipulates that the communication granting time or refusal to grant time, shall also be sent to the assessee. This Court finds that the impugned orders do not discuss the reasons for extension of time at all, leave alone giving its finding either granting or refusing the adjournment. In such circumstances, it is clear that there is a clear violation of the circular of the respondent themselves and it would be just and proper that the petitioner is afforded a fair opportunity to submit its explanation in respect of three pending queries within a reasonable time and thereupon, the respondent may pass fresh orders considering the entire explanation submitted by the petitioner, including the earlier explanations submitted by it. In such perspective of the matter, the impugned orders dated 10.02.2023 are set aside and the respondent is at liberty to fix a date for enquiry, giving a minimum of 30 days time to enable the petitioner to submit its explanation with regard to the three pending queries or any further explanation that may be required by the respondent and thereupon, pass final orders, on merits, after affording personal hearing to the petitioner - Petition allowed.

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• 2023 (5) TMI 965
  Detention of goods - Territorial Jurisdiction - Interstate sale or local sale - it is the grievance of the petitioner, neither the U.P. State authorities have any jurisdiction to detain and seize the goods nor that power has been exercised validly - HELD THAT:- Having perused the record, in the context of a fiscal statute where statutory remedy of appeal is available and issue of jurisdiction arises not by way of inherent and complete lack of jurisdiction but because of facts that the petitioner alleges exist, as are doubted by the revenue authority, we do not find it an appropriate case to offer interference at this primary stage. Once statutory remedy of appeal is provided, it does not become a matter of choice with the assessee to approach either the appellate authority or the High Court in its exercise of extra ordinary jurisdiction under Article 226 of the Constitution. Since in the present case, facts are in dispute, as would require consideration amongst other as to existence or otherwise of the consigner/dealer, genuineness of the transaction of insterstate trade, we would not like to hasten to a conclusion of inherent lack of jurisdiction. Thus, thus is not a fit case to exercise our inherent power under Article 226 of the Constitution. More efficacious and speedier remedy may be available under the statute itself, in the facts of the case. Petition dismissed.

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• 2023 (5) TMI 964
  Levy of GST of advances received - time of supply - supply of goods and supply of services of works contract - composite supply or principal supply - requirement to pay GST on initial advance of 5% and interim advance of 7.5% on Ex works value of goods supplied under First Contract Agreement dated 9th February, 2022. Whether the entire supply which involves two separate contracts however a single bidding document, has to be treated as a composite supply of which the principal supply is the second contract which is a works contract or both the contracts have to be treated as separate transactions for which the time of supply and rate of tax to be levied would differ as per the provisions of the CGST Act 2017? HELD THAT:- As stated by applicant that his responsibility under the first contract completes with making goods (ex-works) available and loading them on to the mode of transport. That the moment he raises tax invoice for the supply of goods, endorse and dispatch the documents, the title of the goods passes on to SCCL. This makes the first contract under category of supply of goods to the recipient as the recipient holds the title of goods before they reach his premises as stated by the applicant - It is supply of goods under First contract if the recipient holds the title of goods before the Second contract is initiated which involves inland transportation for delivery at site, inland transit insurance, unloading, storage, handling at site, installation, insurance covers other than inland transit insurance, testing and commissioning including carrying out guarantee tests in respect of all the plants and equipment supplied under the First Contract . If there is no transfer of title until completion of Second contract then the entire scope of supply would come under category of works contract . An insight is provided by CBIC Circular No 47/21/2018-GST dated 8-6-2018 relating to how servicing of cars involving both supply of goods (spare parts) and services (labour), where the value of goods and services are shown separately, is to be treated under GST - In the said Circular, it is clarified that, the taxability of supply would have to be determined on a case to case basis looking at the facts and circumstances of each case. Where a supply involves supply of both goods and services and the value of such goods and services supplied are shown separately, the goods and services would be liable to tax at the rates as applicable to such goods and services separately. There are number of judgments wherein Hon ble Supreme Court has observed that there can be two separate contracts, that is one for sale and another for Works Contract as in the present case the value of goods sold, property of which in goods has already been passed on, cannot form part of the value of the second contract i.e. Works Contract. The scope of works/supply undertaken under the individual contracts are entirely independent and specific to that contract and are not associated with other contract. Contract agreement document itself, in this case, had put a condition that there are two separate contracts that need to be entered into i.e. one for supply of service and other for supply/sale of goods. Therefore, both the contracts are separate and cannot be clubbed together. The supply under the second contact commences with service of transportation of the said goods supplied under first contract. Since the transfer of property in the goods supplied under first contract is not taking place during the execution of the Works Contract under second contract, the value thereof cannot be included in the Works Contract. Thus the supply/ service under second contract commences commences only on completion of all the milestone activities of first contract. Therefore, it is evident that each Contract is independent and every milestone supply made from the individual contract is, an independent transaction. Thus, the applicant is eligible for the benefit of Notification No. 66/2017 Central Tax, dated 15th November, 2017 and accordingly the tax liability on sale of goods, as per First Contract, will arise as specified in clause (a) of sub-section (2) of section 12 of the said Act i.e. at the time of supply, which is the date of issue of invoice by the taxpayer or the last date on which he is required, under section 31, to issue the invoice with respect to the supply.

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• Income Tax

• 2023 (5) TMI 963
  Validity of Reopening of assessment - assessment of the petitioner company was not done u/s 143(1) but u/s 143(3) - Deduction u/s 80IC - HELD THAT:- As the proceeding initiated against the petitioner company u/s 148 is found vitiated on two counts, viz., in this case, the petitioner (assessee) had made full and true disclosure of facts at the time of original assessment and also at the time of scrutiny proceeding u/s 143(2) and 143(3) - Assessee had no duty beyond that. It was for the assessing officer to draw correct inference from the primary facts. Therefore, if subsequent to assessment made u/s 143(3) AO draws an inference that assessment made by him was erroneous, such a change in opinion would not justify action for re-opening assessment. Sanction / Satisfaction of the proper authority u/s 151(1) - Income Tax Officer, Ward-I, Tinsukia had obtained satisfaction of Additional Commissioner of Income Tax, an authority who is not covered by the provision of Section 151(1) - The said notice was issued after obtaining the satisfaction of the Additional Commissioner of Income Tax. Thus, it prima facie appears that in view of the prescription of Section 151(1) by necessary implication, the Additional Commissioner of Income Tax would not be same as Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner of Income Tax. Therefore, on the ground that the Income Tax Officer, Ward-I, Tinsukia had obtained satisfaction of Additional Commissioner of Income Tax, an authority who is not covered by the provision of Section 151(1) as it stood on 01.01.2019, the proceeding initiated against the petitioner company by issuance of notice u/s 148 is held to be not in accordance with law. A possible plea could have been raised by the Income Tax authorities that this writ petition would not be maintainable as the petitioner could avail ordinary remedy of filing an appeal against the order of re- assessment. Thus under the unique facts of this case, this writ petition under Article 226 of the Constitution would be maintainable because the two pre-conditions for exercise of power under Section 148 of the Income Tax Act, 1961 does not exist in this case. However, this observation is qua this case and is not to be considered as a precedent in any other case. Notices quashed.

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• 2023 (5) TMI 962
  PE India - determine the duration test of nine months to construe installation PE in terms of Article 5(3)(a) of the Tax Treaty - whether the assessee had a fixed place PE in India in terms of Article 5(1) of the Tax Treat? - HELD THAT:- Assessee has no such place or establishment in India in terms of Article 5(2). Departmental authorities have alleged that the assessee had a project office in India, which has to be construed as PE. Whereas, the assessee has contested the aforesaid conclusion of the departmental authorities by contending that the project office is of other consortium partner, who is entrusted with onshore activity. The aforesaid claim of the assessee has not been controverted by the Revenue by bringing on record any cogent material. It is trite law, the burden is entirely on the Revenue to establish existence of fixed place PE. Revenue has failed to discharge such burden. We hold that Revenue s stand that the assessee had a fixed place PE in India is not borne out on record. Accordingly, we hold that the assessee had no fixed place PE in India in terms of Article 5(1). Determine the duration test of nine months to construe installation PE in terms of Article 5(3)(a) of the Tax Treaty - AO must be given a fair opportunity to go through such additional evidences and conduct factual verification to ascertain assessee s claim of stoppage of work and demobilisation of personnel and equipments during monsoon period. Only when complete set of facts are brought on record, the legal proposition as laid down in the judicial precedents cited before us by the assessee can be applied. Though, we admit the additional evidences furnished by the assessee before us, however, considering the fact that they were not furnished before the departmental authorities, we deem it appropriate to restore the issue relating to existence of installation PE to the file of Assessing Officer for de novo adjudication after verifying all facts and materials brought on record or to be brought on record by the assessee including the additional evidences. While doing so, the Assessing Officer must apply duration test of nine months strictly abiding by the ratio laid down by Hon ble jurisdictional High court in the case of National Petroleum Construction Company (supra) and other decisions, which may be brought to his notice by the assessee. Taxability of offshore supplies, it is fully dependent on the outcome of the existence or otherwise of installation PE. Therefore, this issue is also restored back to the Assessing Officer for adjudicating afresh after providing due opportunity of being heard to the assessee. All other residuary issues, being consequential to the issue of existence or otherwise of PE in India, are also restored back to the AO for deciding afresh depending upon the decision to be taken in respect of existence or otherwise of PE. Accordingly, grounds are allowed for statistical purposes.

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• 2023 (5) TMI 961
  Revision u/s 263 - selection of case under scrutiny was unsecured loans from the persons who have not filed their returns of income - HELD THAT:- PCIT has given a general direction to the Assessing Officer to frame entire assessment order again, whereas PCIT in his revision order raised the specific issue to examine the unsecured loan by the AO. Hence the direction given to the Assessing Officer is not in accordance with the specific issue identified by ld PCIT. Therefore, we note that ld PCIT has not provided adequate opportunity to the assessee to file relevant material evidences and documents before him during the revision proceedings and hence the revision order u/s 263 of the Act was passed by ld PCIT in hurry. PCIT has directed the AO to frame the entire assessment afresh which is not acceptable, as the issue identified by ld PCIT was unsecured loan, and direction would have been given by ld PCIT only for examination of unsecured loan. As in case M.S.Gill vs The Chief Election Commission [ 1977 (12) TMI 138 - SUPREME COURT] held The dichotomy between administrative and quasi-judicial function vis- -vis the doctrine of natural justice is presumably obsolescent after Kraipak (A.K. Kraipak vs UOI [ 1969 (4) TMI 103 - SUPREME COURT] which makes the water-shed in the application of natural justice to administrative proceedings. The rules of natural justice are rooted in all legal systems and are not any new theology. They are manifested in the twin principles of nemo judex in parte sua (no person shall be a judge in his own case) and audi alterem partem (the right to be heard). It has been pointed out that the aim of natural justice is to secure justice. Considering the above facts, we note that assessee has not given sufficient opportunity of being heard and could not plead his case successfully before the ld. PCIT, hence it is a violation of principle of natural justice. We note that it is settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to contest his case. Set aside the order of the ld. PCIT and remit the matter back to the file of the ld. PCIT to adjudicate the issue afresh on merits - Appeal of the assessee is allowed for statistical purposes.

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• 2023 (5) TMI 960
  Exemption u/s.11 denied - delay involved in filing of Form 10B - HELD THAT:- As the assessee-trust does not cumulatively satisfy the set of conditions specified in Para 4(i) of the CBDT Circular No.10 and also had not filed any application for condonation of delay u/s.119(2)(b) of the Act as provided in Para 4(ii) of the said circular, therefore, there remains no occasion for condoning the delay involved in filing of Form 10B by the assessee beyond the stipulated time period. Thus, on the basis of my aforesaid observations, find no infirmity in the view taken by the lower authorities who had rightly declined the assessee s claim for exemption u/s.11 of the Act. A.O after declining the assessee s claim for exemption u/s.11 summarily held its gross receipts as its income - AO after treating the assessee as an unregistered trust was obligated to have considered its claim for deduction of expenses as were raised in the income and expenditure account. Accordingly, though uphold the declining of the assessee s claim for exemption u/s.11 of the Act, but at the same time, restore the matter to the file of the A.O with a direction to consider the assessee s claim for deduction of expenses as debited in the income and expenditure account, i.e. to the extent the same are allowable under the Act. Appeal of the assessee partly allowed for statistical purposes.

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• 2023 (5) TMI 959
  Levy of penalty u/s 271(1) (c) - undisclosed investment toward purchase of the property and payment made towards interiors for purchase of villa - HELD THAT:- We find the addition was not voluntary but only after the search was conducted and incriminating evidence were found and confronted to the assessee for which the assessee had no other option but to pay the tax on the said amount. Had there been no search, the assessee would not have offered the above income to tax. So far as the confirmation from M/s. Trident Constructions in respect of sale of immovable property,the same cannot help the assessee since the same is undated and further, the assessee has already paid an amount of Rs. 50 lacs and he was unable to explain the source of the same. Since the assessee could not explain the source of the purchase of the property at Bangalore and the payment towards interiors of villa the additions were made u/s. 69B confirmed - The addition so made was not voluntary but on being confronted during the assessment proceedings on the basis of seized material. Penalty levied by the AO and sustained by the ld.CIT(A) in our opinion is fully justified. Decided against assessee.

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• 2023 (5) TMI 958
  Appeal arising out of the Assessment Order u/s 143(3) as different from the appeal against the order under section 154 - CIT-A disposed off appeal in limine - parallel appeal filed against rectified order u/s 154 for the same assessment year has been disposed off - whether CIT(A) has disposed off the appeal in limine without adjudicating on the merits by observing that the issues raised in this appeal are identical to the issue raised in the appeal arising out of order u/s 154? HELD THAT:- Before the CIT(A), assessee had filed 2 appeals. One appeal arising out of the order under section 154 of the Act and the other arising out of the Assessment Order passed under section 143(3) of the Act. We have perused the grounds of appeal raised before the CIT(A) in both the appeals. We find the grounds raised before the CIT(A) as against the order u/s 154 and out of appeal against order under section 143(3) of the Act are different. CIT(A) has erred in dismissing the appeal in limine by holding that since the issue of additions are similar in both the appeals, this appeal is dismissed in limine . As given to understand the appeal as against the order under section 154 of the Act before the CIT(A) is still pending and has not been disposed off. Taking into consideration the grounds of appeal as against the present appeal (arising out of the Assessment Order under section 143(3) of the Act), is being different from the appeal against the order under section 154 of the Act, we restore this appeal to the file of the CIT(A) to decide the grounds raised before him on merits. Appeal of the assessee is allowed for statistical purposes.

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• 2023 (5) TMI 957
  Deduction u/s 35(2AB) - 100% of capital expenditure incurred on in-house R D facility - Assessee unable to substantiate its claim that the capital expenditure pertained to Research and Development - HELD THAT:- CIT(A) has given a categorical finding of fact, while denying assesses claim of 100% capital expenditure incurred on research and development as per section 35(1)(iv) assessee was unable to substantiate its claim of having incurred capital expenditure for Research and Development. In the absence of any representation on behalf of the assessee, the said finding of fact by the CIT(A) has remained uncontroverted before us. No reason to interfere in the order of the Ld.CIT(A) denying assesses claim of 100% deduction of capital expenses incurred on Research and development u/s 35(1)(iv) - Also since the assesses claim of having incurred capital expense is not established its alternate claim of allowance of depreciation on the same also is not tenable. Decided against assessee. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- DR was unable to either controvert the facts relating to the issue that the exempt income earned by the assessee nor was he able to controvert the legal proposition that disallowance u/s 14A of the Act could not exceed exempt income. As noted the decision of Corrtech Energy Ld. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] , disallowance u/s 14A of the Act cannot exceed the exempt income - in the absence of the ld.DR being able to controvert the finding of the ld.CIT(A), either on facts or in law, we therefore, see no reason to interfere in order of the ld.CIT(A) deleting the disallowance u/s 14A to the extent of Rs.1,58,643/-. Disallowance of prior period expenses - CIT-A deleted the addition noting that the AO has not doubted genuineness of the expenditure, and if it is not allowable in the impugned year, it is to be allowed in the earlier year and the entire exercise is revenue neutral - HELD THAT:- DR was unable to distinguish the decisions relied upon by the ld.CIT(A)for the proposition that the disallowance of prior period expenses being a tax neutral exercise no disallowance was warranted, while deleting the disallowance - in the absence of the ld.DR being able to controvert the finding of the ld.CIT(A), either on facts or in law, we see no reason to interfere in order of the ld.CIT(A) deleting the disallowance of prior period expenses. Disallowance of deduction u/s.80JJA - whether assessee fulfilled the conditions required under the law for claiming deduction under section 80JJA, i.e. whether it used bio-degradable waste for producing biological agents as claimed by the assessee? - CIT-A allowed entire claim of deduction - HELD THAT:- DR has been unable to point out any infirmity in the finding of the ld.CIT(A) that items purchased by the assessee, classified as bio-feed, did qualify as biodegradable waste as defined in section 80JJA and item produced by the assessee from these bio-feed i.e. enzymes, qualified as biological agents as required by section 80JJA, and that the basis of allocation of expenditure by the assessee between the units and eligible for deduction under section 80JJA of the Act and not eligible for deduction 80JJA adopted by the assessee was consistent and correct. The ld.DR having unable to disturb the finding of the ld.CIT(A) either on facts and or in law, we see no reason to interfere in the order of the ld.CI(A) allowing the assessee s entire claim of deduction under section 80JJA of the Act. MAT - disallowance made under section 14A while computing MAT income as per the provisions of section 115JB - HELD THAT:- We find that the issue on hand is no more remain res integra because in the case of ACIT vs. Vireet Investments (P.) Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] held that disallowance under section 14A of the Act shall not apply to MAT computation. In holding so, the Tribunal has relied upon the decision of Hon ble Delhi High Court in the case of Bhushan Steel Ltd [ 2015 (9) TMI 1424 - DELHI HIGH COURT] where it has been held that the computation under the MAT provisions is to be made without resorting to the computation as contemplated under section 14A read with Rule 8D of the Income Tax Rules. Disallowance of interest u/s.36(1)(iii) - Sufficiency of own funds - CIT-A deleted the addition - HELD THAT:- Undoubtedly, there is no evidence with the AO to controvert that the borrowed money was utilised for the purpose of advance for nonbusiness purposes. We are satisfied that the assessee has substantial amount own funds in the form of reserve/ surplus which the assessee could utilise for giving advances. In the absence of any contrary material with the AO to negate the claim of the assessee, we are unable to disturb the finding of the ld.CIT(A) on the above. Assessee s claim of expenditure under section 36(1)(iii) of the Act is to be allowed. Decided against revenue.

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• 2023 (5) TMI 956
  Gain on sale of shares - Business income or Capital Gains - claim of exemption u/s.10(38) in respect of sale of shares denied - assessee is in the business of purchase and sale of IPOs, the said transaction done by the assessee is an one off transaction, the same is liable to be treated as an Adventure in the nature of trade - HELD THAT:- It is an admitted fact that the assessee is doing the business of purchase and sale of shares. As pointed out by the ld. Sr. DR the assessee is doing purchases in IPOs. Thus, there is no dispute that the assessee earns her income from transaction in shares. Just because the assessee has shifted from the IPOs and has made a purchase of the shares in M/s Panchshul Marketing Ltd., would not shift the head of income from capital gains to the Adventure in the nature of trade , insofar as the assessee is an investor in the shares and is not in the business of dealing in shares. This being so, the decision relied on by the ld. Sr. DR would no more survive for consideration. As following the decision of Deepansu Mohapatra [ 2021 (12) TMI 1425 - ITAT CUTTACK ] which has also been affirmed by the Hon ble Jurisdictional High Court of Orissa in the appeal filed by the revenue [ 2023 (2) TMI 392 - ORISSA HIGH COURT ] and also the decision of Rashi Agrawal [ 2023 (5) TMI 851 - ITAT CUTTACK] the addition as made by the AO and as confirmed by the CIT(A) in respect of the claim of exemption u/s.10(38) of the Act in respect of sale of shares of M/s Kailash Auto, stands deleted. Decided in favour of assessee.

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• 2023 (5) TMI 955
  Assessment u/s 153A - addition to the total income of the assessee of the regular items - addition u/s 68 on account of unexplained credit of share application money and premium by holding that no assessment can be made in absence of incriminating materials - HELD THAT:- Hon ble Gujarat High Court in the case of Saumya Construction Pvt. Ltd. [ 2016 (7) TMI 911 - GUJARAT HIGH COURT] has held that there cannot be any addition of regular items shown in the books of accounts until and unless there were certain materials of incriminating nature found during the course of search. The word incriminating has not been defined under the Act, but it refers to those materials/ documents/ information which were collected during the search proceedings and not produced in the original assessment proceeding. Simultaneously, these documents had bearing on the total income of the assessee. Coming to the case on hand, we note that addition was made based on the statement of director of investing companies recorded in an independent proceedings u/s 132/133A/131(1) and the finding of inquiry or investigation was carried in case of investing companies without referring to incriminating document found from the premises of the assessee in this regard which would have made basis for the addition in the assessment. Accordingly, we hold that there cannot be any addition of the regular items which were disclosed by the assessee in the regular books of accounts.

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• 2023 (5) TMI 954
  LTCG on deemed sale of jewellery - Shortage in Jewellery detected during search and quantity declared in wealth tax return - whether the AO can resort to determination of notional LTCG or not? - HELD THAT:- The shortage of jewellery could have been questioned at the time of search and any evidence with regard to the sale of jewellery should be collected during the search or post search enquiry. Nothing of such investigation has been made by the revenue authorities. The revenue authorities have been failed to invoke the provisions of the Act with regard to search seizure and finding of the jewellery kept in any other premises, have come to presumption of sale of such jewellery and determined capital gains. Absolutely no material to prove that there has been such sale which led to Long Term Capital Gains. There is no provision in the Income Tax Act to deem the difference between value of the jewellery declared (in the Wealth Tax Return) and the value of the jewellery found in the search, in case the jewellery falls short of the amount/quantity declared in the WTR. Hence, we direct that the addition made on account of Long Term Capital Gains on the purported, notional, fictitious sale of jewellery be deleted. Addition u/s 69A - loose diamond as per the WTR and the jewellery seized which has been subsequently treated as unexplained investments - submission of the assessee that the loose diamonds which were part of the Wealth Tax Return were studded in the jewellery subsequently and that was the reason that the description of the jewellery was different - HELD THAT:- These three issues need to be examined holistically. Jewellery seized is intra polated in the jewellery found - Hence, entire disclosed jewellery as per the WTR and as found in the premises, we hold that no addition can be made on this account. Appeal of the assessee is allowed.

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• 2023 (5) TMI 953
  Penalty u/s 271 AAA - assessee has not furnished any explanation in respect of surrendered income u/s 132(4) either at the time of assessment proceedings or during the course of penalty proceedings - HELD THAT:- In case of Bhagirath Aggarwal [ 2013 (2) TMI 48 - DELHI HIGH COURT] has held that if an assessee voluntarily makes a surrender, the officials of the income tax department are bound to record that statement u/s 132(4) and such a statement, voluntarily made, is relevant and admissible and is liable to be used as evidence . Thus where no statement u/s 132(2) of the Act is recorded or specific query is made during assessment, for the purpose of Section 271AAA of the Act, then no inference can be drawn that assessee failed to specify the manner in which such income has been derived or substantiates the manner in which the undisclosed income was derived, so as to levy the penalty. At the same time, the order in Rajendra Aggarwal [ 2019 (1) TMI 1208 - ITAT DELHI] is also relevant where it is held that the initiation of penalty u/s 271AAA cannot be on the basis of surrendered amount which cannot be termed as undisclosed income for the purpose of Section 271AAA of the Act. Appeal of assessee allowed.

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• 2023 (5) TMI 952
  TP Adjustment - determination of ALP in respect of software development services - comparable selection - HELD THAT:- In the case on hand, it could be seen from the order of the learned TPO that the learned TPO accepted the turnover filter selected by the assessee with companies, whose net sales are more than Rs. 1 crore, but failed to notice that without fixing the upper limit of such filter, it would lead to the insertion of certain entities, who operate on different scales and economies and render themselves as unsuitable for comparison. Though we agree with the counsel that certain comparables have to be deleted for their operation in relation with the assessee s operation is huge in scale and economies We direct the learned Assessing Officer/learned TPO to take the range of turnover filter at ten times on both the ends and conduct search afresh to take a plausible view. These grounds are accordingly treated as allowed for statistical purposes. ALP adjustment in respect of the interest on trade receivables - We are of the considered opinion that the ends of justice would be met by accepting the interest rate on similar foreign currency receivables/advances as LIBOR+200 points. We direct the learned Assessing Officer/learned TPO to adopt the same. Grounds are partly allowed accordingly.

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• 2023 (5) TMI 951
  Reopening of assessment u/s 147 - Disallowance on account of interest on interest free advances given to the sister concern/relatives for non-business purpose - Addition u/s.36(1)(iii) - HELD THAT:- As when the issue as regards the allowability of assessee s claim for deduction of interest expenditure u/s.36(1)(iii) had been deliberated upon by the A.O while framing the original assessment vide his order passed u/s.143(3) then in absence of any fresh material having been placed on record after culmination of the said assessment the assessee s case could not have been validly reopened u/s.147 of the Act. As in agreement with the view taken by the CIT(Appeals) that reopening of a concluded assessment that is merely prompted by a change of opinion of the successor A.O as against that taken by his predecessor can by no means be held to be justified. The aforesaid view is fortified by the judgment of Kelvinator of India [ 2010 (1) TMI 11 - SUPREME COURT] held, that the case of an assessee cannot be reopened on the basis of a mere change of opinion . As observed by the CIT(Appeals) and, rightly so, as the amounts in question were advanced by the assessee firm in the normal course of its business, therefore, no part of the same could have been disallowed by triggering the provisions of Section 36(1)(iii) of the Act. Decided against revenue.

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• 2023 (5) TMI 950
  Revision u/s 263 by CIT - PCIT doubted the genuineness of purchases - Bogus parties - Matter restored back to AO for verification of purchase and suppliers (parties) - HELD THAT:- Assessment was complicated u/s 143(3) r.w.s. 147 - assessment was reopened u/s 148 r.w.s.151. The approval was granted by the ld. PCIT during issuance of notice u/s 148. During the proceeding u/s 263 the assessee submitted relevant documents in relation to show cause notice issued by the ld. PCIT. PCIT after receiving the submission from assessee just subsided the entire documents to the lower authority for further verification. Without proper verification of documents of the assessee, only to remand the matter to the ld. AO for verification which is vitiated the order u/s 263. In the assessment order, the issue of purchase is dealt by the ld AO is reflected in order of assessment. We fully relied on the order in the case of R.K. Metal Works ( 1976 (12) TMI 28 - PUNJAB AND HARYANA HIGH COURT] - In our considered view when the assessee filed a detailed written submission before him, the ld. PCIT did not deal with any of the points raised in the submission. Without verification of the documents only to remand the matter to the ld. AO for consideration of the points raised in the assessee s written statement. In our considered view the order U/s 263, passed by the ld. PCIT is setting aside and quashed. Assessee appeal allowed.

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• 2023 (5) TMI 949
  Validity of intimation issued u/s 143(1) - disallowance towards employees contribution of Provident Fund (PF) and Employees State Insurance Corporation (ESIC) u/s 36(1)(va) - HELD THAT:- Undisputedly disallowance was made by the AO/CPC while processing the return of income filed by the assessee, under section 143(1) - Also not in dispute that no notice has been issued by the AO/CPC before making disallowance u/s 143(1) - It is also not in dispute that the assessee has also filed the rectification application under section 154 of the Act before the AO which was also dismissed. When we examine the impugned order passed by the CIT(A) it shows that no notice has been issued to the assessee before passing impugned order rather a vague reference in para 1 of the impugned order that statutory notice under section 250 of the Act was issued online to the assessee is given. No date has been given on which date the notice was issued and for which date the assessee was called upon to appear. No doubt the Ld. CIT(A) has passed the order on merits but it is fundamental principle of rule of natural justice that before passing any order the assessee must be given adequate opportunity of being heard. Appeal filed by the assessee is allowed for statistical purposes.

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• 2023 (5) TMI 948
  Deduction u/s. 80P(2)(d) - interest income earned from other cooperative banks/societies - HELD THAT:- From a perusal of Sec. 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee cooperative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. What is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other cooperative society. We though are in agreement with the observations of the lower authorities that with the insertion of Sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co-operative bank. As long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. Though the co-operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but however, as a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of cooperative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d). Thus assessee a cooperative society is eligible for deduction u/s.80P(2)(d) of the Act in respect of the interest income earned by the assessee from either any other cooperative society or from a cooperative bank. Grounds raised by the assessee are allowed.

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• 2023 (5) TMI 947
  Special audit report u/s 142(2A) - whether report of the nominated auditors is purely based on surmises and assumptions? - HELD THAT:- Undisputedly u/s 142(2A) of the Act special audit can be referred by the AO during assessment proceedings only when the accounts of the assessee are complex in nature or it is necessary for the interest of the Revenue. An admitted fact on record that the AO had no occasion to examine the books of accounts furnished by the assessee, which were actually furnished for A.Y. 2007-08 to 2011-12 on 04.10.2013 whereas order for special audit was passed on 22.03.2013 and pursuant thereto special auditor furnished report on 16.09.2013. When we examine the contentions raised by assessee in the light of the aforesaid undisputed facts it goes to prove that the order for special audit has been passed in these cases merely on the basis of surmises by the AO as well as the Ld. CIT even without having a look into the books of accounts furnished by the assessee. Rather on the other hand the assessee has been objecting to the special audit since beginning. Order for special audit in this case was passed on 22.03.2013 and audit report was furnished on 16.09.2013, the AO had no occasion whatsoever to peruse the books of accounts furnished by the assessee for A.Y. 2007-08 to 2011-12 on 04.10.2013. Action of the AO referring the matter for special audit was purely a subjective decision based upon surmises which is patently against the spirit of section 142(2A). Re-course to the special audit by the AO is without any basis and even without perusing the books of accounts of the assessee, which were actually not there before the AO at that time. In that eventualities the AO was having the only option to frame the assessment on the basis of best judgment assessment u/s 144 of the Act. So when the very initiation of proceedings for calling special audit report by the AO and approved by the Ld. CIT is bad in law, merely based upon surmises, the subsequent proceedings are also not sustainable in the eyes of law. Appeal of assessee allowed.

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• 2023 (5) TMI 946
  Validity of assessment - violation of principle of natural justice - assessment order passed without confronting the Appellant with the information/documents on which reliance was placed by the AO and/or by the CIT(A) - HELD THAT:- On perusal of the order passed by the CIT(A) it is not clear whether a copy of the remand report was furnished to the Appellant. Therefore, in order to address the grievance of the Appellant regarding violation of principle of natural justice, we deem it appropriate to set aside the order passed by the CIT(A) with the directions to adjudicate the issue raised in appeal before CIT(A) afresh after giving the Appellant a reasonable opportunity of being heard. CIT(A) is directed to confront the Appellant with the remand report received from the AO in response to letter dated 09/02/2017 sent by the CIT(A) to AO for examination of additional evidence filed by the Appellant along with submissions before adjudicating upon the issue of admissibility or otherwise of the additional evidence furnished by the Appellant. Appeal preferred by the Assessee is allowed for statistical purposes.

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• 2023 (5) TMI 945
  Addition u/s 68 - assessee has sold 2700 equity shares purchased in the earlier years - whether the addition could be made in the hands of present assessee qua the money deposited in the account of the buyer by the third party? - HELD THAT:- After analyzing the records we find that addition if at all is to be made that could have been made in the hands of Santosh Agency who received Rs. 11,00,000/- from M/s Patra Bastralaya . AO is doubting the source of source and if the source is doubtful that has to be added in the hands of Santosh Agency and not the assessee. Here we note that the assessee has filed name and address, sale bill and all the evidences such as bank statement before the authorities below who have instead of making the addition on the right hands simply added it in the hands of the present assessee was added to the income of the assessee u/s 68 which his incorrect and cannot be sustained. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the addition - Appeal of the assessee is allowed.

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• 2023 (5) TMI 944
  Addition on protective basis - credits in the bank accounts of the assessee and foreign company - assessment for the A.Y. 2019-20 stands completed u/s 10(3) of the Black Money Act on a substantive basis - whether the appeal of the revenue for the same assessee be challenged both count first when the addition is made substantively for one year and protective on the other years? - HELD THAT:- Once the substantive addition has been made in the year in which such assets come to the notice of the Assessing Officer that can be charged to tax in the year as per clear mandate of provision of law and since the matter is already under consideration for assessment year 2019-20. The separate addition made in the respective years on protective basis and the appeal filed by the department against the finding of the ld. CIT(A) for these years is not maintainable and has rightly held by the ld. CIT(A) that the protective addition for the year under consideration is not warranted as the same is entirely contrary to the provision of section 3 of the Black money Act. Charge of tax - Beneficial owner of bank accounts of foreign company - Credits in the bank accounts of the assessee and foreign company - Who is beneficial owner of the alleged undisclosed assets and the income therefrom, of an independent non resident foreign company? - HELD THAT:- Place of Effective Management of the said foreign company is situated outside India because of which, the company is a non-resident in India within the meaning of section 6 of the income tax act and none of the assets were liable to be taxed in India. Reference has been made to the CBDT circular dated 23.02.2017 bearing Circular No. 08/2017. Therefore, in no view of the manner taxability arise in the present case proving that the entire edifice of the case is wholly unjust and illegal. Therefore, we are of the view that the non-resident foreign company M/s. Agrasen Polymers FZE based at UAE is a separate legal entity and all the funds/investments etc. belong to the company and no tax liability can be fastened on the assessee. Additions of transactions in the hands of the appellant which solely belong to the non-resident foreign company cannot be added in the hands of the Appellant. Dividend pertained to the non-resident company, cannot be taxed in the hands of the assessee.

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• 2023 (5) TMI 943
  TP adjustment - computation of profit level indicator (PLI) - foreign exchange loss - part of operating expenses or not - Assessee claims that Foreign exchange loss is not to be considered as operating expense while computing profit level indicator with respect to the computation of arm s-length price with respect to the sale of agricultural commodities to its associated enterprise - HELD THAT:- According to the learned dispute resolution panel when the assessee entered into an agreement for sale in foreign currency, the figure of sales and forex loss/gain taken together gives the correct picture. In reality, the assessee incurs neither any loss nor any gain because of forex fluctuation it is only an accounting treatment. Assessee in reality did not incur any liability towards buyer s account on foreign exchange fluctuation. DRP also extracted the scenario provided by the assessee wherein it is proved that foreign exchange loss incurred even before the sale has been made and that is because of reinstatement/adjustment of advances received against sales. Sales and forex losses incurred by the assessee are closely interlinked for this reason. Assessee in the sale price also giving AE benefit of forex fluctuation also. No infirmity in the direction of the LD DRP by including forex loss in the PLI computation of Assessee. Ground is dismissed. Late payment of dues of employees contribution as per respective due dates of the respective Act - HELD THAT:- In view of the decision of Honourable Supreme court in case of Checkmate solutions Services Limited [ 2022 (10) TMI 617 - SUPREME COURT ] this issue is to be decided against the assessee and hence Ground is dismissed. Provision of bad and doubtful debts which is not writing off actual debts - HELD THAT:- As it does not fulfill the condition of allowability as bad debts and hence ld DRP has correctly upheld the order of the ld AO. We dismiss this ground also. Allowance of carry forward losses - HELD THAT:- We set aside this issue to the file of the dl AO that if the necessary conditions are satisfied, the claim of such set off may be examined in accordance with the law. This ground is allowed subject to verification.

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• Customs

• 2023 (5) TMI 942
  Validity of order of lower court for release of goods / return of goods to the accused - Smuggling - yellow coloured metallic bars believed to be gold of Foreign origin - failure to produce any document whatsoever in support of legal importation, possession, acquisition or transportation of the said goods - HELD THAT:- Section 110(2) provides that where any goods are seized under sub Section 1 and no notice is given under clause (a) of Section 124 within six months of the seizure the goods, the goods shall be returned to the person from whose possession the goods have been seized. But in the present case the notice has been issued for extension of time to issue the show cause in terms of section 124 of the Customs Act and ultimately, the show cause notice under section 124 of the Customs Act, 1962 was issued to the opposite party on 01.09.2017 and the opposite party has filed his reply to the said show cause notice on 10.10.2017. Section 122A of the said Act provides for adjudication proceedings. The opposite party being aware of the same has not participated in the adjudication proceedings and has wrongly made an application before the Learned Court. The Learned Court also without appreciating the provision of Customs Act has wrongly passed the order on 05.04.2018, though, the show cause notice had been issued prior to that of the order passed by the Learned Court proposing confiscation of the goods as well as imposition of penalty, therefore, the Learned Court on 05.04.2018 ought not to have passed such order for return of the seized goods when the same has been taken care of by the adjudicating authority in terms of the Customs Act. The Supreme Court in Sunderbhai Ambalal Desai vs State of Gujarat, Special Leave Petition [ 2002 (10) TMI 773 - SUPREME COURT ] laid down the guidelines for return of seized article/vehicles etc. as per section 451 of the Cr.P.C. But the Customs Act has its own provisions for search, seizure, confiscation etc. laying down the detailed procedure in respect of cases under the Act. The Magistrate did not act in the interest of justice and the said order dated 05.04.2018 read with order dated 05.12.2018 passed in Complaint Case No. 1108 of 2016 arising out of Seizure Case No. 1/Seizure/CL/IMP/CUS/GD/2016 dated 22.09.2016 under Section 110 of Customs Act, 1962 for the offence punishable under Section 135 1(b)(ii) of the Customs Act, 1962 pending before the learned Chief Judicial Magistrate, Krishnanagar, Nadia, being not in accordance with law is clearly an abuse of the process of law and if not set aside shall lead to miscarriage of justice - Application allowed.

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• 2023 (5) TMI 941
  Maintainability of petition - scope of Jurisdiction of this court - seeking stay of suspension order - HELD THAT:- This Writ petition is a parallel proceeding and the relief of granting of stay of the suspension order or seeking explanation as to why the charge memo was not issued within a reasonable period, would be beyond the scope of jurisdiction of this Court. We can only give a direction to the Central Administrative Tribunal to take hold of all the issues on 09.06.2023 and pass orders on the basis of the records available. However, the direction that the second respondent should be reinstated, particularly when though the matter had been adjourned to 09.06.2023 it had been taken up during the interregnum period on 26.04.2023 has to be interfered with by us and to that extent, we would give a further direction that such reinstatement shall be kept on hold and all issues can be agitated on 09.06.2023 in detail before the Central Administrative Tribunal. We are confident that Administrative Tribunal would be so doing on 09.06.2023. That portion of the order dated 27.04.2023 which directed reinstatement alone is interfered with by us since it was passed when the matter was originally listed on 09.06.2023. Such an order could have been passed on 09.06.2023 after hearing all parties. Petition disposed off.

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• 2023 (5) TMI 940
  Smuggling - seizure of gold bars/pieces weighing 3999.590 gms - smuggled into India from Bangladesh without any legal documents - benefit of presumption under section 123 of Customs Act, 1962 - Burden to prove - reliability of retracted statements of the co-accused to establish the guilt of the Appellants, when the procedure prescribed under section 138B of the Customs Act was not followed - penalty u/s 112(a) and(b) and 114 AA of the Customs Act, 1962. Whether evidences available on record prove that the gold bars/pieces were smuggled into India from Bangladesh, without any legal documents? - HELD THAT:- The Appellant stated that the gold pieces/bars were seized on the reasonable belief that they were smuggled into India from Bangladesh. The Adjudicating authority has relied upon the decision of the Hon ble Supreme Court in the case of GOPALDAS UDHAVDAS AHUJA AND ANOTHER VERSUS UNION OF INDIA AND OTHERS [ 2004 (7) TMI 10 - SUPREME COURT] for effecting the seizure on the ground of reasonable belief . However, the said case is distinguishable on the ground, firstly, that the subjected case was during the breathing period of Gold Control Act, wherein possession of primary gold even unmarked had a thrust of burden upon the Assessee. When the Gold Control Act was repealed without a saving clause, the said decision under the Gold Control Act has no relevancy under the Customs Act Currently under the Customs Law, the burden has been thrust upon the Department and the presumption under Section 123 of the Customs Act has no application in the present case, as the gold seized is of Indian origin - the Appellants stated that to form a reasonable belief that the goods are smuggled from Bangladesh, there must be irrefutable evidence to prove that allegation. In the present case there is no such evidence available to prove that the goods were of foreign origin and smuggled into India from Bangladesh. The reasonable belief on which the DRI officers presumed that the gold bars/pieces were of smuggled nature is not supported by any corroborative evidence. There is no document available on record to establish that gold bars/pieces were smuggled into India from Bangladesh. The impugned order has concluded that the said gold bars/pieces were smuggled into India only on the basis of assumptions and presumptions without any concrete evidence to substantiate this claim. Hence, the material evidence available on record does not establish that the gold bars/pieces were smuggled into India without any valid documents. Accordingly, answer to this question is negative. Under the facts and circumstances of this case, whether the benefit of presumption under section 123 of Customs Act, 1962 goes in favour of Revenue? - HELD THAT:- It is observed from the Test report that the gold bars/pieces were of purity 99.5, 99.6 and 99.8 only. Normally foreign origin/foreign marked gold will be of purity 99.99. There is no foreign mark available on the gold seized. They were seized from Shri Rajesh Kumar Yadav and Shri Umanath at the Gaya railway station. The Appellants claimed that the gold bars/pieces were purchased domestically from M/s Chandan Enterprises, Delhi under Invoices 3 and 5 dated 01/01/20 and 03/01/20. The Appellants stated that the the gold bars/pieces in question were sent to Kolkata to the goldsmiths for making of jewellery. The investigation ignored their claim and charged that the Appellants failed to give name, addresses, contact number, of the persons/goldsmiths to whom the said goods were sent for exchanging the same into gold jewellery. The Appellants claimed that the gold bars/pieces were purchased from M/s Chandan Enterprises. Delhi. The investigation has not verified the documents submitted by them in support their claim of domestic purchase of the gold bars/pieces. They brushed aside the evidences submitted by the Appellants by citing some mismatch in the dates. One of the reasons cited for ignoring the invoice was that the invoices were not carried along with them by the persons who carried the gold. Not having the invoices at the time of seizure cannot be areason to ignore their claim. The documents produced could have been verified to find out the veracity of their claim. On the contrary, the investigation could not provide any evidence to establish the smuggled nature of the gold - In the absence of any such evidence, the burden of proving that the gold bars/pieces were not smuggled one cannot be thrust upon the Appellants. The burden under Section 123 of Customs Act, to prove that the gold is not smuggled one, does not lie on the Appellants, in this case. Accordingly answer to the question is negative. Whether the retracted statements of the co-accused can be relied upon to establish the guilt of the Appellants, when the procedure prescribed under section 138B of the Customs Act was not followed? - HELD THAT:- The Impugned Order mainly relied upon the statements of the Noticees 1 to 5 to establish the foreign origin nature of the gold. Other than the statements, there is no other evidence available on record to show that the gold were smuggled into the country from Bangladesh. It is incorrect to rely only on the statements of the co-accused without any corroboration, to prove the smuggled nature of the gold. It is a settled law that the statement of the coaccused cannot be relied without any independent corroboration. The Tribunal in the cases of PR. COMMISSIONER OF CUSTOMS (PREV.) DELHI VERSUS SH. AHAMED MUJJABA KHALEEFA [ 2018 (5) TMI 1681 - CESTAT NEW DELHI] dismissed the appeal of Revenue holding that jewellery not bearing any foreign marking other than statement of passenger no other proof produced by Revenue to substantiate the claim that jewellery were smuggled into India - the gold bars/pieces cannot be confiscated based on the retracted statements alone. Accordingly answer is negative. Whether penalties imposed on the Appellants under section 112(a) and(b) and 114 AA of the Customs Act, 1962 are sustainable in this case? - HELD THAT:- Under section 112 (a) and (b) penalty is imposable when the person is found to be dealing with goods for which prohibition is in force or the goods are liable for confiscation. The gold bars/pieces dealt by the Appellants were established to be of Indian origin and hence not prohibited goods. The gold bars/pieces were seized at Gaya railway station fromShri Rajesh Kumar Yadav and Shri. Umanathwho were carrying the gold and are employees of Manoj Kumar Seth and Balwant Raj Soni. They were carrying the gold which were domestically purchased and hence there is no offence established against them.Manoj Kumar Seth and Balwant Raj Somi are the partners of the jewellery shop Gandhi and Sons and they claimed the ownership of the seized gold vide their letter dated 21/01/20 - The investigation has not brought in any evidence to counter this claim. Hence, there are merit in the argument of the Appellants that penalty is not imposable on them under section 112(a)and(b) of Customs Act, 1962. Under section 114 AA of Customs Act, 1962, penalty is imposable when a person makes false or incorrect statement or declaration. The investigation has not brought in any evidence to establish that Manoj Kumar Seth has intentionally made false statement or declaration warranting penalty under section 114AA of Customs Act, 1962. Hence, penalties under sections 112(a) and (b) and 114 AA of the Customs Act, 1962 are not imposable in this case. Accordingly answer is negative. Appeal allowed.

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• 2023 (5) TMI 939
  Classification of imported goods - Inflatable Party Items - to be classified under 39269099 of the Customs Tariff Act, 1975 or under CTH 9503? - Confiscation - redemption fine - penalty - HELD THAT:- The adjudicating authority while classifying the impugned goods i.e. Inflatable Party decoration inflatable item i.e. decoration foil balloon, held that the same is classified under CTH 9503 in terms of the report issued by NCTC dated 29.10.2021 - he report contains that the impugned goods are party decoration inflatable item, but classified under CTH 9503 instead of declared CTH 3926 and held attract BIS Registration. The said report is inconclusive as no detailed analysis has been placed on record. Further, we find that the respondent sought clarification on the import of Inflatable Party decoration inflatable item from the Ministry of Commerce and Industry, Government of India and a clarification was received from the Department of Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India vide F.No.14031/47/2020-CI dated 24.02.2022. As per the Government of India clarification, it is clear that the Indian Standard IS Registration i.e. any product or material designed or clearly intended for use in play by children under 14 years of age, includes requirements for safety of toy balloons as well. These requirements include the possible choking hazards presented by pieces of broken latex ballons or by mouthpieces fitted to balloons - Further, it was held that the impugned goods imported by the respondent are not covered under Toy Quality Control Order, 2020. As it is clarified that the impugned goods are out of preview of BIS Registration by Ministry of Commerce and Industry, Govt. of India, in that circumstances, it was held that the items in question are not in the scope of BIS Standard and the report sought from NCTC by the Revenue is without any basis. The appellants are not required for any BIS Registration for import of the impugned goods i.e. INFLATABLE PARTY ITEM (INPAC) - there are no infirmity in the impugned orders and the same are upheld - appeal of Revenue dismissed.

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• 2023 (5) TMI 938
  Classification of imported goods - aluminous cement - to be classified under CTH 25233000 or under CTH 25239020? - benefit of N/N. 21/2002-Cus dated 01.03.2002 Sl. No. 448A and N/N. 12/2012-Cus dated 17.03.2012 Sl. No. 115A denied - HELD THAT:- The said issue has come up before this Tribunal in the case of M/S VESUVIUS INDIA LTD, ARUN KUMAR GIRI, SHRI THUMMA ANTONY, PLANT MANAGER, M/S VESUVIUS INDIA LTD VERSUS COMMISSIONER OF CUSTOMS [ 2019 (11) TMI 499 - CESTAT HYDERABAD] where the Tribunal has examined the issue and held that A plain reading of the notifications shows that the exemption is available for any high alumina cement falling under chapter 25. It does not distinguish between high alumina cement and low alumina cement. If the intention of the notification was to confine it to aluminous cement falling under a specific heading of the Customs Tariff, it would have said so. In this case also, the respondent has imported Alumina Cement and filed Bills of Entry for their clearance claiming the classification under CTH 25233000 - Further the respondent has manufactured refractory bricks and for that, they have imported the impugned goods and this issue has been examined by this Tribunal in the case of Vesuvius India Ltd. and it was held that the correct classification of the impugned goods is under CTH-25233000 and the respondent is entitled the benefit of exemption Notification No.21/2002-Cus dated 01.03.2002 Sl.No.448A and subsequent Notification. The issue is no more res integra and the correct classification is under CTH-25233000 and the respondent is entitled to the benefit of exemption Notification No.21/2002-Cus dated 01.03.2002 Sl.No.448A and subsequent Notification - Appeal of Revenue dismissed.

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• 2023 (5) TMI 937
  Levy of penalty u/s 112 (a) and 112 (b) of the Customs Act, 1962 - import by misdeclaration of description and value of the consignments using the IEC registered in the name of other person and shell companies - HELD THAT:- The statement of the appellant recorded during the course of investigation perused. From going through the said statement, it is clear that the importer could not have contacted to seek help of the appellant for clearance of the said consignment and the appellant also visited to Kolkata. Therefore, after meeting with the concerned person and knowing that there is a DRI alert, the appellant informed the importer that he could not do anything and further told that if it was known to him that there is a DRI alert, the appellant could not have come to Kolkata also. This part of the statement has not been denied by the Revenue and no other statement or evidence has come on record that the appellant was involved in the clearance of the above said consignments which were mis-declared and under-valued. The act of action of the appellant is only under bonafide belief. Thus, no penalty is imposable on the appellant. Therefore, the penalty imposed on the appellant is set aside - appeal allowed.

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• Corporate Laws

• 2023 (5) TMI 936
  Holding Directorship of companies in excess of the limits prescribed (29 Companies) under the provisions of Section 165 of the Companies Act, 2013 - offence punishable under Section 165(6) of the Act - whether the amendment that was brought into force on 21.12.2020 by virtue of the Companies (Amendment) Act, 2020 can be applied to pending prosecutions? HELD THAT:- At the relevant point of time, contravention was considered as an offence. Further, there was no Explanation II, which specifically clarified for the purpose of reckoning in the limit of Directorship of the 20 companies, the dormant companies shall not be included. By virtue of the Companies (Amendment) Act, 2019 and the Companies (Amendment) Act 2020, the contravention is now liable for penalty by the adjudicating officer appointed by the Central Government. If the contravention is liable for fine, it is triable by a Magistrate and it is an offence and therefore, triable by a Magistrate. Penalty, however, is imposed by the adjudicating officer by the Central Government and hence, the contravention is no longer an offence. The Act not only mollifies the punishment prescribed for contravention, but also the procedure, for determining the penalty. The Hon ble Apex Court in T. BARAI VERSUS HENRY AH HOE AND ANOTHER [ 1982 (12) TMI 186 - SUPREME COURT ] had an occasion to consider the amendments made to Section 16(1)(a) of the Prevention of Food Adulteration Act, 1954. The Act originally prescribed punishment of 6 years for the said offence of the Act. In 1975, an amendment was made by the State of West Bengal by the West Bengal Amendment Act, which provided for punishment upto imprisonment for life for the said offence. Thereafter, the Parliament passed the Prevention of Food Adulteration (Amendment) Act, 1976, which provided for reduced punishment for the offence. The question that was raised before the Hon ble Supreme Court inter alia was whether the amendment would be prospective or would apply to pending prosecutions as well in the State of West Bengal. The amendment not only brought about change in the punishment, but also change in the procedure. By virtue of the amendment, the punishment prescribed was only 3 years, whereas, in the West Bengal Act, the punishment prescribed was life imprisonment. Therefore, the earlier West Bengal Act provided a trial by the Court of Sessions and by virtue of the amendments, the trial was to take place before the Magistrate. Applying the above principles to the instant case on hand, it is found that the Parliament had made amendments for the purpose of easing the doing of business and also for reduction of prosecution that are filed in the Special Court - there is no reason why the said Amendment cannot be applied in favour of the accused in the pending prosecution. The accused shall also be entitled to the benefit of Explanation-II to Section 165(1) of the Companies Act. The intention of the Parliament is very clear and the since of the Amendment Act 2020 mollifies the rigour of punishment the beneficial construction has to be applied in favour of the accused in pending prosecutions and all the prosecution has to be withdrawn and transferred to the adjudicating authority appointed under Section 454 of the Companies Act for further proceedings in terms of the said provision. This Court is of the view that it may not be necessary to deal with the other contentions of the parties - petition disposed off.

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• Law of Competition

• 2023 (5) TMI 935
  Anti-competitive conduct by various bidders in supply and installation of signages at specified locations of State Bank of India across India - bid-rigging and cartelisation in the tender floated by SBI Infra Management Solutions Pvt. Ltd. (SBIIMS) - Section 19(1) of the Competition Act, 2002 - HELD THAT:- There is no force in the argument of counsel for the Appellant insofar as she has submitted that two emails dated 02.06.2018 and 04.06.2018 cannot be relied upon against the company as well as the Director because the said emails are coming from the other party and neither the company nor the Director has copied the email or part of the email. This argument cannot be accepted because at that time, there was not a whisper that ultimately this matter is going to be taken in its Suo Motu jurisdiction by the Commission for the purpose of finding out as to whether there has been a cartel of the bidders which is contrary to the provisions of the Act and, therefore, the role ascribed to Manish Jodhavat has been thoroughly discussed in Para 77 to 92 of the impugned order with which we are totally satisfied that the company as well as Manish Jodhavat was somehow or the other were involved and, therefore, the conclusion drawn by the Commission cannot be faulted. There are no merit in the present appeal and the same is hereby dismissed.

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• Insolvency & Bankruptcy

• 2023 (5) TMI 934
  Initiation of CIRP - Application u/s 7 dismissed by the NCLT - Financial Debt or not - existence of debt due and payable or not - loan was lent for time value of money or not (existence of interest component on loan or not - existence of tripartite agreement between the Appellant, Corporate Debtor and SBI - time limitation. Whether the payment of Rs.10.46 crore by the Appellant to the SBI on behalf of the Corporate Debtor during 2014-2016 in terms of the two MoUs and OTS qualifies to be a financial debt within the meaning and scope of Section 5(8) of the IBC? - HELD THAT:- In Pioneer Urban [ 2019 (8) TMI 532 - SUPREME COURT ] it has been held that any debt to be treated as financial debt, there must happen disbursal of money and the disbursal must be against consideration for time value of money. The concept of time value of money has been further explained to also include a transaction which does not necessarily culminate into money being returned to the lender or interest being paid in respect of money that has been borrowed. Holding Section 5(8) as a residuary provision which has a catch-all nature, it held that it can include anything which is equivalent to the money that has been loaned as long as commercial effect of borrowing or profit as the aim is discernible - In the matter of Anuj Jain [ 2020 (2) TMI 1259 - SUPREME COURT ], the Hon ble Supreme Court articulated that the essential condition of financial debt is disbursement against the consideration for time value of money - Further in the most recent judgment of Hon ble Supreme Court in Orator [ 2021 (8) TMI 314 - SUPREME COURT ], it has been clearly held that financial debt does not expressly exclude an interest free loan. It has also emphasized that financial debt includes any amount raised under any other transaction having the commercial effect of borrowing. The impugned order has observed that the disbursal made by the Appellant is not in the nature of financial debt on the grounds that there is no interest payable on the loan advanced by the Appellant and that there is no time value of money since there is no time fixed for repayment of the loan. In the present facts of the case, that money had been disbursed by the Appellant on behalf of Corporate Debtor to SBI towards loan repayment is undisputed. It is also an admitted fact that no interest was either claimed by the Appellant nor paid by the Corporate Debtor. That the component of interest is not a sine qua non for bringing a debt within the fold of financial debt has been clearly held by the Hon ble Supreme Court in Orator - The misconceived finding of the Adjudicating Authority cannot be accepted that simply because the instant transaction was bereft of loan component and no time was fixed for repayment, it did not qualify to be a financial debt. Whether in the present case, disbursement of money has taken place against the consideration for time value of money and whether commercial effect of borrowing is found to underpin the transaction? - HELD THAT:- The concept of time value of money has not been expressly defined in the IBC. Undoubtedly, the most typical illustration of time value is in the form of interest on the principal amount that has been borrowed. However, it is now a well settled proposition of law that interest on loan is not the only binding criterion for determining time value of money. The Insolvency Law Report, 2018 has also held time value of money to mean compensation or the price paid for the length of time for which money has been disbursed. Thus, time value of money is not only a regular or timely return received for the duration for which the amount is disbursed as an amount in addition to the principal, but also covers any other form of benefit or value accruing to the creditor as a return for providing money for a long duration. The Adjudicating Authority in the impugned order has held that in the absence of time fixed for repayment, it cannot be said that the loan was advanced for time value of money. Even if the loan extended was not interest-bearing and no time was fixed for repayment, it would be both skewed and misconstrued to hold that the loan was disbursed without time value of money. The Appellant had advanced the payment with an intent to gain from the land, plant and machinery and factory building changing hands from the Corporate Debtor to the Appellant as borne out from Clause 4.1.2 of MoU-2 - The expectation to benefit from acquiring the entire right, title and interest over the subject property at a lesser rate compared to the market value has to be factorized as time value of money. As long as the lender visualizes an element of profit and enhancement of economic prospect in return for the money advanced for certain time period, the loan in question entails time value of money and acquires the colour of commercial borrowing which is clearly borne out from the facts of the present case. It has all the trappings of a financial debt and squarely falls within the purview of Section 5(8) of IBC. Thus, the disbursal made by the Appellant in the present case is in the nature of a financial debt and to that extent disagree with the Adjudicating Authority. Whether there was debt, if any, which had become due and payable on the part of the Corporate Debtor and default thereof qua the Appellant? - HELD THAT:- It is trite law that under the IBC once a debt which becomes due or payable, in law and in fact, and there is incidence of non-payment of the said debt in full or even part thereof, CIRP may be triggered by the financial creditor as long as the amount in default is above the threshold limit. It is also well accepted that debt means a liability in respect of a claim and claim means a right to payment even if it is disputed. Viewed against this broad backdrop of the IBC framework, we now dwell upon the facts of the present case to find out whether in this case debt was due and payable. The modality of payment by the Appellant by way of direct deposit to the Corporate Debtor s account with SBI was clearly laid down in Clause 5.7 of the MoU-2. There is also no dispute that Appellant had complied to these modalities and routed the disbursal by depositing the same in the Corporate Debtor s account in the SBI. Receipt of this amount has not been controverted by the Corporate Debtor thereafter. Neither has any claim been made that any part of this sum was repaid by the Corporate Debtor. That being the case there arises no doubt that there was a debt on the part of the Corporate Debtor qua the Appellant for an amount of Rs.10.46 crore. The Appellant having already paid Rs.10.46 crore was still required to pay the balance consideration of Rs.16.70 crore by or before 31.03.2016. Further, it is significant to note that Clause 5.1 of the Completion Arrangements in MoU-2 expressly provided that only after final payment is made by the Appellant to the Corporate Debtor s account in SBI that Corporate Debtor was to take further steps for execution of lease deed in respect of land and registration of factory building in favour of the Appellant. The recitals of the MoU make it amply clear that the Appellant was required to remit the full payment of Rs.27.16 crore and until then he was not entitled to acquire rights and title over the subject property. In other words, the debt qua the Corporate Debtor would have become payable only on the full amount having been remitted to the Corporate Debtor s account and this stage was yet to be reached. The MoUs and A2S had been frustrated due to non-payment by the Appellant of the agreed consideration amount contained therein and for this breach the Corporate Debtor cannot be held responsible as that would tantamount to allowing the Appellant to take advantage of his own wrong. The full payment had clearly not been made by the Appellant having admittedly paid only Rs.10.46 crore, we agree with the finding of the Adjudicating Authority that unless the entire payment was made, no right would accrue to the Appellant to enter into the shoes of SBI and have right to title and possession of the subject property - under the given facts and circumstances, the debt had not become due and therefore was not payable. The Corporate Debtor is entitled to point out that a default has not occurred in the sense that the debt is not due. In the present facts, the debt had not become due in the sense that it was payable only after receipt of full agreed amount of Rs.27.16 crore and which not having occurred, there was no event of default and that being so the debt had not become payable and hence Section 7 of the IBC does not get attracted. The impugned order is upheld - appeal dismissed.

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• 2023 (5) TMI 928
  Maintainability of intervention application - It is submitted that the Application is still pending for consideration and has not yet been admitted - rejection of impugned Application on the ground that at the pre-admission stage there is no occasion to permit the Applicant to intervene in the matter - HELD THAT:- In the present case the Application under Section 7 has not yet been admitted. Adjudicating Authority did not commit any error in rejecting the Intervention Application at pre-admission stage, filed by the Appellant - there are no error in the Impugned Order rejecting the application for intervention. However, it shall be open to the Appellant to file appropriate fresh application in the event application is admitted under Section 7 IBC. Appeal dismissed.

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• Central Excise

• 2023 (5) TMI 933
  Refund of central excise duty paid - refund claimed on behalf of the appellant under the exemption notification dated 25.04.2007 for the period from July, 2010 to February, 2012 - Rejection on the ground of being time barred - whether the appellant, who is unquestionably entitled for excise duty exemption under the Notification dated 25.04.2007 was required to file any formal application for claiming such refund? HELD THAT:- Bare perusal of the language of the clause 3 of Notification dated 25.04.2007, makes it clear that all that is required from a manufacturer eligible for exemption under the Notification to get duty refund is that the statement of duty paid for each month, other than the amount of duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2004 should be submitted to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central excise, as the case may be, by the 7th of the next month for which the duty has been paid. As per Clause 3(b), once the duty paid statement is received, the burden then shifts to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central excise, as the case may be, to make the required verification and refund the amount of duty paid, by 15th of the next month - The Notification dated 25.04.2007 does not stipulate that the manufacturer entitled to exemption would be required to file a formal application for refund. Identical controversy arose in the case of Vernerpur Tea Estate [ 2018 (2) TMI 1883 - GAUHATI HIGH COURT ], wherein challenge given to rejection of claim for duty refund under an analogous Notification dated 08.07.1999 was examined by the Division Bench of this Court, where it was held that statements of duty paid submitted in RT-12 returns by the appellant was substantial compliance of Clause 2(a) of the Notification and there was no need for it to submit a separate statement of the duty paid and claim refund. The language of the notification dated 08.07.1999 under consideration in the said case is pari materia to the notification dated 25.04.2007. The Division Bench of this Court held in unequivocal terms that the only requirement for a manufacturer to claim benefit of exemption of excise duty under the notification was to prove its eligibility for such claim and to submit statement of duty paid, to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central excise, as the case may be, by the 7th of the next month for which the duty had been paid. The Division Bench held that once the appellant was found to be eligible for exemptions and refund of duty paid, denial of benefit of exemptions and refund on the ground of delay cannot be permitted. Merely because the assessee submitted the application for eligibility on 08.01.2012, the claim for duty refund could not be defeated as being time barred. At best, the assessee could be denied the interest, if any accrued on the excise duty paid for the period from July, 2010 to December, 2011. As observed by Hon ble Division Bench in the case of Vernerpur Tea Estate, non-following of procedural requirement cannot deny the substantive benefit otherwise available to the assessee. Exemptions made with a beneficient object like growth of industry in an otherwise difficult region have to be liberally construed and a narrow construction of the notification which defeats the object thereof cannot be accepted. The substantial questions of law framed by this Court, while admitting the appeal, deserve to be decided in favour of the assessee/appellant.

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• 2023 (5) TMI 932
  Reversal of CENVAT Credit - removal of capital goods - case of appellant is that provision of Rule 3(5) of the Cenvat Credit Rules, 2004 would not be applicable to the appellant s case as the goods has been used before the same work removed - HELD THAT:- It is not in dispute that the capital goods on which the credit was availed, has been removed after some use. It is notice that Rule 3(5) and Rule 3(5A) Cenvat Credit Rules, 2004 deal with the obligation of a personal availing credit when that person removes the capital goods on which the credit has been availed. From the sequence of events, it apparent that there was no Rule for reversal of Cenvat Credit on capital goods cleared after some use. Similar case has been examined by Tribunal in the case of RAGHAV ALLOYS (P) LTD [ 2009 (4) TMI 184 - CESTAT, NEW DELHI ] wherein it was held that If the Department s view is accepted, it would lead to absurd results as even when the cenvated capital goods are cleared after long years of use at a small practice of their original value, still full Cenvat credit originally taken would be required to be reversed which would defeat the very purpose of grant of Cenvat credit facility in respect of capital goods. Hon ble High Court in the case of ROGINI MILLS LTD [ 2010 (10) TMI 424 - MADRAS HIGH COURT ] has also been examined similar issue and concluded that The capital goods on which Cenvat credit had been taken or removed after being used, the Manufacturer should pay an amount equal to the Cenvat credit taken on the said capital goods reduced by 2.5% for each quarter of a year or part thereof from the date of taking the Cenvat credit. It is noticed that in the instance case the appellant has reverse the Cenvat Credit equivalent to the duty on the transaction value of the capital goods cleared. Since, such reversal has been accepted by the Tribunal and the Hon ble High Court, the reversal sought by the revenue at a different rate cannot be accepted. Appeal allowed.

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• 2023 (5) TMI 931
  Job work - SSI Exemption - Benefit of N/N. 214/86-CE dated 25.03.1986 as amended by Notification No. 83/94-CE dated 11.04.1994 denied - neither the appellant nor the supplier of raw material has followed the conditions laid down in the said notification - Revenue was of the view that the appellant has wrongly availed the benefit of Notification 8/2003 as amended, on the goods so manufactured on job work basis as well as availed the benefit of Cenvat credit of the duty paid on inputs and cleared the same without payment of central excise duty. HELD THAT:- The issue involved in the present case is no longer res integra. The Tribunal has in the case of VANDANA DYEING PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2014 (8) TMI 441 - CESTAT MUMBAI] has held that notwithstanding the fact that the process fabrics are not included in Notification 214/86, the job-worker is not liable to discharge excise duty liability and any liability thereon is required to be discharged by the supplier of the raw materials. Rule 4(6) of the Cenvat Credit Rules makes it abundantly clear that, if the goods are required to be cleared from the job-worker s premises instead of being returned to the supplier, then the Commissioner can direct clearance of the goods on payment of duty from job-worker s premises. This would also indicate that the liability to discharge duty under the provisions of Rule 4(5)(a) is on the supplier of the goods and not on the processor of the goods. In this view of the matter, we find that the impugned order is not sustainable in law and merits to be set aside. In the case of M/S. INAR PROFILES PVT. LTD. (FORMERLY KNOWN AS VISAKHA STEEL ALLIEDS) VERSUS COMMISSIONER OF CENTRAL EXCISE, SERVICE TAX AND CUSTOMS - VISAKHAPATNAM-II [ 2014 (4) TMI 297 - CESTAT BANGALORE] it was held that the appellant is eligible for the benefit of Notification in respect of their supplies made to the SSI units. As regards contractors and traders, etc., the learned counsel drew our attention to the table submitted by them in reply to the show-cause notice wherein they had shown that if the clearances to third category of traders alone is taken in all the years under consideration by us, the total clearances made by the assessee would be less than the limit for total exemption prescribed by the SSI exemption Notification. The decisions relied in the impugned order are clearly distinguishable and do not come the way of holding that the benefit of Notification No. 214/86 dated 25.03.1986 as amended by Notification No. 83/94, 84/94 both dated 11.04.1994 cannot be extended in the present case in respect of the job worker. In above cases the demand has been made on the principal manufacturer i.e. the raw material supplier for whom the job work was carried out. Notification casts an obligation on the supplier of the raw material and not on the job worker to file such a declaration. The only reason for denial of the benefit of this notification as referred above is that the principal manufacturer i.e. the raw material supplier has not filed any declaration as required. The appellant in the present case could not have been held responsible for the failure of the supplier of raw material to give the undertaking as ascribed to the proper officer having jurisdiction over the factory of the job worker/supplier. Appeal allowed.

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• CST, VAT & Sales Tax

• 2023 (5) TMI 930
  Classification of goods - Gas Metering Skids - classifiable under Chapter Tariff Heading No. 90328990 or classified as machinery under Entry No. 58A in Schedule II of the Gujarat Value Added Tax Act, 2002 where the rate of tax is 4 paise in the rupee - Gas Meter Skid are not used in the manufacture of the final product but only for transportation of Gas, or not - whether the Gas Metering Skid was not an accessory and/or component of the machine used in the manufacture of goods and therefore appropriately classifiable under Entry 58A of the Schedule II of the GVAT Act? HELD THAT:- As far as the Special Civil Applications are concerned, the orders challenged therein are the orders passed by the Deputy Commissioner respondent No.4 herein. The Deputy Commissioner, it was submitted, ex-parte relied on the order passed by the Tribunal which is subject matter of challenge in the above captioned appeals and that they are passed even without hearing the petitioners to dismiss the case of the petitioners - Since the aforesaid appeals are admitted and in ultimate analysis the issue involved in the petition is identical, there shall be notice in all the petitions, returnable on 7.6.2023. Since, it was stated that in the two appeals as well as in the Special Civil Applications, the appellants-petitioners have paid the amount towards tax payable, which is also reflected from the impugned orders, by way of ad-interim relief, it is directed that there shall be no coercive steps against the appellants/petitioners in respect of the further recovery of tax. The petitioners, however, shall be obliged to pay the tax with interest, if so adjudged and ordered by the court at the final conclusion of the matter. Application disposed off.

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• Indian Laws

• 2023 (5) TMI 929
  Dishonour of Cheque - legally enforceable debt or not - Failure to prove source of loan given - Failure to rebut presumption u/s 139 of NI Act - opportunity to explain the incriminating circumstances not provided - HELD THAT:- The learned Trial Court had no reason to hold that the accused person had no liability to issue the cheque as he did not incur any liability by taking loan from the complainant. It was the wife of the accused person who took the loan. It is further observed by learned Trial Court that there was no evidence to show that the accused had the capacity to lend money. He did not have any licence to lend money as well. When it is admitted by Soumen De that the cheque was issued by him, it is to be presumed that he issued the cheque in order to repay the loan incurred by him and his wife. The onus was shifted upon the drawer of the cheque, to rebut such presumption. In his bid to discharge his onus Soumen De, respondent no. 2 took two specific defence. According to the respondent, the money was never received by him as loan other than a sum of Rs. 20,000/-. The loan was of taken by his wife and during subsistence of their marriage. His wife told him that she would take care of the loan. The other defence of the accused person is that the complainant did not have the capacity to extend a sum of Rs. 8,60,000/- as loan. The stand taken by the accused person, appear to be mutually contradictory. If the loan is taken by his wife and his wife assured him that she would take care of the issue of repayment of loan, it indicates that the complainant had the capacity to accommodate the accused person or his wife and to pay a sum of Rs. 8,60,000/- towards loan, as claimed by the complainant - the accused person failed to raise a probable defence to rebut the presumption under Section 139 of the NI Act. Considering the language used in Section 138 of the NI ACT, it can be said that it is only the drawer of the cheque who can be made liable for the penal action under the provisions of the NI Act. It is settled law that strict interpretation is required to be given to penal statutes - When drawer of the cheque issued the cheque and failed to rebut the presumption, there is hardly any reason to dismiss the petition of complaint on the ground that the loan was not taken by the drawer of the cheque. In fact, as the cheque was not issued by Paramita De, learned Trial Court had no reason to issue process against her in the proceeding under Section 138 of the N.I. Act, though she may be liable to legal action in other forum. Having admitted the fact that the cheque Exhibit 2 contains his signature, the accused person has incurred the liability to pay the money and also he has made himself culpable for the offence within the meaning of section 138 of the NI Act. By several judicial pronouncement, apart from the statutory provision as laid down under section 138 of the NI Act, it has become settled principle of law that the person who issues the cheque drawn on an account maintained by him for payment of any amount to another person, from out of that account for the discharge, in whole or in part of any debt or liability, in case of dishonour of the cheque shall have to face the consequences - It goes without saying that an accused person is presumed to be innocent unless proved guilty and an order of acquittal strengthens such presumption in favour of the accused person but the same rule cannot be made applicable with same rigour while dealing with an offence under section 138 of the NI Act, where a presumption is available that the holder of the cheque received the cheque for the discharge of any debt or liability either wholly or in part. This presumption is rebuttable. The accused person has failed to rebut such presumption. The learned trial court committed grave mistake in recording an order of acquittal, upon absolute misreading of not only the evidence on record but also upon erroneous understanding of statutory provision of law as laid down under section 138 of the NI Act. Learned Trial Court even after drawing up presumption, proceeded with the view that the complainant was to prove the case beyond reasonable doubt. It was but a fundamental error committed by learned Trial Court. The impugned judgement therefore, is not sustainable in law - appeal allowed.

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