TMI Tax Updates - e-Newsletter
June 14, 2023

Case Laws in this Newsletter:

GST Income Tax Insolvency & Bankruptcy PMLA Service Tax Central Excise Indian Laws

Articles

1. E-Invoicing Under Goods and Services Tax (GST)

   By: Ishita Ramani

2. No refund if demand overlaps for the same period unless refund amount is substantiated from demand

   By: Bimal jain

3. CUSTOMS CARGO SERVICE PROVIDER

   By: DR.MARIAPPAN GOVINDARAJAN

4. Short tax paid can be adjusted with the excess tax paid in subsequent months/quarters

   By: Bimal jain

News

1. PLI Schemes contribute to increase in production, employment generation, and economic growth

2. Successful conclusion of the 1st Meeting of the Joint Committee of the India-UAE Comprehensive Economic Partnership Agreement

3. Auction for Sale (issue/re-issue) of (i) ‘7.06% GS 2028’, (ii) ‘7.26% GS 2033’ and (iii) ‘New GS 2053’

Notifications

Customs

1. 42/2023 - dated 12-6-2023 - Cus (NT)

Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Supersession of the Notification No. 39/2023-CUSTOMS (N.T.), dated 1st June, 2023

GST - States

2. G.O.Ms.No. 233 - dated 5-6-2023 - Andhra Pradesh SGST

The Andhra Pradesh Goods and Services Tax Act, 2017- Certain Amendments to Go.Ms,No.259, Revenue (CT-II) Department, dated 29.06.2017

3. G.O.Ms.No. 220 - dated 16-5-2023 - Andhra Pradesh SGST

The Andhra Pradesh Goods and Services Tax Act, 2017- Seeks to implement e-invoicing for the taxpayers having aggregate turnover exceeding Rs. 5 Cr from 1st August 2023

4. 38/1/2017-Fin(R&C)(248)/3509 - dated 2-6-2023 - Goa SGST

Seeks to amend Notification No. 38/1/2017-Fin(R&C)(133) dated the 30th March, 2020

5. G.O. Ms. No. 3 - dated 19-5-2023 - Puducherry SGST

Extension of time limit for application for revocation of cancellation of registration

6. G.O. Ms. No. 2 - dated 19-5-2023 - Puducherry SGST

Amendment in Notification G.O. Ms. No. 2, dated 3rd January, 2018

Income Tax

7. 39/2023 - dated 12-6-2023 - IT

Cost Inflation index for the Finance Year 2023-24 - Seeks to amend Notification No. 44/2017 dated 5th June 2017

8. 38/2023 - dated 12-6-2023 - IT

Manner of disposal of application for advance ruling - In case difference of opinion between the members, decision will be taken by Majority with the help of Third Member - e-advance rulings (Amendment) Scheme, 2023

9. 37/2023 - dated 12-6-2023 - IT

Signing of Application for Advance Ruling - The condition of mandatory digital signature has been done away with - Income-tax (Ninth Amendment) Rules, 2023

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/86 - dated 13-6-2023

Regulatory framework for Execution Only Platforms for facilitating transactions in direct plans of schemes of Mutual Funds

2. SEBI/HO/IMD/IMD PoD-2/P/CIR/2023/87 - dated 13-6-2023

Corrigendum to Circular on Participation of Mutual funds in repo transactions on Corporate Debt Securities dated June 8, 2023

Customs

3. Public Notice No. 41/2023 - dated 12-5-2023

Modification in the procedure of granting manual Out Of Charge-reg.

4. Public Notice No. 06/CCP/JMR/2023 - dated 30-3-2023

Capturing additional declarations in the Bill of Entry filed w.e.f. 1st April, 2023 for the two CTHs pertaining to telecom equipment viz. 85176290 and 85176990 — reg.

5. Public Notice No. 05/CCP/JMR/2023 - dated 29-3-2023

Subject: Generation of IGCR Intimation Number (i.e. IIN) at ICEGATE under IGCR Rules for the Financial Year 2023-24 and utilizing thereof in the Bill of Entry files w.e.f. 15* April, 2023 — reg.

Highlights / Catch Notes

GST

• Advance Ruling Request Denied: Place of Supply for Antenna Services Not Covered Under CGST/TGST Act Section 97(2.

  Case-Laws - AAR : Scope of Advance Ruling application - Determination of place of supply - supply of services such as installation, testing and commissioning of antennas installed in various other States, other than the home State - Since the question raised by the Taxpayer pertains to determination of place of supply of the services rendered by the taxpayer, therefore the application is liable to be rejected as the queries raised do not fall within the ambit of provisions of section 97(2) of CGST/TGST Act’ 2017. - AAR
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• Pure Services to Government Entities Exempt from GST, Including Sub-Contractor Services to Entities Like SUDA.

  Case-Laws - AAR : Exemption form GST - pure services or not - services provided by a sub-contractor to the main contractor - The notification exempts pure services provided to government entities, and there is no condition that the services must be provided directly. Therefore, the applicant is entitled to exemption if the services are provided to SUDA under a sub-contract with the main contractor. - AAR
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Income Tax

• CBDT reissues notification setting Cost Inflation Index (CII) at 348 for FY 2023-24; justification awaited.

  Notifications : Cost Inflation index for the Finance Year 2023-24 - the CBDT issued the same CII as 348 for the FY 2023-24 vide notification dated 10.4.2023 - Same has been repeated again by issuing notification dated 12.6.2023 - CBDT needs to justify the reason behind this.
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• Court Rules Performance Level Not Grounds for Denying Depreciation on Installed Energy Saving Devices.

  Case-Laws - HC : Disallowance of depreciation on account of energy saving and pollution control devices - AO has not disputed the fact that the devices were installed. The level of performance of devices is not a measure based on which the AO could have denied depreciation to the respondent/assessee. - HC
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• Expenses for Replacing Decayed Parts in Manufacturing Qualify as Current Repairs u/s 31 of Income Tax Act.

  Case-Laws - AT : Nature of expenditure - current repairs - replacement of decayed parts - The assessee explains that the replacement was necessary for the manufacturing process, and there is no evidence to suggest that it resulted in a new asset or advantage to the assessee. Therefore, the expenses should be considered as current repairs and allowed u/s 31 - AT
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• Penalty for Concealment u/s 271(1)(c) Overturned Due to Taxpayer's Honest Admission of Reporting Error.

  Case-Laws - AT : Levy of penalty u/s 271(1)(c) - Failure to offer full amount of Interest earned on income-tax refund as taxable income - The assessee did not contest this addition, acknowledging their mistake - The assessee explained that the interest component not returned in the impugned year was returned in the succeeding year. Therefore, the penalty for concealment or furnishing inaccurate particulars of income is untenable, and it is directed to be deleted. - AT
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• Reopening Tax Assessments Needs Solid Justification; Mere Claims of Non-Disclosure Insufficient u/s 147 Proviso.

  Case-Laws - AT : Reopening of assessment u/s 147 - proper reasoning - Merely by adding a line in the reasons recorded by the Assessing Officer that the assessee had failed to disclose fully and truly all material facts, requirement of proviso to section 147 of the Act would not be satisfied for the purpose of reopening of the assessment u/s 147 - AT
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• ITAT rules taxpayer can't claim bad debt deduction without actual write-off u/s 36(1)(vii) of Income Tax Act.

  Case-Laws - AT : Deduction towards Provision for bad debts - Addition u/s 36(1)(vii) - The ITAT found that the assessee had made a provision for bad debts but had not actually written them off in their books. Therefore, they did not meet the conditions required to claim a deduction for bad debts under Section 36(1)(vii) of the Act.- AT
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• Penalties Imposed for Violating Income Tax Act Sections 269SS and 269TT on Cash Transactions by Assessee Company.

  Case-Laws - AT : Penalty u/s 271D & 271E - Contravention of provisions of Section 269SS & 269TT - Accepting and repayment of loans / deposits in Cash from the Managing Director of the Assessee Company - The justification given by the assessee for receiving loans in cash is unsubstantiated, as they received and repaid huge amounts without reasonable cause. Therefore, the penalty is justified. - AT
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• Court Upholds 30% Tax Deduction on Rental Income from Amenities u/s 24(a), Promoting Consistency in Tax Treatment.

  Case-Laws - AT : Deduction u/s. 24(a) equal to 30% - Rental income from fixture, fittings and amenities - separate agreements for let out of the property and for providing amenities - The principle of res judicata does not apply to tax proceedings, but the rule of consistency must be respected unless there are new facts. - the rule of consistency supports the claim of the assessee that the rental income from amenities must be treated as income from house property and is eligible for a deduction under section 24(a) of the Act - AT
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• Section 54F Exemption: Actual Sales Consideration Suffices for New House Investment; Section 50C Value Not Required.

  Case-Laws - AT : Deduction u/s 54F - LTCG - quantum of investment to be made in the New House Property - Actual consideration or Value or transferred property determined as per Section 50C - when the assessee has invested entire actual sales consideration received by him in the purchase and construction of new house accordance with the provision of section 54F(1) thereafter the provision of section 50C has not been applicable - assessee is entitled to exemption under section 54F - AT
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• ITAT Reopens Orders for Delayed Employee ESI/PF Contributions, Citing Retrospective Effect of Supreme Court Ruling.

  Case-Laws - AT : Reopening of earlier orders of ITAT for making additions towards delayed payment of employee’s contribution to ESI and PF - if the Apex Court intended its judgment to be applied prospectively, it would have provided a specific rider - as no such rider is found in the Checkmate Services Pvt. Ltd. vs. Commissioner of Income Tax-I case, it is concluded that the judgment has retrospective application - ITAT recall the respective orders - Appeals filed by the revenue allowed - AT
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• Tribunal Confirms Deletion of Additions u/s 69 for Unexplained Expenditure; Revenue's Appeal Dismissed.

  Case-Laws - AT : Unsecured loans - Additions u/s 69 as unexplained expenditure - the tribunal finds that the ld. CIT(A) rightly deleted the impugned additions as the AO failed to establish that the loss on occasion of share trading was a bogus or sham loss claimed. The second ground relates to the deletion of an addition made by the AO in respect of gross profit, and the tribunal finds that there was no difference in the amount of gross profit declared by the assessee and computed by the AO. Therefore, the tribunal dismisses the appeal of the Revenue. - AT
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• Tribunal Rules Section 14A of Income Tax Act Inapplicable Due to Lack of Evidence on Interest and Exempted Income Link.

  Case-Laws - AT : Disallowance u/s 14A - precondition of applicability of Sec 14A - interest paid on loan / borrowed funds - The tribunal held that the precondition of applicability of Section 14A had not been fulfilled in the present case and that there was no discussion as to how interest payment had been incurred in relation to some exempted income. Therefore, the disallowance made under Section 14A was directed to be deleted. - AT
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• Penalty u/s 270A Not Applicable for Income Underreporting Based on Gross Profit Estimation; AO to Delete Penalty.

  Case-Laws - AT : Penalty u/s. 270A - GP estimation - underreporting of income - The AO failed to prove underreporting, and the penalty for underreporting of income u/s 270A cannot be imposed based on an estimate. As the addition was made on GP estimation, the penalty is not maintainable, and the AO directed to delete it. - AT
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• ITAT Upholds CIT(A) Decision: Taxpayer Provided Sufficient Info on Unsecured Loans; AO Failed to Investigate Further.

  Case-Laws - AT : Bogus loans u/s 68 - unsecured loans from the three loan creditors and interest on loans - reliance on third party statement - The ITAT upheld the CIT(A)'s order, stating that the assessee had discharged its burden by submitting the requisite information, and the onus lies on the AO to make enquiries. The AO failed to make further enquiries and relied on the statement recorded, which was retracted subsequently. - AT
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• Capital Gain Assessment in Joint Ventures: Evaluating Transfer u/ss 2(47)(vi) and 2(47)(i) Amid Payment Delays.

  Case-Laws - AT : Assessment of capital gain - transfer u/s. 2(47)(vi) r/w s. 2(47)(i) - JV agreement for construction of building/s - Construction nearing completion but delay in payment of consideration - If the assessee hasn't initiated any legal process for cost recovery from the developer, a shortfall in consideration will result in incurring cost to a proportionate extent. If construction is incomplete, the value of consideration must be scaled down accordingly. The details must be clarified by the assessee and examined by the Revenue authorities. The actual cost incurred may not be in the same proportion due to delay, but this is irrelevant for computing capital gain. Any supporting material will be examined and adjudicated upon. - AT
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• Central Excise Duty refund classified as capital subsidy, not deductible u/s 80IB for new or expanded business units.

  Case-Laws - AT : Deduction u/s 80IB on Central Excise Duty refund - receipt of the subsidy was capital in nature as the assessee was obliged to utilize the subsidy only for repayment of term loans undertaken by the assessee for setting up new units/expansion of existing business. - In factual matrix the capital subsidy as capital receipt cannot be the part of the calculation of deduction U/s 80IB of the Act. - AT
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• NCLT Nullifies Penalty u/s 271(1)(c) of Income Tax Act; Assessing Officer Must Comply with Order.

  Case-Laws - AT : Penalty levied u/s 271(1)(c) - demand has already been extinguished in the order passed NCLT - The only apprehension of the assessee perhaps is that the AO may not nullify the demand, since the Ld CIT(A) has observed that he is dismissing the appeal as infructuous. In our view, this apprehension is unfounded, since the AO should necessarily nullify the demand following the order passed by NCLT and not on the basis of appellate orders passed under the Income tax Act. - AT
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• Penalty u/s 271(1)(c) of Income Tax Act Annulled Due to Lack of Specific Satisfaction by Assessing Officer.

  Case-Laws - AT : Levy penalty u/s 271(1)(c) - since no specific satisfaction has been recorded by the Ld. Assessing Officer either in the body of the assessment order or in the show cause notice issued u/s 271(1)(c) of the Act dated 02.05.2017 for initiation of penalty proceedings penalty imposed on the assessee under section 271(1)(c) is directed to be set-aside. - AT
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Corporate Law

• NCLT Welcomes 14 New Judicial and Technical Members for a Five-Year Term.

  Notifications : NCLT gets 14 new Members as Judicial Member and Technical Member in the National Company Law Tribunal for a period of five years. - Notification
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Indian Laws

• Court Rules Tender Authority Has Final Say on Net Worth Calculations, Including Deferred Tax Liability, Unless Legally Erroneous.

  Case-Laws - HC : Computation of net worth - inclusion of Deferred Tax Liability - Direct or Indirect Method of Calculation - Rejection of Petitioner’s bid in respect of a tender - The purpose of calculating net worth should be primarily left with the tender issuing authority and the evaluating committee and the Court cannot dictate as to how the net worth should be calculated unless the decision is contrary to law. - HC
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IBC

• Tribunal Overturns Liquidation Order, Approves Resolution Plan for Corporate Debtor Without RBI Pre-Approval Under Insolvency Code.

  Case-Laws - AT : Seeking approval of the Resolution Plan - Keeping in view, the clarification given by the Counsel for RBI that the ‘prior permission’ is not required, this ‘Tribunal’ is of the considered view that the Adjudicating Authority ought not to have rejected the Resolution Plan, more so, when the principal objective of the Code is that ‘revival of the Corporate Debtor and Resolution’. - The Order of the Adjudicating Authority directing ‘Liquidation’ is set aside - AT
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• Tribunal Rules Arbitration Award Challenge Keeps Operational Debt in Dispute, Affecting Insolvency Proceedings Under Arbitration Act 1996.

  Case-Laws - AT : Initiation of CIRP - Recovery proceedings - Execution of Ex-parte order, passed in arbitration proceedings - So long as the Arbitration Award, was challenged under the relevant Section of the Arbitration and Conciliation Act, 1996, the Operational Debt, in the instant Appeal, is considered to be under Dispute, as opined by this Tribunal. - AT
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Service Tax

• Delayed Payment Charges Not Subject to Service Tax u/s 66E(e) of Finance Act, 1994 Since July 2012.

  Case-Laws - AT : Banking and Other Financial Services - delayed payment charges collected from the borrowers who made loan repayments belatedly ie beyond the period stipulated in the agreement - declared service in the light of section 66E(e) of the Finance Act, 1994 or not. - the service tax could not be levied on ‘delayed payment charges’ collected by the appellant from their customers from 01.07.2012 also. - AT
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• Refund Authority Must Decide on Applications; Cannot Return as Premature.

  Case-Laws - AT : Refund claim - Once an application of refund has been filed before the refund sanctioning authority, the said authority is duty bound to decide the refund application one way or the other. - The refund application can either be rejected or allowed in part or in full. The provisions of refund do not give liberty to the fund sanctioning authority to return the refund application by terming the same to be premature. - AT
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• RMC Supply Classified as "Works Contract Service," Not Subject to Service Tax, Following L&T Case Ruling by Apex Court.

  Case-Laws - AT : Classification of services - supply of Ready-mix Concrete (RMC) - Commercial or Industrial Construction Service or not - In view of the Hon’ble Apex Court judgment in the case of L&T, the appellant’s activity of sale and pumping of RMC would necessarily fall under “Works Contract Service” - sale of RMC does not involve any service angle in spite of the fact that the appellants are pumping the RMC to the desired floor at the request of the customers. - Demand set aside - AT
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Central Excise

• Appellant Justified in Suo Motu Abatement Claim u/r 10 of 2010 Tobacco Packing Machine Duty Rules.

  Case-Laws - AT : Benefit of abatement under Rule 10 of Chewing Tobacco and Un-manufactured Tobacco Packing Machine (Determination of Capacity and Collection of Duty) Rules, 2010 - whether the appellant could suo motu claim abatement - Based on the facts and circumstances of the case, the appellant was justified in claiming suo motu rebate under rule 10 of the 2010 Rules. - AT
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Case Laws:

• GST

• 2023 (6) TMI 533
  Denial of Input Tax Credit (ITC) - Cancellation of registration of supplier - rejection of claim of the petitioner without considering the documents relied by the petitioner - violation of principles of natural justice - Reliance of Judgement of HC in M/S LGW INDUSTRIES LIMITED [ 2021 (12) TMI 834 - CALCUTTA HIGH COURT ] - HELD THAT:- The main contention of the petitioner that the transactions in question are genuine and valid and relying upon all the supporting relevant documents required under law, the petitioner with due diligence verified the genuineness and identity of the supplier and name of the supplier as registered taxable person was available at the Government Portal showing its registration as valid and existing at the time of transaction - Admittedly at the time of transaction, the name of the supplier as registered taxable person was already available with the Government record and the petitioner has paid the amount of purchased articles as well as tax on the same through bank and not in cash. This Court finds that without proper verification, it cannot be said that there was any failure on the part of the petitioner in compliance of any obligation required under the statute before entering into the transactions in question - the respondent authorities only taking into consideration of the cancellation of registration of the supplier with retrospective effect have rejected the claim of the petitioner without considering the documents relied by the petitioner. The impugned orders are set aside. The respondent no. 1 is directed to consider the grievance of the petitioner afresh by taking into consideration of the documents which the petitioner intends to rely in support of his claim - Petition disposed off.

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• 2023 (6) TMI 532
  Validity of Assessment Order - rejection of rectification application filed under Section 161 of GST Act - HELD THAT:- The petitioner filed an application under Section 161 of the Act seeking rectification of errors allegedly apparent on record. This application has come to be rejected by way of order dated 18.04.2023 - The officer refers to Section 161 of the Act, which provides for rectifications only of an error apparent on the face of record. He enumerates the various opportunities granted to the petitioner to supply the break-up of the ITC claimed and the reconciliation and notes non- compliance with those directions. An attempt is made to state that the Assessing Officer could well have examined the particulars that accompanying the return that were part of the file might have contained the details that he was looking for, and come to a proper conclusion in law even suo motu, without expecting the petitioner to supply the same. This is too much to expect from the Assessing Officer and it is not for an assessee who has not made even a solitary attempt to cooperate or assist in the assessment proceedings to lay the blame at the doorstep of the revenue - Petition dismissed.

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• 2023 (6) TMI 531
  Principles of Natural Justice - petitioner was completely denied opportunity of oral hearing before the Assessing Authority - Section 75(4) of the U.P. GST Act, 2017 - HELD THAT:- Once it has been laid down by way of a principle of law that a person/assessee is not required to request for opportunity of personal hearing and it remained mandatory upon the Assessing Authority to afford such opportunity before passing an adverse order, the fact that the petitioner may have signified No in the column meant to mark the assessee s choice to avail personal hearing, would bear no legal consequence. Even otherwise in the context of an assessment order creating heavy civil liability, observing such minimal opportunity of hearing is a must. Principle of natural justice would commend to this Court to bind the authorities to always ensure to provide such opportunity of hearing. It has to be ensured that such opportunity is granted in real terms - the impugned order itself has been passed on 25.11.2022, while reply to the show-cause-notice had been entertained on 14.11.2022. The stand of the assessee may remain unclear unless minimal opportunity of hearing is first granted. Only thereafter, the explanation furnished may be rejected and demand created. The matter is remitted to the respondent no.2/Assistant Commissioner, State Tax, Sector-6, Aligarh to issue a fresh notice to the petitioner within a period of two weeks from today - Petition allowed.

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• 2023 (6) TMI 530
  Scope of Advance Ruling application - Determination of place of supply - supply of services such as installation, testing and commissioning of antennas installed in various other States, other than the home State - HELD THAT:- Applicant are installing the antenna supplied to M/s. Bharat Electronics Limited, Bangalore. This amounts to rendering of service which includes installation, testing and commissioning whose place of supply has to be determined under provisions of the IGST Act, 2017. The jurisdiction of the AAR with respect to the scope of Advance Ruling is enumerated under Section 97 of the CGST Act, 2017 and the sub section (2) contains the exhaustive list of subjects on which a ruling can be sought. If the clarifications sought in the application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules does not fall within the ambit of the list of issues as detailed in provisions of section 97(2) of CGST/TGST Act 2017, it makes the application liable to be rejected. The list in Section 97(2) of the CGST/TGST Act 2017 does not have any reference to determination of Place of Supply. Since the question raised by the Taxpayer pertains to determination of place of supply of the services rendered by the taxpayer, therefore the application is liable to be rejected as the queries raised do not fall within the ambit of provisions of section 97(2) of CGST/TGST Act 2017. Application dismissed.

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• 2023 (6) TMI 529
  Scope of Advance Ruling application - classification of supply - services supplied by KESCO by way of utility shifting is integral part of main services supplied by KESCO by way of distribution of electricity - whether the issue raised in the application is squarely covered under Section 97(2) of the CGST Act 2017 or not? - HELD THAT:- The Applicant MIS Uttar Pradesh Metro Rail Corporation Limited is receiver of the Goods/Services provided by the KESCO. As provided under Section 95 of CGST Act 2017, only supplier of the services can file Application for Advance Ruling. In this case the supplier of service is KESCO. Also in the similar matter M/s Purvanchal Vidyut Vitran Nigarn Limited had applied for advance ruling as supplier of service and advance ruling authority has ruled on merit. Accordingly, the application for consideration/ruling on merits, cannot be admitted, as applicant does not fall under the definition of Advance Ruling. This ruling is valid only within the jurisdiction of Authority for Advance Ruling Uttar Pradesh and subject to the provisions under Section 103 (2) of the CGST Act, 2017 until and unless declared void under Section 104(1) of the Act.

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• 2023 (6) TMI 528
  Exemption form GST - Classification of services - pure services or not - Activity in relation to function entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively of the Constitution of India or not - Project Development Service (i.e. Detailed Project Report Service (DPR) and Project Management Consultancy services (PMCS) provided by the applicant to the recipient under the Contract from State Urban Development Agency (SUDA) under the Contract for PMA Y-U - claim of exemption on services provided by a sub-contractor to the main contractor HELD THAT:- As per SI. No. 3 of Notification No. 12/2017-CT (Rate) dated 28.06.2017 Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243 W of the Constitution as amended by notification no. 16/2021-central tax (rate) w.e.f 1.1.2022 are exempt from tax. SUDA has been established as a state level nodal agency, under the department for Urban Employment and Poverty Alleviation by Uttar Pradesh Government - As SUDA has been established as a state level nodal agency, under the department for Urban Employment and Poverty Alleviation by Uttar Pradesh Government and as per the information contained in Memorandum of Association (in Para 14 above), it is clear that SUDA is a part of State Government of UP. Further, as per website of Pradhan Mantri Awas Yojana-blousing for All (Urban), Ministry of Housing and Urban Affairs, the PMAY is a Scheme to provide central assistance to Urban Local Bodies (ULBs) and other implementing agencies through States/UTs for Rehabilitation of existing slum dwellers using their land as a resource through private, participation, and affordable Housing in Partnership. As per the details available on website SUDA is the state level nodal agency for PMAY(U) in the state of Uttar Pradesh - the Consultancy services rendered by the Applicant under the contract with SUDA, and for PMAY are in relation to functions entrusted to Municipalities / Panchayats under Article 243W / 243G of the Constitution of India. Whether such services provided by the Applicant would qualify as Pure services? - claim of exemption on services provided by a sub-contractor to the main contractor - HELD THAT:- The services mentioned in the contract would qualify as Pure Service (excluding works contract service or other composite supplies involving supply of any goods) as provided in serial number 3 of Notification No. 12/2017- Central Tax (Rate) dated 28 June, 2017 issued under Central Goods and Services Tax Act, 2017 (CGST) and corresponding Notifications No. KA.N.I.-2-843/X1 - 9 (47) / 17-UP. Act-1 - 2017 - Order - (10) - 2017 Lucknow, dated June 30, 2017 issued under Uttar Pradesh Goods and Service Tax Act, 2017 (UPGST Act). In an identical matter, the Appellate Authority of Advance Ruling, Uttar Pradesh vide Appeal Order No. 17/A AAR/02/7/2021 dated 02.07.2021 [ 2021 (12) TMI 414 - APPELLATE AUTHORITY FOR ADVANCE RULING, UTTAR PRADESH] has held that the Services rendered by the appellant to the State Urban Development Agency, Uttar Pradesh (SUDA), and for PMAY are in relation to functions entrusted to Municipalities under Article 243 W and to Panchayats under Article 243G of the Constitution of India and such services would qualify as Pure Service (excluding works contract service or other composite supplies involving supply of any goods). It is observed that Sl. No. 3 of Notification No. 12/2017-CT (Rate) dated 28.06.2017 exempts Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243 W of the Constitution as amended by notification no. 16/2021-Central Tax (rate) w.e.f. 1.1.2022 - As such, for qualifying exemption under the said entry, it is essential that specified services are provided to the Central Government, State Government or Union territory or local authority or a Governmental authority and there is no condition in the notification that the said services are provided directly to the Central Government, State Government or Union territory or local authority or a Governmental authority. Accordingly, the applicant is entitled for exemption if the specified services are provided to SUDA under sub-contract with main contractor.

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• Income Tax

• 2023 (6) TMI 527
  Disallowance of license fee - HELD THAT:- This issue is covered by the judgment of this Court in M/s Nestle India Ltd [ 2011 (5) TMI 566 - DELHI HIGH COURT] . Addition u/s 14A - Tribunal sustaining the view of the CIT (Appeals) in reducing disallowance - HELD THAT:- The view taken by the Tribunal cannot be found fault with. The Tribunal accepted the suo motu disallowance made under Section 14A by the respondent/assessee to the extent of Rs. 20,13,989/- (for AY 2013-14). We are in agreement with the view taken by the Tribunal, having regard to the judgment of Coordinate Bench in Coforge Ltd s case [ 2021 (7) TMI 346 - DELHI HIGH COURT] . Disallowance of depreciation on account of energy saving and pollution control devices - HELD THAT:- According to us, the statutory conditions which are provided in Section 32 of the Act are such that they require the assessee claiming depreciation to establish that the concerned asset has been purchased by the assessee and the same has been put to use. The first aspect is not dispute. The other aspect, clearly, gets demonstrated, as the AO has not disputed the fact that the devices were installed. The level of performance of devices is not a measure based on which the AO could have denied depreciation to the respondent/assessee. Asking the assessee to place on record the comparative chart, in our view, was not imperative, for arriving at a decision whether the assessee should be entitled to depreciation u/s 32 of the Act. We are informed that this view has been affirmed in favour of the respondent/assessee (i.e., concerning the sustainability of claim of depreciation) in AYs 2009-10, 2010-11 and 2011-12, as well.

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• 2023 (6) TMI 526
  Assessment u/s 153A - Addition u/s. 68 - Bogus LTCG - Addition u/s. 69C on account of expenses on bogus LTCG ? - HELD THAT:- Decision of Saumya Construction [ 2016 (7) TMI 911 - GUJARAT HIGH COURT ] held that the case of completed assessment/unabated assessment in absence of any incriminating material will not permit making of addition by the AO and that the AO has no jurisdiction to reopen the completed assessment. As decided in Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT ] confirmed the view taken by the Delhi High court in Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT ] and of this Court in Saumya Construction [ 2016 (7) TMI 911 - GUJARAT HIGH COURT ] laying down the law that no addition can be made in respect of completed assessment in absence of any incriminating material. The supreme court in laying down the proposition considered the object and purpose of insertion of section 153A of the Act. No substantial question of law.

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• 2023 (6) TMI 525
  Reopening of assessment - assessee had not responded to the notice u/s. 148A(b) - application seeking adjournment by the petitioner to file reply to the notice u/s 148A(b) made by assessee - Non availing the opportunity to defend its case to the petitioner - petitioner had submitted its request and the portal had received it, however, for some technical snag, its confirmation was not found and because of that reason, the petitioner remained deprived any further time to file reply, though requested for as above - HELD THAT:- There is no gainsaying that the impugned order and the notice passed under section 148A(d) and 148 of the Act respectively, remain without availing the opportunity to defend its case to the petitioner. There was an evident breach of principles of natural justice. Observance of natural justice is essential part of quasi judicial process. When the provisions of section 148A themselves provide expressly for giving opportunity of hearing to the assessee, it was indispensable for the department to extend the reasonable opportunity to the petitioner to respond to the notice to put forth his case. It was some technical snag on the portal, which deprived the petitioner of such opportunity. The petitioner deserves to be given due opportunity. The impugned order passed u/s 148A(d)and notice of even date passed u/s 148 are hereby set aside only on the ground that the petitioner was deprived of opportunity pursuant to notice dated 21.3.2022 under section 140A(b) of the Act.

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• 2023 (6) TMI 524
  Nature of expenditure - current repairs - replacement of decayed parts - expenditure on repairs to machineries - treated as capital expenditure by revenue - HELD THAT:- Merely because the description of expenditures states to be replacement of certain parts or machinery, it cannot lead to the conclusion that the expenditure was not for the purpose of maintaining or preserving of an asset, and it resulted in creation of a new asset or new advantage to the assessee. Assessee had explained that it was in the business of manufacturing various acids which corroded its plant machinery speedily, and therefore, its plant machinery needed to be repaired and part of it replaced so as to maintain its working capability. Assessee had incurred huge expenses to the tune of Rs. 2.68 crores towards repairs maintenance of plant machinery and expenses only to the extent of Rs. 37.50 lakhs have been found to be capital in nature. Not in agreement with the Revenue that expenses were not in the nature of current repairs to be allowed in terms of section 31 of the Act particularly when the assessee had explained that considering the nature of manufacturing done by it, machinery parts corroded frequently warranting their replacement so as to maintain the machineries in working condition, which has not been controverted by the Revenue. And the finding of the Revenue of the expenses being capital in nature /noncurrent is based on mere description of the expense as replacement of certain machinery with no facts emanating from the records before us to substantiate the same. No reason to uphold order of the ld.CIT(A) confirming the disallowance of repairs maintenance expenditure - Appeal of assessee allowed.

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• 2023 (6) TMI 523
  Levy of penalty u/s 271(1)(c) - disallowance u/s 14A as per Rule 8D and addition of interest of income tax refund u/s 244A - HELD THAT:- There is no actual finding of any expenses incurred by the assessee for earning exempt income, and it is only on account of computational provision of Rule 8D read alongwith section 14A that the disallowance in the impugned case has been made - Investment made by the assessee was only in one share that too in the preceding year, and there is no finding of any actual incurrence of any expenses for earning income from the shares, the disallowance of expenses being made only on account of the computational provisions provided in the Rules, the assessee in such facts and circumstances, cannot be charged with having concealed or furnished inaccurate particulars of income vis- -vis the expenses disallowed. Penalty levied on account of the disallowance of expenses being administrative in nature u/s 14A of the Act is we hold not sustainable in law and is directed to be deleted. Levy of penalty - Failure to offer full amount of Interest earned on income-tax refund as taxable income - The same was returned in the succeeding year. - HELD THAT:- it is only under a mistaken belief that the assessee failed to offer interest income during the impugned year, and the assessee otherwise was vigilant to have duly returned whatever interest it received on refund . Assessee in such circumstances cannot said to have concealed or furnished inaccurate particulars of income so as to levy penalty u/s 271(1)(c) - Penalty levied for this component of the addition is also held to be untenable in law, and therefore directed to be deleted. Decided in favour of assessee.

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• 2023 (6) TMI 522
  Assessment u/s 153A - AO treated the cash found and seized from the assessee as undisclosed income of the assessee u/s 69A - Hurried assessment on the very next day of issuing notice as getting barred by limitation - HELD THAT:- Assessee filed returns of income for the above assessment year declaring NIL income on the assumption that the income were below tax limit inadvertently, but the assessee rectified the mistake by making revised returns showing factual income of every year and furnished well before the proceedings initiated u/s 143(2) - AO has not considered the revised returns filed by the assessee. Assessee was asked to produce details of PAN, ID and other particulars of his brother which was complied with and accepted by the AO. AO has not recorded any statement from the person(s) whose details were furnished before the AO. AO has stated that the assessee has not furnished the details such as break up details of brokerage commission, name and address of persons from whom received brokerage commission and proof for money received from his mother as called for vide this office notice u/s 142(1) on 27.03.2015. The notice issued under section 142(1) of the Act on 27.03.2015 being Friday and the Assessing Officer hurriedly concluded the assessment on the very next working day on 30.03.2015 for the reason that the assessment was getting barred by limitation, which appears to be legally not correct. Having co-terminus power, atleast the ld. CIT(A) should have called for the details from the assessee before concluding the appellate order, which was not done. We set aside the orders of authorities below and delete the addition made u/s 69A of the Act. Decided in favour of assessee.

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• 2023 (6) TMI 521
  Reopening of assessment u/s 147 - Proper reasoning - reopening beyond four years from the end of the relevant A.Y. - Disallowance u/s 37(1) for payment of professional fees - HELD THAT:- As per the relevant provisions, the AO is bound to show that there was failure on the part of the assessee to fully and truly disclose all material facts necessary for its assessment. The payment of Rs. 25 lakhs to Sanyals was towards liasoning done by them in furtherance of the contract work of the assessee. A bare perusal of the reasons mentioned hereinabove do not even allege that there has been a failure on the part of the assessee to disclose any material facts. The claim of expenditure was made and was thoroughly examined during the original assessment proceedings. In our considered opinion, whether the claim of expenditure is for legitimate needs of business expediency cannot be questioned in the reassessment proceedings. As decided in E.I. Dupont India [P] Ltd [ 2013 (2) TMI 406 - DELHI HIGH COURT] Failure to disclose all material facts necessary for assessment is a condition precedent for reopening of an assessment beyond the period of four years from the date of assessment. This is a pre-condition set out in the statute itself. Merely by adding a line in the reasons recorded by the Assessing Officer that the assessee had failed to disclose fully and truly all material facts, requirement of proviso to section 147 of the Act would not be satisfied for the purpose of reopening of the assessment u/s 147 - No merit in the reopening of the assessment - Decided in favour of assessee.

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• 2023 (6) TMI 520
  Deduction towards Provision for bad debts - Addition u/s 36(1)(vii) - Amount of debts not write off - CIT- A deleted the addition - Alternative argument of allowable business loss u/s. 28 - HELD THAT:- As per provisions of Sec. 36(1)(vii) of the Act, any bad debt write off as irrecoverable in the accounts of the assessee, would not include any provision for bad debts made in the accounts of the assessee. In other words, w.e.f.01.04.1989, a mere provision for bad debts per se was not entitled for deduction u/s. 36(1)(vii) of the Act, and this legal position is reiterated by the Hon ble Supreme Court in the case of Southern Technologies Ltd [ 2010 (1) TMI 5 - SUPREME COURT] . Therefore, it is very clear that in order to claim deduction for any bad debts, such bad debts should be write off as irrecoverable in the accounts of the assessee by debiting into P L A/c and crediting into sundry debtor s account in the books of accounts of the assessee. In this case, the assessee has made a mere provision for bad debts without actual write off bad debts in the books of accounts of the assessee by crediting into respective debtors account. Therefore, in our considered view, the assessee did not satisfied the conditions prescribed u/s. 36(1)(vii) r.w.s. 36(2) of the Act, to claim deduction towards bad debts. Hon ble Supreme Court in the case of Southern Technologies Ltd. [ 2010 (1) TMI 5 - SUPREME COURT] very clearly held that write off of bad debts cannot include any provision for bad debts made in the accounts of the assessee. Thus the assessee is not entitled for deduction towards provision for bad and doubtful debts, because, the conditions prescribed u/s. 36(1)(vii) r.w.s.36(2) of the Act, are not satisfied. The Ld.CIT(A) without appreciating relevant facts deleted the additions made by the AO, and thus, we reversed the findings of the Ld.CIT(A) and sustained the additions made by the AO towards disallowance of provision for bad debts. Alternative arguments of the assessee in light of provisions of Sec. 28 - W e find that once any expenditure or allowance falls under particular provision of Income Tax Act, 1961, then, said expenditure/allowance cannot be considered under general provision of sec. 37(1) or 28 of the Act, for deduction. We are of the considered view that the assessee cannot claim deduction towards provision for bad debts as business loss u/s. 28 of the Act, since, the claim of the assessee directly fall under the provisions of Sec. 36(1)(vii) of the Act, and thus, we reject the alternative claim of the assessee for deduction towards provision for bad debts u/s. 28 of the Act. Decided against assessee.

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• 2023 (6) TMI 519
  Penalty u/s 271D 271E - Accepting and repayment of loans / deposits from the Managing Director of the Company - whether notice has been issued after the date of the order imposing penalty? - HELD THAT:- We find that the notice referred to by the assessee is only system generated notice while uploading the order imposing penalty u/s. 271D 271E of the Act, in ITBA portal as required under the law, which is clearly evident from the records that the ITBA portal has generated notice u/s. 274 r.w.s.271D 271E of the Act, on 04.03.2019 and also order imposing penalty u/s. 271D 271E of the Act, also dated 04.03.2019. From the above, it is clear that it is only a system generated notice when the orders have been uploaded in ITBA portal only. On the other hand, from the orders imposing penalty u/s. 271D 271E of the Act, it is very clear that the AO initiated penalty proceedings by issuance of notice u/s. 271D 271E of the Act, on 03.08.2018 and passed order imposing penalty on 26.02.2019. Therefore, we are of the considered view that there is no merit in objection raised by the assessee, and thus, the same is rejected. Period of limitation u/s. 275(1)(c) - HELD THAT: - In the present case, the AO sent a proposal for initiation of penalty proceedings on 24.07.2018 and the AO issued notice u/s. 271D 271E of the Act, on 03.08.2018, within less than a month. Therefore, we are of the considered view that the ratio laid down by the Hon ble Delhi High Court Rishikesh Buildcon (P) Ltd., [ 2022 (11) TMI 1038 - DELHI HIGH COURT] is not applicable to the facts of the present case. The assessee had also relied upon the decision of Mahesh Wood Products (P) Ltd [ 2017 (5) TMI 433 - DELHI HIGH COURT] We find that the facts of the case before the Hon ble Delhi High Court are entirely different to the facts of the present case, and thus, we are of the considered view that the case laws relied upon by assessee is not applicable to the facts of the present case. Contravention of provisions of Sec. 269SS 269TT - Accepting and repayment of loans / deposits from the Managing Director of the Company - HELD THAT:- The claim of the assessee that it has received cash for urgent requirement for making payment for various expenditure, is also not correct, because, the assessee received a sum of Rs. 18 lakhs from Mr.M.Muruganandam on 14.09.2011, even though, the assessee had more than Rs. 11 lakhs cash in hand as on that date in the books of accounts. From the above, it is very clear that the justification given by the assessee for receiving loans advances in cash from its Managing Director is unsubstantiated. Further, the assessee had also repaid loans advances in cash in huge amount on various dates and could not explain why loans have been repaid in cash. Therefore, we are of the considered view that the assessee could not explain the reasonable cause for accepting loans advances in cash in contravention of provisions of Sec. 269SS 269TT of the Act. Arguments of the assessee that its place of business situated where there is no adequate banking facilities - The assessee is maintaining a current account with Canara Bank and there is a Canara bank at Cheyyar Town. From the above, it is clear that the arguments of the assessee that there is no adequate banking facilities, in a place, where its business is carried on, is unsubstantiated. There is a clear violation of provisions of Sec. 269SS of the Act, in accepting loans advances in cash from its Managing Director and also there is a clear violation of provisions of Sec. 269TT of the Act, in repayment of loans advances in cash to its Managing Director and which warrants levy of penalty u/s. 271D 271E of the Act. The Ld.CIT(A) after considering relevant facts has rightly upheld penalty levied u/s. 271D 271E of the Act, and thus, we are inclined to upheld the findings of the Ld.CIT(A) and dismiss the appeals filed by the assessee.

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• 2023 (6) TMI 518
  Correct head of income - Rental income from fixture, fittings and amenities - Deduction u/s. 24(a) equal to 30% - separate agreements for let out of the property and for providing amenities - propionate Disallowance of 30% deduction claimed under the head income from house property against rent for fixture, fittings and amenities being part of permanent structure of the property and treating the rent received under the head income from other sources - HELD THAT:- We are in complete agreement with the contention of DR that the principle of res judicata does not apply to the tax proceedings. At the same time we cannot ignore other related principle i.e. rule of consistency which has to be respected by the tax authorities until unless there is any new or different facts and circumstances for different assessment years are discernable. This principle has emerged from the judgment of Hon ble Supreme Court in the case of Radaswami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] wherein their Lordship speaking for the apex court held that, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. Since, undisputedly facts and circumstances of AY 2012-13 2013-14 are identical and similar therefore rule of consistency again supports the claim of assessee that the rental income from amenities has to be treated as income from house property and assessee is eligible for claim of deduction u/s. 24(a) of the Act accordingly ground 2 of assessee is allowed. Disallowance u/s 14A - HELD THAT:- DR did not controvert rather candidly agreed to the submission of ld. AR based on the judgment of ACB India Ltd. [ 2015 (4) TMI 224 - DELHI HIGH COURT] and order of the Special bench of the Tribunal in the case of ACIT vs. Vireet Investment (P.) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] that the investment which did not yield any exempt income are not to be considered and only those investment which yield or brought exempt income to the assessee are to be considered for computing disallowance under rule 8D of the Income Tax Rules 1962. Therefore ground no. 3 of assessee is allowed for statistical purposes with the direction to the Assessing Officer that the disallowance under Rule 8D of the Rules, for arriving the average value of investment, only those investment are to be considered which yielded exempt income during the year. Accordingly, ground no. 3 of assessee is allowed in the manner as indicate above.

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• 2023 (6) TMI 517
  Deduction u/s 54F - LTCG - quantum of investment to be made in the New House Property - Actual consideration or Value or transferred property determined as per Section 50C - deduction denied as assessee has not deposited the sale consideration received on transfer of the property in capital gain account as per provisions of section 54F(4) - HELD THAT:- In the instant case, the cost of new asset is not less than the net consideration thus the whole of the capital gains will not be charged even if the capital gains has been computed by adopting the value adopted by stamp registration authority. It is clearly mentioned in s. 54F(4) also that net consideration which is not appropriated towards the purchase of new asset then the same is to be taxed in case such net consideration not appropriated is not deposited in the capital gain account. It is not necessary that the new asset should be got registered before filing of the return. The requirement of law is that net consideration is required to be appropriated towards the purchase of the new asset. Thus deduction under s. 54F is clearly applicable. The natural meaning of full value of consideration refers to consideration specified in the Sale Deed. In this regard, in the case CIT vs. Smt. Nilofer I. Singh [ 2008 (8) TMI 165 - DELHI HIGH COURT] had held that full value of consideration refers to the consideration specified in the sale deed. Thus when the assessee has invested entire actual sales consideration received by him in the purchase and construction of new house accordance with the provision of section 54F(1) thereafter the provision of section 50C has not been applicable - we are of the view that assessee is entitled to exemption under section 54F. Thus, the disallowance made is hereby deleted - Decided in favour of assessee.

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• 2023 (6) TMI 516
  Rectification u/s 254 - Rectification of earlier orders passed by the ITAT based on subsequent judgment of Supreme Court - Delayed payment of employee s contribution to ESI and PF - Addition u/s 36(1) r.w.s. 43B - Whether judgment be given a prospective applicability? - Delayed deposit of employee s share of contributions towards labour welfare funds [Employee s Provident fund (EPF) and Employee s State Insurance (ESI)] addition deleted by Tribunal - as per department that orders of the Tribunal are not found to be in conformity with the recent judgement of the Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd.[ 2022 (10) TMI 617 - SUPREME COURT ] thus, the same suffers from a mistake which being glaring, apparent, patent and obvious from record HELD THAT:- We are unable to persuade ourselves to subscribe to the claim of the Ld. AR s that the Hon ble Apex Court in the case of Mepco Industries Ltd. [ 2009 (11) TMI 24 - SUPREME COURT] had held that an order passed by the Tribunal which is not found to be in conformity with the ratio decidendi of a subsequent judgment of the Hon ble Apex Court cannot be rectified under sub section (2) of Section 254 of the Act. The issue leading to filing of the present miscellaneous applications by the department, i.e. as to whether an order passed by the Tribunal while disposing off an appeal can be rectified u/s. 254(2) of the Act for the purpose of bringing the same in conformity with a subsequent judgment of the Hon ble Apex Court or that of the Hon ble Jurisdictional High Court is squarely covered by the judgments in the case of ACIT Vs. Saurashtra Kutch Stock Exchange Ltd. [ 2008 (9) TMI 11 - SUPREME COURT] and S.A.L Narayana Row, CIT Vs. Model Mills Nagpur Ltd [ 1966 (10) TMI 2 - SUPREME COURT] and thus, is no more res-integra. Article 141 of the Constitution of India provides that the law declared by Supreme Court shall be binding on all courts within the territory of India. The law laid down by Supreme Court operates retrospectively and is deemed to the law as it has always been unless, the Supreme Court, says that its ruling will only operate prospectively. Tribunal had observed that even if the Hon ble Apex Court renders a judgment after passing of the order sought to be rectified, the same is to be strictly followed, as the judgment of the Hon ble Apex Court is always understood from the inception of the provision and it is never considered as a prospective ruling unless so specified As and where the Hon ble Apex Court had intended that its judgment be given a prospective applicability, a specific rider to the said effect as in the case of M/s New Noble Educational Society [ 2022 (10) TMI 855 - SUPREME COURT] had been provided. However, we are afraid that no such rider is found in the judgment of the Hon ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-I (supra), which means that the same would have a retrospective application. As stated by the department in its miscellaneous application and, rightly so, as the view taken by the Tribunal in the captioned appeals is not found to be in conformity with the judgment of the Hon ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-I (supra), therefore, the same had rendered the orders passed while disposing off the respective appeals as suffering from a mistake, which being apparent from record had therein made those amenable for rectification under sub-section (2) to Section 254 of the Act. There is a mistake apparent on record in view of the decision of the Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd. [ 2022 (10) TMI 617 - SUPREME COURT ] though rendered subsequent to the order passed by the Tribunal and has to be rectified by holding that the disallowance made by the revenue authorities u/s.36(1)(va) of the Act was justified. Decided against assessee.

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• 2023 (6) TMI 515
  Unsecured loans - Additions u/s 68 as cash credit - onus to prove - CIT-A deleted the addition - HELD THAT:- Assessee had been successful in establishing the identity of the creditor, genuineness of the transactions as also the capacity of the creditor. Not only the immediate and direct source was established being from the concerned creditor from the banking channels but also there been sufficient source available in the hands of the respective creditors. It is not case of the revenue that cash amount was deposited in the bank account of the creditor before transfer to the assessee. Once such initial burden was successfully discharged by the assessee, the onus shifted to the revenue to prove that the subjected credits did not belong to the creditors but the said amount belong to the assessee, however, the AO completely failed to discharge the burden shifted to him. DR failed to point out if anything wrong was committed by the ld. CIT (A). No infirmity in the order of Ld CIT(A), who rightly deleted the addition made u/s 68 of the act. Therefore, the ground of appeal no.1 taken by the revenue is hereby dismissed. Unsecured loans - Additions u/s 69 as unexplained expenditure - CIT(A) deleted the impugned additions - HELD THAT:- As not disputed that all the transactions have been carried out through banking channels only. Even all the transactions carried out with India Nivesh are through banking channels. The AO has nowhere established that the loss on occasion of share trading was a bogus or sham loss claimed. The attempt of AO to compare the balance amount of 1.62 crore with the share trading loss was an example of mere suspicion without any supporting material. Repayment of Rs. 1.62 crores was made through banking channel. The audited accounts were submitted and the AO completely failed to point out any discrepancy or error in the accounts which were not even rejected by him. As not the case of the AO as he failed to point out any expenditure incurred without source or which is unrecorded. Hence provisions of S.69C were wrongly invoked. - Decided against revenue. Addition on account of shortfall in NP rate - Difference while comparing the gross profit shown by the appellant in the books of accounts and the gross profit worked out by the AO on the basis of sales and purchases shown in the VAT return - CIT-A deleted addition - HELD THAT:- Assessee has maintained complete books of accounts on day today basis which were subjected to tax audit. It is not denied that there was no adverse remark made by the Tax Auditor in the tax audit report. The accounts were neither rejected nor S.145 of the Act was invoked. The copies of the VAT return, copies of goods ledger account with purchase sale register were submitted before us which were carefully gone through and it is seen that all the transactions shown in the reconciliation statements are verifiable with reference to the books of accounts, tax audit report and the VAT return. The contention of the assessee that the commission income of Rs. 50,212/- on the sales and purchase made on the behalf of the principal M/s Sanjay Rathi HUF were duly disclosed has not been found fault with or wrong by any of the lower authorities. The Ld CIT(A) has also recorded categorical finding of facts which could not be rebutted by Ld DR during the course of hearing. The assessee has not challenged the part sustenance of the addition so made. After considering the totality of the facts of circumstances, we find no error in the order of the Ld CIT(A). Decided against revenue.

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• 2023 (6) TMI 514
  Disallowance u/s 14A - precondition of applicability of Sec 14A - interest paid on loan / borrowed funds - how much expenditure has been incurred in relation to an exempted income? - CIT(A) upheld the applicability of S. 14A but has very categorically held that the disallowance was not correctly worked out by the AO by overlooking Rule 8D - CIT(A) held that the AO was at fault by not having provided an opportunity of being heard to the assessee, because of these reasons, in second round again directed the AO to work out the said disallowance as per rule 8D - HELD THAT:- The provisions of S. 14A empowers the AO to disallow any deduction claimed in respect of the expenditure incurred by the assessee but in relation to such income which does not form part of the total income under the Act. Thus, the claimed expenditure must have been in relation to the income which is exempt and therefore, it was incumbent for the AO to have identified and established that the particular expenditure claimed by the assessee was incurred in relation to such income which was exempt. As per the mandate u/s 14A AO is bound to determine the amount of expenditure incurred in relation to such income which does not form part of the total income. In the present case, however, there is absolutely no finding recorded by the authorities below that which and how much expenditure has been incurred in relation to an exempted income the fact otherwise shows that the total income also included taxable income from house property, which is not contemplated. Claim of interest payment on borrowed funds u/s 36(1)(iii) has not been shown as resulting into some exempted income or was incurred in relation to an exempted income. CIT(A) erred in not considering the challenge raised by the assessee before him. CIT(A) failed to appreciate that the provisions of S. 14A of the Act was wrongly applied. We are, therefore, satisfied that the assessee could have raised the issue of applicability of S. 14A in the peculiar facts of the case. Further coming to grounds of appeal no. 2.2 3 wherein the very applicability of S.14A is challenged, we have already held that the precondition of applicability of S. 14A has not been fulfilled in the present case in as much the law never contemplates to apply S. 14A in relation to a taxable income as in the present case. There is absolutely or no discussion as to how interest payment has been incurred to in relation with some exempted income, if any. Disallowance made u/s 14A under challenge is hereby directed to be deleted. Decided in the favour of the assessee.

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• 2023 (6) TMI 513
  Penalty u/s. 270A - GP estimation - underreporting of income - AO had estimated Gross Profit at 10% for Liquor Business and 20% on account of Sale of food - HELD THAT:- There is no denial that the additions have been made on estimated basis. AO had not bothered to verify the Stock Register maintained by the assessee for his Liquor Business which is mandatory as per the Excise Act and the Excise Inspectors visits the shop to verify the stock. Thus, the AO without bothering to verify the stock register estimated the GP. In these facts and circumstances we are of the opinion that AO has failed to establish underreporting. We find that in CIT vs. Aero Traders Pvt. Ltd [ 2010 (1) TMI 32 - DELHI HIGH COURT] has held that no penalty u/s.271(1)(c) of the Act can be imposed when income is determined on estimate basis. We are of the opinion that AO has failed to establish underreporting. Section 270A of the Act provides for imposition of penalty for underreporting and misreporting of income. Sub-section (2) enlists certain circumstances of under-reporting of income. Sub-section (3) deals with the determination of under-reported income, which, in our context, is by reducing the income returned by the assessee from the amount of income finally assessed. In the case under consideration, the addition is based on GP estimation. Hence, we hold that the penalty levied u/s.270A is not maintainable - Decided in favour of assessee.

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• 2023 (6) TMI 512
  Bogus loans u/s 68 - unsecured loans from the three loan creditors and interest on loans - loan providing entities were part of the Bhanwarlal Jain Group - reliance on third party statement - AO received the information that the assessee is one of the beneficiaries of the accommodation entries provided by the group concerns - CIT-A held as assessee has discharged the burden by submitting the requisite information and the onus lies on the AO to make enquires and deleted the addition - HELD THAT:- In spite of filing all the details, the A.O. has not conducted any investigation or enquiry in respect of the information submitted by the assessee. CIT(A) has considered the facts, circumstances and observed that the assessee prima-facie has complied the ingredients required u/s 68 of identity, genuineness and creditworthiness. CIT(A) relied on the catena of judicial decisions and test checked the genuineness and creditworthiness of the lenders. CIT(A) came to a reasonable conclusion that the assessee has discharged its burden on submitting the information in the assessment proceedings and the A.O. has failed to conduct the enquiries and the A.O should have conducted independent investigation without relying on the third party statements and facts. AR demonstrated the copy of bank statements reflecting the credits from the three parties along with other evidences - A.O has failed to make further enquiries and relied on the statement recorded, which was retracted subsequently and has overlooked the factual aspects that the assessee has discharged the initial burden placed by submitting the information - DR could not controvert the findings of the CIT(A) with any new cogent material or information to take different view - Decided against revenue.

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• 2023 (6) TMI 511
  Assessment of capital gain - transfer u/s. 2(47)(vi) r/w s. 2(47)(i) - JV agreement for construction of building/s - effect of part-performance of a contract u/s. 53A of the TP Act - both the GPA and JVA were unregistered documents - assessee s plea before him that the transaction did not materialise as the Builder-developer could not complete the building even by 2017, was met by him by stating that the project was nearly complete in October, 2018 - HELD THAT:- Non-delivery of consideration cannot be by itself regarded as a project failure, as where the necessary permissions, which are the responsibility of the Developer-Builder, and subject to which only the project could be undertaken, do not materialize, failing the project, as was the case in Balbir Singh Maini [ 2017 (10) TMI 323 - SUPREME COURT] . In the instant case, the GPA in fact was specifically executed only for the same. Why, even upto December, 2016, i.e., up to completion of assessment, there was admittedly no whisper of the project failing, but only of it being part-performed. And even as without doubt there could be issues leading to the project being delayed. In fact, the ld. CIT(A) clearly states, unrebutted before us, of the project being nearly complete in October, 2018. No material contradicting the same has been brought on record, or otherwise to our notice. We, yet, in the interest of justice, restore the matter back to the file of the first appellate authority for the assessee to exhibit the non-transfer u/s. 2(47)(vi) r/w s. 2(47)(i) in the undisputed facts and circumstances of the case. Reference to s. 2(47)(i) is made so as to highlight that the rights to the buyers of the apartments would stand to arise thereunder, if not u/c.(vi). Further, we say undisputed with a view to clarify of no dispute qua facts being either observed or brought to our notice. And, further, to eliminate any scope for the said remittance leading to expanding the scope of controversy, or fresh facts or disputes being raised. No application for admission of additional evidence, it may be noted, stands made either at the first appellate stage, or even before us u/r. 29 of the Income Tax (Appellate Tribunal) Rules, 1963. All the material on record, including before the Tribunal, would though be liable to be considered. Our only purpose is to allow the assessee opportunity to state his case as regards his legal claim as to non-applicability of s. 2(47)(vi); Sh. Veeramani claiming to be not fully prepared. In so deciding, we also take note of the submission by him that the project was finally completed by the co-owners themselves, i.e., by taking-over the project, which may have computational implications. CIT(A) shall cause such verification and adjudication by the assessing authority, by remanding the matter thereto, as it may deem fit and proper in the circumstances, and finally decide the matter/s, issuing definite findings of fact and law, per a speaking order and after hearing both the parties before him. The issue of deduction u/s. 54-F shall also be adjudicated upon in view of the Board Circular 672 dated 16/12/1993, allegedly not considered by him. Both the sides before the ld. CIT(A), as indeed he himself, may rely on case law, observing of course the principles of natural justice.

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• 2023 (6) TMI 510
  Levy penalty u/s 271(1)(c) - disallowance of deduction u/s 80- IB(10) and disallowance of bad debt - contention raised by assessee with respect to non-recording of satisfaction before initiating the penalty proceedings - HELD THAT:- In the case of Sahara India Life Insurance Company Ltd. [ 2019 (8) TMI 409 - DELHI HIGH COURT] held that imposition of penalty under Section 271(1)(c) without specifying the limb i.e. whether the penalty is being imposed for concealment of particulars of income or for furnishing of inaccurate particulars of income, was not justified. In the case of SSA S Emerald Meadows [ 2015 (11) TMI 1620 - KARNATAKA HIGH COURT] held that the Tribunal, allowed the appeal of the assessee holding that notice issued under Section 274 r.w.s. 271(1)(c) of the Act was bad in law since the order did not specify under which limb of Section 271(1)(c), penalty proceedings had been initiated, there was no substantial question of law which arose for determination. Recording of satisfaction by Assessing Officer in relation to concealment of income or furnishing of inaccurate particulars by assessee in notice issued for initiation of penalty proceedings under section 271(1)(c) is sine qua non for initiation of such proceedings. See M/S. GOLDEN PEACE HOTELS AND RESORTS PVT. LTD. [ 2021 (3) TMI 195 - SC ORDER] . In Goa Dourado Promotions (P.) Ltd. [ 2020 (1) T MI 140 - BOMBAY HIGH COURT] the Bombay High Court held that recording of satisfaction by Assessing Officer in relation to concealment of income or furnishing of inaccurate particulars by assessee in notice issued for initiation of penalty proceedings under section 271(1)(c) is sine qua non for initiation of such proceedings Accordingly, we observe that since in the instant case no specific satisfaction has been recorded by the Ld. Assessing Officer either in the body of the assessment order or in the show cause notice issued u/s 271(1)(c) of the Act dated 02.05.2017 for initiation of penalty proceedings penalty imposed on the assessee under section 271(1)(c) is directed to be set-aside. Decided in favour of assessee.

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• 2023 (6) TMI 509
  Dismissal of appeal in limine - refusing to condone the delay in filing the appeal by the assessee - delay was due to non-receiving of intimation by the assessee - Counsel pointed that without proper opportunity the deduction u/s 80IB was rejected in processing of return u/s 143(1) - HELD THAT:- There is a delay of 9 years is a huge delay for adjudicating the appeal by the ld. CIT(A). But the assessee also submitted the reasonable cause for filing the appeal in delay. In fact, the revenue also not able to submit proof for any other mode of service of intimation to the assessee. However, through the Email there is huge confusion in relation to the service of intimation u/s 143(1) of the assessee. The assessee submitted the condonation of delay with an affidavit and also the ld. counsel respectfully relied on the order of Senior Bhosale Estate (HUF) v. ACIT [ 2019 (11) TMI 940 - SUPREME COURT ] and Shakuntala Devi Jain vs Kuntal Kumari And Ors. [ 1968 (9) TMI 116 - SUPREME COURT ] We find that the assessee has a sufficient cause for non-submission of the appeal within due time. The merit was also not considered in appeal stage as it is decided in limine. Therefore, we remit back the issue to the ld. CIT(A) and direct to pass the order on merits, denovo - Appeal of the assessee allowed for statistical purposes.

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• 2023 (6) TMI 508
  Deduction u/s 80IB on Central Excise Duty refund - refund from Central Excise is a capital receipt or revenue receipt? - grievance of the revenue is that similar receipts were held to be revenue in nature as the same had been made after the industries had been set up and not for purpose of setting up of the industries - HELD THAT:- We respectfully relied on the observation in the case of CIT vs. Ponni Sugars and Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT] assessee was free to use the money in its business entirely as it liked. It was not obliged to spend the money for a particular purpose. In the present case also, receipt of the subsidy was capital in nature as the assessee was obliged to utilize the subsidy only for repayment of term loans undertaken by the assessee for setting up new units/expansion of existing business. We respectfully relied on the judgment of Shree Balaji Alloys [ 2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] Hon ble jurisdictional high court have duly considered and followed the law laid down in the aforesaid Apex Court judgments, which has in turn been followed by ld. CIT(A). But in factual matrix the capital subsidy as capital receipt cannot be the part of the calculation of deduction U/s 80IB of the Act. Claiming Depreciation u/s 32 in Building, Plant and Machinery - assessee had charged depreciation on the building, plant and machinery head @ 25%, which the rate of depreciation will be @ 10%. So the 15% was disallowed by the ld. AO - AO had calculated the depreciation considering the nature of assets. The issue was already covered by the order of assessee s own case in [ 2012 (7) TMI 188 - ITAT AMRITSAR] . We relied on the order of coordinate bench upheld the order of the ld. CIT(A). Bank Charges on Bank Guarantee - AO has not considered the bank charges for bank guarantee which has no nexus of the business accordingly the addition was made - As per CIT expenditure is to be treated as revenue allowable fully in the year in which, it is incurred and no part of the expenditure can be deferred or claimed in the subsequent years - HELD THAT:- CIT(A) has taken a correct view in relation to the bank guarantee charges paid on bank amount - We are not intervening in the order of the ld. CIT(A) and accordingly ground No-4 of the revenue is dismissed. Disallowance on account of depreciation claimed in respect of Capital Subsidy - HELD THAT:- We respectfully relied on the judicial observation on application of depreciation in capital subsidy. In our considered view, this capital subsidy of the assessee is not interfering in the actual cost of the assets. The assessee received this capital subsidy from NABARD. Here, we are intervening in the order of the ld. CIT(A).The addition amount of Rs. 23,16,393/- is quashed. Accordingly, the appeal of the assessee are allowed. Disallowance of other expenses - 10% was disallowed of total expenses on Travelling expenses in Foreign Inland and Vehicle running and maintenance - HELD THAT:- The disallowance was made without finding any specific lacuna. CIT(A) in his order has upheld the addition without mentioning any specific discrepancy. CIT(A) without verifying the same pass the order only on basis of observation of the ld. AO. CIT(A) is equally fallacious since the expenses are extremely useful for furtherance and growth of any business, leave aside the assessee s business. No worthwhile argument has been advanced by the ld. CIT-DR as to why he has treated this expense as bogus. The addition amount is dismissed. Disallowance on account of prior period expenditure - HELD THAT:- Since the genuineness of transaction is not in dispute and as such, the prior period expenditure is accepted. The claim is taken in impugned assessment year. The payment is related to actual payment. CIT-DR has not made any objection in this issue. We find that revenue has wrongly added the prior period expenditure, service tax We dismiss the addition of the assessee. Deduction u/s 80HHC - meat export division - HELD THAT:- As meat export division is engaged in export of meat. It is not disputed that no activity of purchase and sale of meat for the purpose of export is from any of the Units at Jammu. Even the AO in the remand reports has not rebutted written submissions of the appellant. As such, there remains no justification to sustain the disallowance u/s 80HHC of the Act. Therefore, the same is deleted and the ground raised is thus allowed. Applicability of section 40(a)(ia) only on payable amount not in paid amount - HELD THAT:- We relied on the CBDT Circular No-10/DV/2013 dated 15/12/2013. The statutory provision amply clarified that the payable include the amount paid during the previous year .CIT(A) is correct view to upheld the addition u/s 40(a)(ia). The section will be applicable in both paid payable. We confirmed the addition.

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• 2023 (6) TMI 507
  Penalty levied u/s 271(1)(c) - disallowance of claim of amortization of premium payable on ZCB - demand has already been extinguished in the order passed NCLT - HELD THAT:- We are of the view that the present appeal of the assessee does not require adjudication at all, as there cannot be any grievance to the assessee as the demand has already been extinguished, which fact has been accepted by the Ld CIT(A). The only apprehension of the assessee perhaps is that the AO may not nullify the demand, since the Ld CIT(A) has observed that he is dismissing the appeal as infructuous. In our view, this apprehension is unfounded, since the AO should necessarily nullify the demand following the order passed by NCLT and not on the basis of appellate orders passed under the Income tax Act. Assessee appeal allowed.

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• 2023 (6) TMI 506
  TP Adjustment - comparable selection - functional dissimilarity or extra-ordinary events - Difference in business model - difference between KPO and BPO/ITES - HELD THAT:- Cosmic Global Ltd. is functionally different from that of the assessee as it out-sourced major part of its work and it had an exceptional performance, high turnover, abnormal profit in the relevant assessment year - we affirm the order of the CIT (Appeals) in excluding Cosmic Global Ltd., from the final set of comparables selected by the TPO for the purpose of bench-marking international transactions. Accentia Technologies Ltd - As decided in PTC SOFTWARE (I) PVT. LTD., [ 2018 (4) TMI 1002 - BOMBAY HIGH COURT] the nature of activities carried out by Accentia Technologies Ltd. are different from that carried by the assessee - Thus functions of the assessee company and the comparable selected by the TPO with that of Accentia Technologies Ltd., are dissimilar and also since during the assessment year 2009-10 there were extra-ordinary events such as merger/amalgamation, this company cannot be considered as comparable. Eclerx Services Ltd. is a KPO providing specialized services whereas the activities of the assessee are in the nature of routine BPO services. Assessee is providing only ITES services and whereas Eclerx Services Ltd. which provides data analytics and data processing solutions to some of the largest brands in the world and is recognized expert in chosen markets financial services, retail and manufacturing is a data analytic KPO service provider specialized in two verticals financial services and retail manufacturing, cannot be considered as a comparable company of that of the assessee and the ld. CIT (Appeals) rightly excluded Eclerx Services Ltd. from the final set of comparables selected by the TPO. Coral Hub (formerly known as Vishal Technologies Ltd.) we notice that this company has out-sourced its BPO activities and in the case of Rampgreen Solutions (P.) Ltd. [ 2015 (8) TMI 931 - DELHI HIGH COURT] held that a company which out-sourced its activities cannot be held comparable with a company which carries BPO activities as business model of both the companies are different. Thus we hold that the ld. CIT (Appeals) rightly excluded Coral Hub Ltd. from the final set of comparable companies selected by the TP. Benefit of working capital adjustment - ground raised by the assessee before the ld. CIT (Appeals) for not allowing working capital adjustment has been decided as infructuous without considering the submissions of the assessee - HELD THAT:- We restore this ground to the file of the Assessing Officer, who shall consider the claim of the assessee in accordance with law. This ground is allowed for statistical purpose.

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• Insolvency & Bankruptcy

• 2023 (6) TMI 505
  Seeking approval of the Resolution Plan - Section 31(1) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It is significant to mention that Section 238 of the Code, will prevail over any of the provisions of the SARFAESI Act, 2002, if it is inconsistent with any of the Provisions of the I B Code, 2016 and therefore the Adjudicating Authority ought not to have placed reliance on Section 10(2) of the SARFAESI Act, 2002. It is also pertinent to mention that the CoC has approved the Resolution Plan by the majority of 98.70% in its 27th meeting, held on 19/10/2020. The Hon ble Supreme Court in a Catena of Judgments has held that the commercial wisdom of the CoC is non-justifiable and in the instant case, there are no material irregularity, under Section 30(2) of the IBC Code, 2016 . Keeping in view, the clarification given by the Counsel for RBI that the prior permission is not required, this Tribunal is of the considered view that the Adjudicating Authority ought not to have rejected the Resolution Plan, more so, when the principal objective of the Code is that revival of the Corporate Debtor and Resolution . Liquidation ought to be the last resort, keeping in view the scope and spirit of the Code. The Order of the Adjudicating Authority directing Liquidation is set aside and the matter is remanded to the Adjudicating Authority for approval of the Resolution Plan under Section 31(1) of the IBC Code, 2016 - Appeal allowed.

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• 2023 (6) TMI 504
  Initiation of CIRP - Recovery proceedings - Execution of Ex-parte order, passed in arbitration proceedings - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- A Dispute, in existence, means and includes raising a Dispute, before a Court of Law or an Arbitral Tribunal, before receipt of Notice, under Section 8 of the I B Code, 2016. Further, Dispute, continues at stage, where challenge to an Arbitral Award, in an Appeal, is projected by a Party, as opined by this Tribunal - So long as a Dispute, truly exists in fact and it is not spurious or an imaginary, and not a hypothetical one, an Adjudicating Authority / Tribunal, is to reject, the Petition / Application, filed under the I B Code, 2016 - an Arbitration Proceedings, and I B Code Proceedings, cannot go on together, in the considered opinion of this Tribunal. By virtue of the Arbitration Clause, as per Agreement, the Appellant, had secured the Ex-parte Award, and as against the same, the Respondent / Corporate Debtor, filed an Appeal, in terms of Section 34 of the Act. The very fact that an Appeal, was filed against the Ex-parte Award, by the Respondent, Prima Facie, there exists a Pre-existing Dispute - It cannot be gainsaid that, for initiating a Corporate Insolvency Resolution Process, against the Corporate Debtor, there ought to be no real dispute, existing between the respective Parties, to the Debt, owed in question. So long as the Arbitration Award, was challenged under the relevant Section of the Arbitration and Conciliation Act, 1996, the Operational Debt, in the instant Appeal, is considered to be under Dispute, as opined by this Tribunal. In so far as the amount awarded in Award, is not Disputed, and in reality, due to efflux of time, the Interest, gets added on the Award Due Amount. As such, the difference in the Amount, mentioned in the Demand Notice, dated 21.02.2019, in the main Petition, and in service Record of Default, with the Information Utility, produced by the Appellant with Affidavit, dated 09.03.2021, will not exhibit any incompatibility, so as to be of any assistance, to the Respondent / Corporate Debtor. This Tribunal, comes to an inescapable, inevitable and irresistible conclusion that the view arrived at by the Adjudicating Authority ( National Company Law Tribunal , Bengaluru Bench), in dismissing the main CP (IB) No. 276 / BB / 2019 (filed by the Appellant / Petitioner / Operational Creditor, for recovering the Sum, awarded in Arbitration Proceedings), is free from any Legal Errors - appeal dismissed.

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• PMLA

• 2023 (6) TMI 503
  Seeking grant of Anticipatory Bail - delay in handing over/delivery of possession of apartments/ commercial units - concurrent jurisdiction casted upon the Court of Session and High Court - HELD THAT:- This Court is of the view that this Court has the jurisdiction to entertain the bail application under Section 438 even when the applicant has not approached the Court of Sessions first. To argue upon the limited purposes for which the parties are before this Court today, reference has been made to the twin test which has been provided under the PMLA and which has been relied upon the Courts while considering cases under the Act. The twin conditions serve as a definitive test for the Courts to form an opinion - there is no doubt that in order to link any accused with the offences under the PMLA, the twin test must be satisfied. In the instant case, the respondent/ED has yet not been able to show whether that the Applicant has been charged with or even linked to the Scheduled Offences as provided under the PMLA. Moreover, it has been settled that jail is exception and bail is the rule, as has also been observed in spirit in the landmark judgment passed by the Hon ble Supreme Court in SUSHILA AGGARWAL AND OTHERS VERSUS STATE (NCT OF DELHI) AND ANOTHER [ 2020 (1) TMI 1193 - SUPREME COURT ] that arrest should be done in the rarest of the rare case. Even if the authorities are not satisfied then jail is the last weapon in the hand of the Authorities. In the matter at hand, it has been stated that three times the Applicant and the M3M Group were summoned and on all the occasions the representative on their behalf appeared and cooperated in the investigation. Further, the respondent has already seized numerous assets, including cars, cash, jewelry, etc. and also issued letters to bankers of M3M and its Group Companies directing that various bank accounts of the Company and its group concerns be marked as debit freeze accounts. Moreover, the Applicant has yet not been implicated in any Scheduled Offences as provided under the PMLA and in fact, the ECIR does not even find mention of the name of the Applicant or any of the M3M Companies. It has also been submitted that the when summoned by the respondent, one of the representatives on behalf of the Applicant or the M3M Group has always appeared before the respondent for inquiry and investigation. In view of the fact that the Applicant has not been named in the ECIR and that the respondent has not yet been able to implicate the Applicant in any of the Scheduled Offences under the PMLA, in the interest of justice as well as considering the mandate of Article 21 of the Constitution of India, this Court is of the considered opinion that the Applicant may be granted interim protection till the next date of hearing - in the event of any arrest of the Applicant, he shall be released on bail on his furnishing a personal bond of Rs 10,00,000/- with two sureties of the like amount to the satisfaction of the Investigating Agency, subject to the conditions imposed. Application allowed.

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• Service Tax

• 2023 (6) TMI 502
  Sabkha Vishwas (Legacy Dispute Resolution) Scheme, 2019 - extension of time limit for making balance payment under SVLDRS 2019 and accepting the payment already made in respect of tax dues quantified - violation of provisions of Section 127(5) of the Finance Act, 2019 - HELD THAT:- When the matter had come up on 24.04.2023, this Court had directed the petitioner to pay the balance amount of Rs. 14,78,471/-. In compliance of the same, they have remitted the said amount by Challan dated 25.05.2023. By this payment, the principal amount payable under the scheme has been paid by the petitioner. The very nomenclature of the scheme would imply that the scheme has been introduced for the development of all. The petitioner has set out the reasons as to why he was unable to adhere to the schedule under the scheme. Therefore, taking into account the facts of this case and considering the fact that the amount due under the scheme has been paid, the interest of justice would be sub-served directing the petitioner to pay the interest at the rate of 15% from 01.10.2020 till the dates of respective payments. It is needless to state that the amounts paid prorata would be deducted for calculating the interest. The payment of the interest would also ensure that the revenue is not prejudiced. On such payment, the discharge certificate should be issued. The said exercise shall be completed within a period of 3 weeks from the date of receipt of a copy of this order. This order has been passed only taking into account the special facts of this case. The Writ Petition is disposed of.

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• 2023 (6) TMI 501
  Non-payment of Service Tax - Banking and Other Financial Services - delayed payment charges collected from the borrowers who made loan repayments belatedly ie beyond the period stipulated in the agreement - declared service in the light of section 66E(e) of the Finance Act, 1994 or not. Whether section 65(12) of the Finance Act, 1994 cover delayed payment charges under the classification of Banking and Other Financial Services , up to 30/06/2012? - HELD THAT:- As per section 65 (105) (zm) of FA 1994 Taxable Service means any service provided or to be provided to any person, by a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern, in relation to banking and other financial services. It is seen that as per Para 6 of the agreement the borrower acknowledges that strict compliance of the repayment schedule is an essential condition for grant of loan and the time is the essence of the contract. The agreement hence indicates that the provision for delayed payment is not the reason for the agreement but only provides a safeguard to the commercial interest of the appellant. Hence the payment, unlike interest, is only a condition and not the consideration for the loan. The payment therefore cannot be treated as interest as claimed by the appellant. Consideration is something paid or done in furtherance of the object or purpose for which the parties enter into a contract. Defaulting on the loan schedule cannot be said to be the object or purpose of the agreement. Hence the penal payment of delayed payment charges , cannot be held to be consideration as per Explanation (a) to section 67 for providing a loan to any person as a taxable service, classifiable under Banking and Other Financial Services of FA 1994, for the period prior to 30/06/2012. This being so the demand for service tax on this count must fail. Unlike FA 1994, provisions under Section 15 of the Central Goods and Services Tax (CGST) Act, 2017 relating to Value of Taxable Supply , includes interest or late fee or penalty for delayed payment of any consideration for any supply and hence the Boards GST circular dated 03/08/2022, relied upon by both the parties would not be relevant to understand the legal issue involved in this case. Whether the appellant is providing a declared service as per section 66E(e) of FA 1994? - period with effect from 1.7.2012 - HELD THAT:- A similar stand has been taken by coordinate benches of this Tribunal in M/S NEYVELI LIGNITE CORPORATION LIMITED VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, CHENNAI WITH M/S NLC INDIA LIMITED VERSUS COMMISSIONER OF GST AND CENTRAL EXCISE, TRICHY [ 2021 (7) TMI 1090 - CESTAT CHENNAI] in the case of M/S. BHARAT HEAVY ELECTRICALS LIMITED VERSUS COMMISSIONER OF G.S.T AND CENTRAL EXCISE, TIRUCHIRAPPALLI [ 2023 (4) TMI 1196 - CESTAT CHENNAI] , where it was held that the penalty amount, forfeiture of earnest money deposit and liquidated damages received by the appellant therein towards consideration for tolerating an act as being amenable to Service Tax under Section 66E (e) of the Finance Act, was not sustainable. - thus the service tax could not be levied on delayed payment charges collected by the appellant from their customers from 01.07.2012 also. As the issue does not survive on merits for the entire period of both the show cause notices, all the other issues related to valuation, interest and penalties etc. also do not survive. Appeal allowed.

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• 2023 (6) TMI 500
  Valuation - Custom House Agent Services - inclusion of reimbursable expenses in assessable value or not - LCL charges - deconsolidation charges - transportation charges - DO charges - terminal handling charges - demurrage charges - documentation charges - other charges from their clients - Department was of the view that the appellant ought to have included these expenses in the taxable value to discharge service tax liability - Time Limitation. HELD THAT:- From the SCN itself it is seen that the demand has been made on the reimbursable expenses incurred by the appellant. Further, the allegation as per para 3.2 of the SCN that appellant has not included the charges in the nature of deconsolidation charges, transportation charges, DO charges etc. incurred by them for providing CHA services. It is understandable that such charges are collected by the appellant from their clients and paid to the concerned service provider. It is settled position that the reimbursable expense is not subject to levy of service tax as per the decision of the Hon ble Apex Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT] . After analysing the facts and going through the evidence, we are of the considered view that the decision of Hon ble Apex Court in Intercontinental Consultants and Technocrats Ltd. will be squarely applicable to the facts of the case. The demand cannot sustain. The impugned order is set aside. Appeal is allowed.

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• 2023 (6) TMI 499
  Refund claim - rejection of the application being pre-mature - consulting Engineers Services - export of services - services rendered by M/s Essar Engineering Ltd. were consumed outside the India - whether the refund claim filed by the appellant could have been returned as premature, when in fact, it was complete in all aspects and no further compliance was lacking at the Appellant s end? - HELD THAT:- Section 35(1) of Central Excise Act, 1944 provides for filing appeals before Commissioner (Appeals). This section states that any person aggrieved by any decision or order passed under this Act by a Central Excise officer may appeal to the Commissioner (Appeals). The words used are decision or order . In many judgments, the Tribunal as well as Hon ble High Courts have held that a letter issued informing the decision which affects the right of the assessee can be considered as an appealable order. In the cases of INSTANT CLEARING SERVICES (I) PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS, CHENNAI [ 2015 (10) TMI 97 - CESTAT CHENNAI] , M/S MANDVI CASTING PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, GOA [ 2011 (4) TMI 577 - CESTAT, MUMBAI] and BHAGWATI GASES LTD. VERSUS COMMISSIONER OF C. EX., JAIPUR-I [ 2008 (1) TMI 712 - CESTAT, NEW DELHI] the instances were communications issued by department and the issue for consideration was that can such comunications constitute an appealable order or not. It was held that when such communication/letter affects the right of assessee/party then appeal was maintainable. Once an application of refund has been filed before the refund sanctioning authority, the said authority is duty bound to decide the refund application one way or the other. The refund application can either be rejected or allowed in part or in full. The provisions of refund do not give liberty to the fund sanctioning authority to return the refund application by terming the same to be premature. Therefore the action of the Asstt. Commissioner in holding the application as premature is really an act of refusal to exercise a statutory duty to decide upon the refund application one way or the other. For this reason also, the order of the lower authority is untenable. The grounds for refund have not been considered by both the authorities nor the judgments relied upon by the appellant considered by both the authorities, nor there is any finding distinguishing the same. Thus clearly, there is serious violation of principles of natural justice apparent on the fact of record - if the tax itself is not leviable, it would be immaterial whether the payment for the services is received in Indian Currency or foreign currency. When the services in question were not taxable at all, as they were consumed outside India, the refund claim could not have been returned as premature on the ground that payment for the services were to be received in foreign exchange by M/s EPIL on a future date. Therefore the impugned order in-appeal passed by the Ld. Commissioner in the present matter legally not correct. It is on records that the identified service element has been wholly rendered and consumed abroad. As Hon ble Supreme Court in the case of ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. VERSUS DIRECTOR OF INCOME-TAX [ 2007 (1) TMI 91 - SUPREME COURT] held that in respect of offshore services, there should be sufficient nexus between the rendition of services and territorial limits of India. It was held that applying the principle of apportionment to composite transactions which have some operation in one territory and same in other, it is essential to determine taxability of the service operations. Applying this principle, in the present case the whole of service rendered and consumed outside India is beyond the taxable territory as per Finance Act, 1994, hence not liable to service tax. In the present case, the department and both the adjudicating authority nowhere disputed the facts that the services rendered by Appellant to ESML were provided and consumed at a place outside India and therefore, not leviable to Service tax, as the services was provided beyond the territorial jurisdiction of India. Thus, in the instant case, the amount deposited by the appellants without any authority of law cannot be considered as Service Tax. Therefore, the appellant are entitled to get the refund. There are no merits in the impugned order passed by the Learned Commissioner (Appeals) - appeal allowed.

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• 2023 (6) TMI 498
  Short-payment of service tax - Management or Business Consultancy service - non-inclusion of VAT amount in the value of taxable service to arrive at the service tax payable by them which has resulted in short-payment of service tax - time limitation - revenue neutrality - HELD THAT:- The period involved is prior to 18.4.2006. The appellant has been called upon to pay service tax under reverse charge mechanism. Section 66A was introduced in the Finance Act, 1994 only with effect from 18.4.2006. The judgment of the Hon ble High Court of Bombay in the case of INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA [ 2008 (12) TMI 41 - BOMBAY HIGH COURT] which has been affirmed by the Hon ble Supreme Court in UNION OF INDIA VERSUS INDIAN NATIONAL SHIPOWNERS ASSOCIATION [ 2009 (12) TMI 850 - SC ORDER] has held that the service recipient cannot be called upon to pay service tax under reverse charge mechanism for the services rendered prior to the introduction of Section 66A. Following the said decision, the demand upto 18.4.2006 is required to be set aside. Part of the demand is also confirmed from 18.4.2006 to July 2007. It is submitted by the learned counsel that the amounts were paid under book adjustments. So also VAT refunds were received by such book adjustments from their associated enterprise, situated at Netherland. The demand has been made on the book adjustments which are made prior to 10.5.2008. When the entries are made in the books of accounts of the appellant in respect of the amounts which are to be paid to the overseas entities, prior to 10.5.2008, there is no liability to pay service tax merely on such accounts - The decision of the Tribunal in the case of M/S. SIFY TECHNOLOGIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, LTU CHENNAI [ 2015 (3) TMI 964 - CESTAT CHENNAI] as well as M/S. NORTEL NETWORKS (I) PVT. LIMITED VERSUS CST, NEW DELHI [ 2015 (9) TMI 50 - CESTAT NEW DELHI] have considered the issue and held the issue in favour of the assessee. After appreciating the facts and following the case laws cited above, the demand for the period after 18.4.2006 also cannot sustain and requires to be set aside. Time Limitation - revenue neutrality - HELD THAT:- It is seen that the issue as to whether the recipient of service is liable to pay service tax under reverse charge mechanism to an overseas service provider was under dispute and the Hon ble Supreme Court in the case of Indian National Shipowners Association had held that the demand cannot be made prior to the introduction of section 66A in the Finance Act, 1994. Further, the situation is revenue neutral as the appellant would be able to take credit of the service tax paid under reverse charge mechanism for the relevant period. The department has not been able to establish any positive act of suppression of facts with intent to evade payment of tax on the part of the appellant. In such circumstances, the demand raised invoking the extended period cannot sustain and the Show Cause Notice is time-barred. The appeal succeeds both on merits as well as on limitation. The appeal is allowed.

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• 2023 (6) TMI 497
  Non/short payment of Service Tax - Information and Technology Software Service - import sale of software as a dealer provided to their clients, the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell information technology software and right to use software components for the creation of and inclusion in the software products - reverse charge mechanism - Section 66A of the Finance Act, 1994 and Section 67 (4) (c) of the Finance Act, 1944. Technical Testing and Analysis Services - MRSS - Department has denied to accept the contention that these services have been exported on the ground that the appellant has not received the consideration in convertible foreign exchange - HELD THAT:- Ld. Counsel has explained the provisions with regard to manner of receipt in foreign exchange. As per said rules, a person shall be deemed to have repatriated the realised foreign exchange to India when he receives in India payment in rupees from the account of a bank or an exchange house situated in any country outside India, maintained with an authorized dealer. The appellant has furnished FIRC documents before the authorities below - the view taken by the department that appellant has not received consideration in convertible foreign exchange is without any factual or legal basis. The contention of the appellant that the services were exported stands established. The levy of service tax on MRASS TTAS, therefore cannot sustain and the demand of Rs.64,14,478/- requires to be set aside. Reversal of CENVAT Credit - value of exempted services provided by them as required under Rule 6 (3) of CCR 2004 - Department is of the view that as the appellant had not intimated the department that they are exercising the option in terms of Rule 6 (3A) - HELD THAT:- The appellant has been asked to pay 6% / 8% of the value of exempted services. This issue is no longer res integra. The Tribunal in the case of M/S. RELIANCE LIFE INSURANCE CO. LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI [ 2017 (10) TMI 400 - CESTAT MUMBAI ] analysed the issue and held that procedure given in Rule 6 (3A) of CCR 2004 is intended to make Rule 6 (3) workable and available to the assessee. Rule 6 (3) (i) cannot be made automatically applicable on failure to intimate in writing about the option to be availed by the assesseee - the demand cannot sustain and requires to be set aside. Disallowance of cenvat credit availed on meal passes and group insurance services - HELD THAT:- Needless to say that during the relevant period (prior to 01.04.2011) the definition of input services had a wide ambit as it included the phrase activities relating to business . Thus, almost all the services were covered within the definition of input services if used for providing the output services. There is nothing to show that the said services were not used for the employees of the appellant-company. The Tribunal in the case of Ford [ 2018 (8) TMI 1513 - CESTAT CHENNAI] had considered the issue and held that the credit is eligible. The appellant is eligible for credit and the disallowance of credit is not sustainable and requires to be set aside. The appeal is allowed.

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• 2023 (6) TMI 496
  Classification of services - Commercial or Industrial Construction Service or not - supply of Ready-mix Concrete (RMC) to their customers on the basis of Purchase Orders placed - HELD THAT:- Purchase Order dated 29.12.2008 issued by Shapoorji Pallonji and Co. Ltd., has footnote in the bottom stating VAT extra at the rate of 4% against Form D-1, FOR at site basis. Pumping charges up to 5th floor at the rate of 85 per cum beyond Rs.25 per cum extra per floor ; Purchase Order dated 04.08.2008, issued by M/s G.S. Developers and Contractors Pvt. Limited, indicates that the prices is inclusive of pumping charges at the rate of 100 per M3. On going through the various purchase orders, the only indication that is available in the purchase orders is that the prices are inclusive of pumping charges. In some purchase orders, for example the supply order issued by Disney Farms Pvt. Limited dated 29.12.2008 indicates that the rate per cum are inclusive of service tax at the rate of 12.36%. However, there is no proof to the effect that the said service tax has been paid by the customer and collected by the appellant. However, this issue is not raised either in the show cause notice or in the OIO, which only proceed on the assumption that the appellants have rendered Commercial or Industrial Construction Service . The sale of RMC does not involve any service angle in spite of the fact that the appellants are pumping the RMC to the desired floor at the request of the customers. The activity of pumping RMC is incidental to the sale of RMC, on which requisite VAT has been paid, by the appellants, is incidental to the sale of RMC. It is further found that showing pumping charges separately in the work orders or invoices does not materially alter the situation - Option for installation is optional for the purchaser. For the reason that the dealer is charging installation charges, the dealer cannot be held to be a service provider. Therefore, the argument of Revenue that the activity of the appellant amounts to Commercial or Industrial Construction Service is incorrect. Judgment in the case of L T [ 2015 (8) TMI 749 - SUPREME COURT ] was rendered by the Hon ble Supreme Court in 2015, holding that indivisible services ought to be categorized under Works Contract only after 01.06.2007. Simply because the appellants categorized the service, which in fact is held to be a no service at all, under Business Auxiliary Service , does not take away the right of the appellant to classify the same under Works Contract Service . Moreover, the Department having sought to classify the activity under Commercial or Industrial Construction Service cannot alter their argument to the classification rendered by the appellants after 16.06.2008. In view of the Hon ble Apex Court judgment in the case of L T, the appellant s activity of sale and pumping of RMC would necessarily fall under Works Contract Service . However, there is no service rendered by the appellants in their business. The appeal is allowed.

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• 2023 (6) TMI 495
  Levy of penalty u/s 76 of the Finance Act, 1994 - classification of services - activities of execution of the work of interior decorator - Interior Decorator Service or works contract service - period June, 2007 to March, 2008 - HELD THAT:- The entire service has been provided by the assessee along with materials. The said fact has not been disputed either of the sides. Relying on the decision of the Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] and the decision of the Tribunal in the case of SPANDREL VERSUS COMMISSIONER OF CENTRAL EXCISE, HYDERABAD [ 2010 (5) TMI 299 - CESTAT, BANGALORE] , it is held that the appropriate classification of the said services is Works Contract Service . As there is no demand under Works Contract Service against the assessee, but the assessee opted to pay service tax under composite scheme of works contract, the same has been taken on record. In that circumstances, the appropriate classification of activities of works undertaken is Works Contract Service and they have discharged service tax liability. In these circumstances, the demand against the assessee under the category of Interior Decorator Service is not sustainable. Accordingly, the same is set aside. As the demand is not sustained, the question of imposing penalty under Section 76 of the Finance Act, 1994, does not arise. Appeal filed by assessee allowed.

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• Central Excise

• 2023 (6) TMI 494
  Valuation - no sale of the product to any other independent buyer (transfer of goods to its own units) - fixing the value of copper anode - seeking netting the excess payment against the amounts short-paid before the department raises a demand, if any - HELD THAT:- It was pointed out to the appellant s counsel that the prayer in the appeal was to set aside the impugned order and what they were stating now was a fresh plea. Further for any appeal to be taken up there must be an existing dispute involving a question of law or fact, on which the existence or extent of a legal right depends. By their acceptance of the impugned order the earlier dispute does not survive. The issue now submitted by the appellant is what may arise post the finalization of the demand, if any, by the department, based on the impugned order and is currently not the subject matter. The issue of valuation being settled, no issue remains to be decided - the impugned order is upheld - Appeal dismissed.

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• 2023 (6) TMI 493
  Benefit of abatement under Rule 10 of Chewing Tobacco and Un-manufactured Tobacco Packing Machine (Determination of Capacity and Collection of Duty) Rules, 2010 - it is alleged that abatement under rule 10 of the 2010 Rules cannot be claimed suo motu for the reason that the appellant was required to first pay the entire amount determined and then claim abatement - whether the appellant could suo motu claim abatement and this issue was decided by the Tribunal in favour of the appellant? - HELD THAT:- On a careful perusal of the order dated October 24, 2017 passed by the Tribunal, there is no manner of doubt that the matter had been remitted to the Principal Commissioner to only determine the number of days the factory of the appellant remained closed each month. The period, so determined, was then required to be dealt with in accordance with the provisions of rule 10 of the 2010 Rules and paragraph 10 of the order. If that be so, there is no manner of doubt that all that was required to be determined by the Principal Commissioner was whether the factory of the appellant remained closed for a minimum period of fifteen continuous days each month. The Principal Commissioner proceeded to examine this issue and came to a conclusion that the factory of the appellant remained closed for a minimum period of fifteen continuous days each month. This finding of the Principal Commissioner is based on the orders passed regarding sealing and unsealing of the factory of the appellant by the officers of the Department and this is also in conformity with the factual position contained in Annexure A to the show cause notice. The finding of the Principal Commissioner has not been assailed by the Department also and rightly so because it is based on the factual position. Such being the position, it has to be held that the appellant was justified in claiming suo motu rebate under rule 10 of the 2010 Rules. The order dated January 29, 2019 passed by the Principal Commissioner cannot, therefore, be sustained and is set aside - appeal allowed.

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• 2023 (6) TMI 492
  Default in the payment of duty - whether differential duty has to be paid only during the period of default on the highest number of machines installed/operated based on the amended provisions or as contended by the Revenue to be calculated in terms of proviso 7 of Rule 9 of PPM (CDCD) Rules, 2008 for the entire financial year as it stood prior to 27.2.2010? HELD THAT:- Board s clarifications F.No.341/109/2008-TRU dated 27.7.2009 and No.81/17/2007-CX3 dated 20.04.2010 are very categorical and clear wherein it is stated that Reading of proviso to Rule 7 to the Rule 9 of PPM (CDCD) Rules, 2008 makes it clear that the default for payment of duty for one month would not be treated as default for all the remaining part of the full financial year. However, the default would continue till the duty for the said month is paid . Hence, in the instant case, the learned Commissioner has rightly demanded the differential duty along with interest for the available packing machines during the period of default. Board s clarifications are very categorical and clear wherein it is stated that the default would continue till the duty for the said month is paid. Hence, in the instant case, the learned Commissioner has rightly demanded the differential duty along with interest for the available packing machines during the period of default. Revenue is bound to follow the Board s clarification as per the decision rendered by Hon ble Supreme Court in the case of COLLECTOR OF CENTRAL EXCISE, VADODARA VERSUS DHIREN CHEMICAL INDUSTRIES [ 2002 (2) TMI 115 - SC ORDER] . In view of the Board s Clarifications vide F.No.341/109/2008-TRU dated 27.7.2009 and No.81/17/2007-CX3 dated 20.04.2010, the Commissioner s order wherein he has redetermined the differential duty taking into account the Boards clarifications dated 27.7.2009 and 20.4.2010, is upheld and the department s appeal is dismissed. Appeal dismissed.

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• Indian Laws

• 2023 (6) TMI 491
  Computation of net worth - inclusion of Deferred Tax Liability - Direct or Indirect Method of Calculation - Rejection of Petitioner s bid in respect of a tender - rejection on the ground that Net Worth of the Petitioner is not in compliance with the eligibility criteria (financial) - jurisdiction under Article 226 of the Constitution of India. HELD THAT:- The law relating to interference by Courts in matters of tender is well settled. The authority issuing the tender is the best person to know the requirements of the tender and the clauses contained therein. Courts can interfere with the decisions taken by the authorities issuing the tender only if the decision is arbitrary or perverse or intended to favour someone or is biased against the person whose bid is sought to be rejected. The law regarding interference by a Court with the actions of a tendering authority in exercise of its jurisdiction under Article 226 of the Constitution of India is well settled. The Apex Court in AFCONS INFRASTRUCTURE LTD. VERSUS NAGPUR METRO RAIL CORPORATION LTD. ANR. [ 2016 (9) TMI 1292 - SUPREME COURT] , has observed that constitutional courts must defer to the understanding and appreciation of the author of the tender documents unless there is malafide or perversity in the understanding or appreciation in application in the terms of the tender. In THE SILPPI CONSTRUCTIONS CONTRACTORS VERSUS UNION OF INDIA AND ANR. ETC. ETC. [ 2019 (6) TMI 1449 - SUPREME COURT] the Supreme Court, while discussing the aspect of judicial intervention in matters of contract involving state instrumentalities had held that the authority which floats the contract or tender, and has authored the tender documents is the best judge regarding interpretation of the same. Any interference by the Court has to be for the purposes of preventing arbitrariness, irrationality, bias, mala fides or perversity. The Petitioner has not been able to demonstrate as to how the decision arrived at by the tendering authority in rejecting the bid of the Petitioner as not being compliant of Clause 3.28 and Clause 6.1.2 of the bid document is perverse. The tender issuing authority cannot be asked to wait for an unlimited period awaiting an opinion which is sought to be procured by the tenderer. The tender has been evaluated by experts and this Court is not inclined to sit as an Appellate Authority over the Tender Evaluating Committee which has come to the conclusion that the bid of the Petitioner does not meet with the financial criteria. A perusal of Respondent s letter dated 11.03.2023 shows that the net worth of the Petitioner as calculated by the Respondent by referring to audited financial statements of the Petitioner for the FY 2021-22 shows that the net worth of the company is Rs. 393.73 crores. The Respondent vide letter dated 10.04.2023 had sought clarification from the Respondent pertaining to the consideration of deferred tax liability as part of net worth. The Petitioner replied to the same clarifying its stance by relying upon a report of its statutory auditor, a certificate from an independent chartered accountancy firm and a registered valuer in support of its treatment of deferred tax liability in computing net worth. The Petitioner also stated that they have sought an opinion from the ICAI regarding the same - vide the Impugned letter, the Respondent had rejected the bid of the Petitioner. The purpose of calculating net worth should be primarily left with the tender issuing authority and the evaluating committee and the Court cannot dictate as to how the net worth should be calculated unless the decision is contrary to law. In the opinion of this Court, it cannot be said that the action of the Respondent in not considering deferred tax liability as a part of net worth and rejecting the bid of the Petitioner for not meeting the qualification criteria is so arbitrary that it would warrant interference by this Court under Article 226 of the Constitution of India. Petition dismissed.

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• 2023 (6) TMI 490
  Enquiry on the alleged irregularities with regard to the functioning of the Society - Forbearance of authorities from proceeding with the enquiry initiated under Section 34A of the Act without affording due opportunity to the newly elected office bearers - bone of contention of the petitioners is that the impugned notice of enquiry dated 15.05.2023 ought to have been issued after recalling the Government Order in G.O.Ms.No.17, Commercial Tax and Registration (M-1) Department, dated 01.03.2023, in and by which, the Management Committee was superseded by the Government. HELD THAT:- The petitioners / some of the newly elected Management Committee Members have made a representation on 04.02.2023 and filed WP.No.7179 of 2023 for a mandamus. The Government Order in G.O.Ms.No.17, Commercial Tax and Registration (M-1) Department was passed on 01.03.2023. This Court, on 10.03.2023, directed the respondents to pass orders on the representation of the petitioners. This order was passed at the admission stage itself. The petitioners have suppressed the issuance of the Government Order dated 01.03.2023, when the writ petition came up for hearing on 10.03.2023. Therefore, this Court, without any reference to the Government Order dated 01.03.2023, directed the first respondent herein to pass orders on the representation of the petitioners. Since the Government Order in G.O.Ms.No.17, Commercial Tax and Registration (M-1) Department, dated 01.03.2023, has been passed after affording due opportunity to the then Office Bearers, who are also the incumbent President, Vice President, Secretary, Treasurer of the Society, there is no necessity for providing opportunity to each and every member of the Society in the proceedings initiated under Section 34A of the Act. The impugned notice of enquiry dated 15.05.2023 is set aside, as it is not necessary, in view of the issuance of G.O.Ms.No.17, Commercial Tax and Registration (M-1) Department, dated 01.03.2023. Since this Government Order has already been challenged before this Court and the said writ petitions are also pending consideration, the petitioners can work out their remedy in the pending writ petitions, if so advised. Petition allowed in part.

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