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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter June 23, 2022 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise Indian Laws Articles 1. Simplified Practical FAQs on TDS U/s 194R on benefits and perquisites By: Dinesh Singhal Summary: The Finance Act, 2022 introduced Section 194R to the Income-tax Act, 1961, mandating tax deduction at source (TDS) on business or professional benefits or perquisites provided to residents, effective July 1, 2022. A 10% TDS applies if the total value exceeds 20,000 annually. Exemptions include individuals or Hindu undivided families with turnover below 1 crore for businesses and 50 lakh for professions. The Central Board of Direct Taxes issued guidelines clarifying TDS applicability, including non-cash benefits, valuation, and specific scenarios like discounts, free samples, and conferences. TDS is not required on sales discounts or rebates but applies to benefits like free samples or incentives. 2. Govt. Clearance is must for appointment as directors in Indian Companies By: CSLalit Rajput Summary: The Ministry of Corporate Affairs in India has amended the Companies (Appointment and Qualification of Directors) Rules, mandating government clearance for appointing directors from countries sharing land borders with India, effective from June 1, 2022. Nationals from China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan must obtain security clearance from the Ministry of Home Affairs. This measure aims to prevent opportunistic takeovers, particularly by Chinese entities, amid the COVID-19 pandemic. The amendment aligns with the Foreign Direct Investment policy and requires directors to declare compliance with these requirements when applying for a Director Identification Number. News 1. Minutes of the Monetary Policy Committee Meeting, June 6 to 8, 2022 [Under Section 45ZL of the Reserve Bank of India Act, 1934] Summary: The Monetary Policy Committee (MPC) of the Reserve Bank of India held its 36th meeting from June 6 to 8, 2022, to address rising inflation and economic challenges. The MPC decided to increase the policy repo rate by 50 basis points to 4.90%, with corresponding adjustments to other rates, to curb inflation while supporting growth. The decision aligns with the goal of maintaining consumer price index inflation at 4% within a +/- 2% range. The committee noted global inflationary pressures, geopolitical tensions, and domestic economic recovery indicators, retaining the GDP growth forecast for 2022-23 at 7.2%. The focus remains on withdrawing accommodation to manage inflation expectations. 2. Income Tax Department conducts searches in Rajasthan and Mumbai Summary: The Income Tax Department conducted search and seizure operations on June 16, 2022, targeting a business group involved in handicrafts, real estate, and bullion trading across Rajasthan and Mumbai. Over 25 premises were searched, uncovering incriminating documents indicating unaccounted cash transactions and bogus purchase bills. The group allegedly inflated purchases to suppress profits and engaged in cash transactions with bullion traders for real estate investments. Unaccounted cash and gold jewelry worth over Rs. 9.20 crore were seized, with unaccounted income estimated at over Rs. 100 crore. Further investigations are ongoing. Notifications DGFT 1. 13/2015-20 - dated 21-6-2022 - FTP Amendment in Import Policy Condition of Water Melon Seeds under ITC(HS) Code 1207 70 90 of Chapter-12 of ITC (HS), 2022, Schedule-I (Import Policy) Summary: The Government of India has amended the import policy for watermelon seeds under ITC(HS) Code 1207 70 90. The policy now allows the import of watermelon seeds to be "Free" until September 30, 2022. Shipments made by this date can be cleared at Indian Customs if the Bill of Entry is filed and goods are presented for examination by October 31, 2022. These imports are restricted to Kandla and Mundra Ports. This amendment is issued by the Directorate General of Foreign Trade under the Foreign Trade Policy 2015-2020. GST - States 2. G.O.Ms.No.432 - dated 8-6-2022 - Andhra Pradesh SGST Waiver of Late fee under Section 47 for the period from 01.05.2022 till 30.06.2022 for delay in filing FORM GSTR-4 for the F.Y 2021-2022 Summary: The Government of Andhra Pradesh, under the Andhra Pradesh Goods and Services Tax Act, 2017, has issued an amendment to waive the late fee for delays in filing FORM GSTR-4 for the financial year 2021-2022. This waiver applies to the period from May 1, 2022, to June 30, 2022. The decision follows recommendations from the Goods and Services Tax Council and amends a previous notification from January 24, 2018. This order is issued by the Revenue (Commercial Taxes-II) Department, under the authority of the Governor of Andhra Pradesh. 3. 07/2022-State Tax - dated 6-6-2022 - Gujarat SGST Waiver of late fee for the period from 01.05.2022 to 30.06.2022 for delay in filing FORM GSTR-4 for FY 2021-22 Summary: The Government of Gujarat, under the Gujarat Goods and Services Tax Act, 2017, has issued a notification waiving the late fee for delays in filing FORM GSTR-4 for the financial year 2021-22. This waiver applies to the period from May 1, 2022, to June 30, 2022. The decision follows recommendations from the Goods and Services Tax Council and amends a previous notification from December 29, 2017. The waiver is officially ordered by the Deputy Secretary to the Government of Gujarat, in the name of the Governor. 4. (05/2022) FD 07 CSL 2022 - dated 17-6-2022 - Karnataka SGST Seeks to provide waiver of interest for specified electronic commerce operators for specified tax periods. Summary: The Government of Karnataka, under the Karnataka Goods and Services Tax Act, 2017, has issued a notification waiving interest for certain electronic commerce operators who failed to file FORM GSTR-8 by the due date due to technical issues. This waiver applies to operators who deposited the collected tax in the electronic cash ledger for specified months. The waiver covers periods from the date of tax deposit until the filing of the required statement. This measure is implemented following recommendations from the Council to address non-compliance due to technical glitches on the portal. 5. G.O. Ms. No. 12 - dated 14-6-2022 - Puducherry SGST Seeks to amend Notification G.O. Ms. No. 2, dated the 3rd January, 2018 Summary: The Government of Puducherry has issued an amendment to Notification G.O. Ms. No. 2, dated January 3, 2018, under the Puducherry Goods and Services Tax Act, 2017. This amendment, detailed in G.O. Ms. No. 12 dated June 14, 2022, introduces a new proviso that waives the late fee for delays in filing FORM GSTR-4 for the financial year 2021-22. The waiver applies to the period from May 1, 2022, to June 30, 2022. This amendment is made on the recommendation of the Council and is ordered by the Lieutenant-Governor of Puducherry. 6. 461/X1-2-22-9(47)/17-T.C.184-U.P.Act-1-2017-Order-(237)-2022 - dated 20-6-2022 - Uttar Pradesh SGST Seek to waive interest for certain e-commerce operators as per the recommendations of ITGRC. Summary: The Governor of Uttar Pradesh has issued a notification waiving interest for specific e-commerce operators who failed to file the required statement in FORM GSTR-8 for December 2020 due to a technical glitch. Despite the filing issue, these operators had deposited the collected tax into the electronic cash ledger. The interest rate for this period has been set to 'Nil' as per the recommendations of the ITGRC and under the provisions of the Uttar Pradesh Goods and Services Tax Act, 2017. This notification is effective retroactively from June 7, 2022. Income Tax 7. 67/2022 - dated 21-6-2022 - IT Income-tax (19th Amendment) Rules, 2022 - Payment on transfer of virtual digital asset - Amends various rules i.e. Due Date of payment of TDS (Rule 30) - Certificate of TDS (Rule 31) - Quarterly statement / Return of TDS (Rule 31A) - New Forms Summary: The Income-tax (19th Amendment) Rules, 2022, effective July 1, 2022, introduce amendments to the Income-tax Rules, 1962, concerning the taxation of virtual digital assets. Key changes include updates to the due date for TDS payments (Rule 30), the issuance of TDS certificates (Rule 31), and the filing of quarterly TDS statements (Rule 31A). New forms, such as Form No. 26QE and Form No. 16E, have been introduced for reporting and certification purposes. These rules are enacted under the authority of the Central Board of Direct Taxes, as per the Income-tax Act, 1961. Highlights / Catch Notes GST Court Denies Anticipatory Bail in Fraudulent Tax Credit Case; Evidence Beyond Co-Accused Statement Justifies Further Probe. Case-Laws - HC : Seeking grant of Anticipatory Bail - Fraudulent availment of Input tax credit - Insofar as the submissions made by the learned Senior Advocate for the present applicant that the only material with the Investigating Officers, is the statement of co-accused, which may not be a basis, to implicate the present applicant, in the considered opinion of this Court, at this stage, the department based upon the material that had been collected by them, are inquiring/ investigating in the scam and whereas in the considered opinion of this Court, more particularly in view of the material shown to this Court by the learned Public Prosecutor, it could not be stated that the statements of the co-accused would be the only material which is available with the department. - Application rejected - HC Visit to Get Source Income Tax Assessment Reopening for Freebies Violation Dismissed; Change of Opinion Not Allowed u/s 147 Proviso. Case-Laws - HC : Reopening of assessment u/s 147 - Allowability of Expenditure on account of freebies incurred in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2022 is not admissible under Section 37(1) - This is not a case where the assessment is sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of assessee to disclose truly and fully all material facts that were necessary for computation of income but this is a case wherein the assessment sought to be reopened on account of change of opinion of the Assessing Officer about the manner of computation of income. The same is not permissible, in view of proviso to Section 147 - HC Visit to Get Source Assessee's Liaison Office in India Deemed Preparatory, Not a Permanent Establishment, Confirms High Court Under Article (5)(3)(e)(ii). Case-Laws - HC : Income accrued in India - PE in India - as per revenue as detected at the time of survey u/s. 133A wherein the Assessee has carried out all the business activities from the Liaison office - After considering documents, Tribunal found that the concerned place of business was only for the supply of information having preparatory or auxiliary character. Accordingly, the Tribunal concluded that the same would fall under Article (5)(3)(e)(ii). This finding of fact, recorded by the Tribunal after due consideration of the material on record, cannot be considered as perverse. - ITAT has rightly held that, Assessee's case does not constitute the "PE" - HC Visit to Get Source Court Validates Reassessment u/s 147: No Change of Opinion in Donations Inquiry u/s 35(1)(ii. Case-Laws - HC : Reopening of assessment u/s 147 - Change of opinion - the threshold bar for initiation of the reassessment proceedings is satisfied. This Court must conclude, at this stage, that the AO's subjective prima facie opinion, though is based on the records made available during the assessment proceedings, is because of further enquiry, into the affairs of organization to whom donations were made u/s 35(1)(ii), and this is not a case of 'change of opinion'. - HC Visit to Get Source PCIT's Approval for Reopening Tax Assessment Invalid Due to Lack of Proper Evaluation u/s 147. Case-Laws - AT : Reopening of assessment u/s 147 - validity of sanction as accorded by PCIT - the Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer and the said power cannot be exercised casually and in a routine manner. In the said case, the Commissioner had simply mentioned “approved” while according sanction to the Assessing Officer to reopen the assessment and issue notice under Section 148 of the Act and the same was held to be without any application of mind - AT Visit to Get Source Japanese Company Interest Income Taxation in India: Interplay of Tax Treaty Articles 11(6) and 7(1) Examined. Case-Laws - AT : Income accrued in India - taxation of interest income - assessee is a company incorporated and fiscally domiciled in the Republic of Japan - For interplay of Article 11(6) and Article 7(1), in our considered view, the expression “effectively connected with such permanent establishment” must mean a situation in which the interest income in question can be said to be “directly or indirectly attributable to the permanent establishment” and can be brought to tax under article 7(1) as such. That is not even the case of the Assessing Officer before us. - AT Visit to Get Source Income Recognition Under AS-9: Arbitration Award Confirms Addition as Income for FY 2013-14 Despite Non-Scheduling by LANCO. Case-Laws - AT : Recognition of income - scope of AS -9 - addition being the amount already realized and shown as income in the FY 2013-14 as per arbitration award - It is for example nobody”s case that there is no accrual of a right to the assessee to any sum on the non-scheduling of agreed power by LANCO, and which, to the extent it does, is only for the current year. - Addition confirmed - AT Visit to Get Source Supreme Court Rules Loan Waiver for Capital Assets Not Taxable Under Income Tax Act Sections 41(1) or 28(iv. Case-Laws - AT : Addition u/s 41 - sick company - cessation of liability towards unsecured loans availed from financial institutions in terms of order of the BIFR - Apex Court has held that, waiver of loan for acquiring capital assets cannot be treated as remission of trading liability and brought to tax u/s. 41(1) or u/s.28(iv) - AO has erred in assessing cessation of liability towards unsecured loans availed from financial institutions in terms of order of the BIFR u/s.41(1) of the Income Tax Act, 1961. - AT Visit to Get Source Assessment Revised u/s 263 for Inadequate Inquiry into Cash Deposits Exceeding Reported Turnover in Savings Account. Case-Laws - AT : Revision u/s 263 - AO has completed the assessment without making enquires or verification which should have been made in respect of deposit of cash in the savings bank accounts of the assessee, more particularly when the case was selected for assessment with limited scrutiny for the reason that “cash deposit in savings bank accounts is more than the turnover”. - Revision proceedings sustained - AT Visit to Get Source Tax Deduction Approved for Chennai Port Container Terminal u/s 80IA(4) as Infrastructural Facility. Case-Laws - AT : Deduction u/s 80IA(4) - container terminal developed by assessee - The assessee was vested with the authority of developing and providing infrastructural facilities for ports. The container terminal developed was a part of Chennai Port. The term ‘Port’ is mentioned as an infrastructural facilities in the explanation (d) to Sec.80IA(4). The term ‘port’ as defined in CBDT Circular No. 10 dated 16.12.2005 includes structures at the ports for storage, loading and unloading etc. The project fulfilled all the stipulate conditions. - The other entity has been allowed similar deduction and there is no reason as to why the deduction is not available to the assessee. - AT Visit to Get Source CBDT Circular: Income from shares held over 12 months is capital gains; consistent classification required yearly. Case-Laws - AT : Correct head of income - income arising from sale of shares - CBDT Circular, as relied upon by Ld. CIT(A), clearly provide that in respect of listed shares and securities held for a period of more than 12 months, if the assessee desires to treat the income arising thereof as capital gains, the same not be put to dispute by AO - This stand once taken by the assessee in a particular year shall remain applicable in subsequent years also and the taxpayer shall not be allowed to adopt a different/contrary stand in this regard in subsequent years. - AT Visit to Get Source Tax Authority's Estimations Overturned Due to Lack of Evidence on Incomplete Bills and Vouchers. Case-Laws - AT : Disallowance of expenditure pertaining to salary & wages, job work and other expenses - Addition made on incomplete bills and vouchers - the assessing authority has disallowed the expenses purely on the basis of estimation without specifying the instances where the vouchers were found to be incomplete or missing. - Additions deleted - AT Visit to Get Source CIT's Section 263 invocation leads to new issues, original concerns deemed unsustainable and dismissed. Case-Laws - AT : Revision u/s 263 by CIT - having invoking the powers u/s.263 of the Act, no addition on the said issues has been made. The additions have been made on other issues; clearly shows that the issues raised in the proceedings u/s.263 of the Act are unsustainable and liable to be quashed. - AT Visit to Get Source Court Vacates Disallowance u/s 14A, Rule 8D Due to Authorities' Failure to Record Satisfaction for Jurisdiction. Case-Laws - AT : Disallowance u/s 14A r.w.r. 8D - failure to record satisfaction - as there is a clear lapse on the part of the lower authorities in validly assuming jurisdiction for dislodging the assessee’s claim that no disallowance u/s.14A of the Act was called for in its hands, therefore, the disallowance worked out by the Assessing Officer u/s 14A r.w Rule 8D(2)(iii), which thereafter, had been sustained by the CIT(Appeals) is liable to be vacated. - AT Visit to Get Source Customs Petitioner Seeks Refund of Rs.2.5 Crores Paid Voluntarily During Investigation, High Court Denies Relief. Case-Laws - HC : Refund of amount deposited during Investigation - Payment was voluntary or under Coercion / Threat - The payment of Rs.2.5 Crores is supported by the letter of the petitioner. The letter is issued by the petitioner to the respondents along with payment. The covering letter presented with the payment of Rs.2.5 Crores as made by the petitioner to the respondent consequent to the search proceedings on 9th February 2021 suggests that the petitioner accepts the issue raised by the officers of the DRI and as a token of cooperation on ongoing investigation, the petitioner submits the demand draft of Rs.2.5 Crores and requested the respondents to consider the said payment towards differential duty liabilities - No relief - HC Visit to Get Source Redemption Fines for Seized Goods: Balancing Pre-Adjudication Estimates and State Accruals with Proportional Value Approach. Case-Laws - AT : Provisional release of seized imported goods - determination of redemption fine - Over the years, the quantification of fine has been placed within the practical framework of offsetting the potential for windfall deriving from the breach for which the goods are confiscated. Rarely would it be the value of goods; some proportion thereof suffices - It is moot if a tentative estimation prior to adjudication can hold a candle to the assured accrual to the State after adjudication, subject, of course, to appellate determination - the extent of mandatory pre-deposit should, in most cases, be the benchmark for quantification of reasonable security. At least, as far as the impugned goods are concerned. - AT Visit to Get Source Court Challenges Valuation of Vessel; Questions Application of Rule 12, Customs Valuation Rules 2007, Citing Lack of Evidence. Case-Laws - AT : Valuation of goods - old and used self-propelled platform supply vessel Sagar Fortune - The justification offered for invoking rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, i.e., alleged misdeclaration of tariff item in First Schedule to Customs Tariff Act, 1975, does not logically pan out without evidence that such technical distinction, even if uncontested, impacts value of the vessel. The impugned order has not allotted any space for such scrutiny. Recourse to sequential application of rule 4 to rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is, thus, without authority of law. - AT Visit to Get Source Corporate Law Company Cleared of Charges for Not Disclosing Political Contributions in 2016-17 Due to Format Limitations. Case-Laws - HC : Prosecution proceedings for Non-disclosure of contribution in the Profit and loss Account - political contribution/donation to the tune of Rs. 10.00 lakhs each in two occasion to a particular party during a financial year 2016-17 - It cannot be said that there is a criminal intention for not specifically mentioning the name of the political party as political contribution. When there is no specific column in the format of the disclosure of the financial status of the company, the question of allegation for non disclosure of political donation does not arise. - HC Visit to Get Source Indian Laws Accused Must Rebut Presumption of Valid Cheque Despite Writing Discrepancies; Court Allows Handwriting Expert as Defense Witness. Case-Laws - HC : Dishonor of Cheque - Even if the difference in writing is established, the accused will still have to rebut the presumption under the Act, that the cheque is a valid tender and that he had made the payment to the complainant but despite that fact, the complainant filled up the cheque and presented the same leading to it being dishonoured - The petitioner-accused allowed examine the handwriting expert as a defence witness - HC Visit to Get Source Liability of Drawer or Maker Altered by Contract Under Negotiable Instruments Act; Defendants Jointly Liable for Debt. Case-Laws - HC : Scope of the Drawer or Maker or acceptor under Negotiable instrument act - recovery from the surety - there is a contract that has the effect of varying the prescription in Section 37 read with Section 33 of the NI Act as regards acceptance of liability as a primary obligor by a person other than the drawee or drawee in need or acceptor for honour. On the facts of this case, however, it does not make a material difference whether the second Defendant's obligation is as principal debtor under a contract to the contrary or as surety because the first Defendant failed or refused to pay for goods received, thereby triggering the liability of the second Defendant even if considered as a surety. - Both the first and second Defendants are jointly and severally liable - HC Visit to Get Source IBC Homebuyers Struggle with Unregistered Sale Deeds Amid Corporate Insolvency; Rights at Risk Under Insolvency and Bankruptcy Code, 2016. Case-Laws - AT : Homebuyers/allottees - Non-execution of sale deeds of allottees - pendency of non-registration of sale deed in favour of such allottees - Although the CD had handed over the possession of Commercial space to the Appellants, admittedly, no sale deed was executed by the CD in favour of allottees prior to the commencement of CIRP. - The rights of home buyers cannot be affected adversely in the Corporate Insolvency Resolution Process and their interest is to be appropriately preserved and protected within the parameters of the I & B Code, 2016. - AT Visit to Get Source Service Tax High Court Dismisses Petition Over Disallowed CENVAT Credit Claim Due to Lack of Payment Proof Under SVLDRS-3. Case-Laws - HC : Validity of SVLDRS-3 issued to petitioner - non consideration of the CENVAT credit claimed - Once the CENVAT credit is disallowed, in absence of proof of it, it would be difficult for the court to conclude about the justification to claim the benefit of CENVAT credit - In absence of the proof, of the Petitioner having paid the tax to which the Petitioner is entitled for the benefit of CENVAT, the documents would be necessary to come to the conclusion. It is not the case that the Petitioner was not accorded with the opportunity. The show cause notice were issued to the Petitioner giving the details. Claim of the Petitioner for CENVAT credit to a large extent was disallowed. - Petition dismissed. - HC Visit to Get Source Appellant Denied Service Tax Refund: Services Rendered Domestically, Not Qualified as Exports Under Business Support Service. Case-Laws - AT : Refund of Service Tax paid - export of services or not - Business Support Service - The appellant may have rendered the service as an agent of his overseas principals and may have received the consideration from them towards such service. Service Tax being “Destination Based Consumption Tax”, as the service is rendered and consumed in the country, the service cannot be said to have been exported. For this reason, the contentions of the appellants are not acceptable. - AT Visit to Get Source Refund Approved for Service Tax on Non-Commercial Sports Stadium Construction; Conditions Apply on Unjust Enrichment & Limitation. Case-Laws - AT : Refund of service tax paid, which was not required to be paid - services provided in relation to sports stadium - commercial or industrial construction service - Providing and fixing of seating system - Laying of Synthetic athletic track - nature of civil structure is not of commercial - In so far as the taxability of service provided is concerned it is held that the services provided by the appellant are not taxable. - Refund to be allowed subject to unjust enrichment as well as limitation - AT Visit to Get Source No Suppression of Facts Found in Service Tax Payment Case; Extended Limitation Period Not Applicable, No Penalty Imposed. Case-Laws - AT : Penalty - Suppression of facts or not - Extend period of limitation - Service tax paid on Reverse Charge Mechanism and credit was availed even after issuance of SCN - The Commissioner should have dropped the demand for the extended period of limitation in view of our finding in this case that there was no suppression of facts. However, the confirmation of demand has not been assailed by the respondent, possibly because it was entitled to the CENVAT credit of whatever service tax it paid. - No penalty - AT Visit to Get Source Central Excise Court Upholds Excise Duty on Tobacco; No Violation of Article 14 Found in Levy of NCCD Under Central Excise Act. Case-Laws - HC : Levy of excise duty and NCCD under the Central Excise Act, 1944 - It is pertinent to note that in the writ petition, there are no pleadings that action of levy of excise duty on tobacco and tobacco products amounts to hostile discrimination and is violative of Article 14. - he levy of excise duty on tobacco and tobacco products is a matter of public policy and this Court in excise of writ jurisdiction would not interfere with the same. The appellants have failed to demonstrate that levy of excise duty either suffers from manifest arbitrariness or is discriminatory. Accordingly it is held that the levy of excise of duty of tobacco and tobacco products is not violative of Article 14 of Constitution of India. - HC Visit to Get Source CENVAT Credit Denial Unjustified Without Concrete Evidence Beyond Third-Party Transporter Records and RTO Reports. Case-Laws - AT : CENVAT Credit - availment of credit fraudulently without receipt of inputs - Merely on the basis of the transporter records and RTO check-post reports, it cannot be concluded that the inputs were not received by the appellant. In the absence of any evidence to the contrary, we find that the denial of Cenvat credit on the basis of the investigations conducted at the third party end cannot be adopted as the sole basis for denial of credit. - AT Visit to Get Source Case Laws: GST 2022 (6) TMI 964 Demand of interest in terms of Section 50 of the Central Goods and Services Tax Act, 2017 - period July, 2017 to September, 2021 - HELD THAT:- Apprehending demand of recovery, since there is no response till date to the request seeking personal hearing, the present Writ Petition has come to be filed challenging the quantification in the impugned order. Seeing as what remains is only a proper quantification of the demand based on the rival quantifications between the Department and the petitioner, it would suffice that the petitioner be directed to appear before the respondent on Friday, the 24th of June, 2022 at 10.30. am. without expecting any further notice in this regard. Let the parties deliberate upon the matter and arrive at a proper quantification of the demand, pursuant to which fresh demand of interest payable may be raised. Petition allowed. 2022 (6) TMI 963 Seeking grant of Anticipatory Bail - Fraudulent availment of Input tax credit - present applicant is alleged to be the mastermind of the entire scam - relevancy of statement under Section 70 of the GCST Act - HELD THAT:- This Court based upon the submissions of the learned Public Prosecutor more particularly relying upon confidential documents provided to this Court, is of the opinion that the present applicant, who was mastermind of the entire scam, whereby the entity in question one M/s Madhav Copper Limited had availed input tax credit to the tune of Rs.137.28 Crores. It also clearly appears from the said documents that the present applicant was also a prime beneficiary of the scam in question. In the considered opinion of this Court, when learned Co-ordinate Bench of this Court has thought it fit not to exercise its discretion in favour of a person who had almost similar or slightly lesser role than that played by the present applicant in the scam in question, then certainly this Court would not exercise its discretion in favour of the present applicant. Insofar as the submissions made by the learned Senior Advocate for the present applicant that the only material with the Investigating Officers, is the statement of co-accused, which may not be a basis, to implicate the present applicant, in the considered opinion of this Court, at this stage, the department based upon the material that had been collected by them, are inquiring/ investigating in the scam and whereas in the considered opinion of this Court, more particularly in view of the material shown to this Court by the learned Public Prosecutor, it could not be stated that the statements of the co-accused would be the only material which is available with the department. The submissions made by learned Senior Advocate for the applicant more particularly with regard to admissibility of the statement under Section 70 of the CGST Act would not be appreciated by this Court at this stage - in the considered opinion of this Court, this should not be the case where this Court would exercise discretionary jurisdiction under Section 438 of the Code of Criminal Procedure to release the present applicant on anticipatory bail - Application dismissed. Income Tax 2022 (6) TMI 969 Disallowance of deduction u/s.36(1)(viii) - Assessee claimed deduction @ 20% of profit derived from eligible business. i.e., business of providing long term finance for construction or purchase of house in India for residential purposes - assessee while working out deduction u/s.36(1)(viii) has excluded profit from non-housing portfolio as well as profit from housing loan given for period less than five years from profits of business and has arrived at profit from eligible business - HELD THAT:- As in respect of interest earned on Govt. securities (SLR), issue has been settled by the Tribunal in assessee s own case for earlier assessment year,[ 2016 (12) TMI 1879 - ITAT CHENNAI] where the Tribunal held that interest earned from Govt. securities (SLR) is eligible for deduction u/s.36(1)(viii) of the Income Tax Act, 1961. Therefore, to this extent, we find that reasons given by the Assessing Officer to disallow deduction claimed on interest earned from SLR securities is not in line with settled position as per decision of the Tribunal and thus, we reject arguments of the learned DR for the Revenue. Deduction claimed towards other income like other investments income, provision on standard asset, interest on short term deposits, investment income, profit on sale of current investments, profit on sale of fixed assets and miscellaneous income - .Although, there is merit in the arguments advanced by the learned A.R for the assessee that only other income relatable to eligible business sector needs to be excluded, while computing deduction u/s.36(1)(viii) of the Income Tax Act, 1961, but from the records, it is not clear whether the assessee has apportioned other income to eligible business and noneligible business or not. Therefore, to ascertain facts with regard to apportionment of income to eligible business and to compute deduction u/s.36(1)(viii) of the Income Tax Act, 1961, the issue needs to go back to file of the Assessing Officer. Therefore, we set aside the issue to file of the Assessing Officer for limited purpose of examining claim of the assessee that the learned CIT(A) has restricted deduction only to other income which relates to eligible business, we direct the Assessing Officer to examine claim of the assessee and while computing deduction u/s.36(1)(viii) of the Income Tax Act, 1961 by following directions given by the Tribunal in assessee s own case for the assessment year 2005-06 and decide the issue in accordance with law for the impugned assessment years. Disallowance u/s.14A r.w. Rule 8D - HELD THAT:- There is no dispute with regard to fact that the assessee has earned exempt income in the form of dividend and interest from NHB bonds which has been claimed as exempt u/s.10(34) of the Income Tax Act, 1961. It is also an admitted fact that the assessee has not made any suo motu disallowance of expenditure relatable to exempt income u/s.14A - Although, the assessee claims to have not incurred any expenditure in respect of exempt income, but when the assessee has maintained common set of books of accounts for taxable and exempt income, possibility of incurring common expenditure for both segments cannot be ruled out and therefore, we are of the considered view that there is no error in the reasons given by the Assessing Officer to invoke Rule 8D of Income Rules, 1962 to compute disallowance u/s.14A of the Income Tax Act, 1961 and thus, we reject arguments of the assessee. Interest disallowance under Rule 8D(2)(ii) - In this case, claim of the assessee is that it has sufficient own funds in excess of investments made in shares and securities which yield exempt income. But, facts are not clear and the assessee has not filed any cash flow statement to prove availability of own funds when those investments were made during the relevant assessment years. Therefore, we are of the considered view that this issue needs to go back to the file of the Assessing Officer to verify facts with regard to availability of own funds to explain investments made in shares securities which yield exempt income. Only those investments which yielded exempt income needs to be considered for working out disallowance under Rule 8D(2)(iii) - In this case, it was claim of the assessee that Assessing Officer has considered total investments, including investments which does not yield any exempt income for relevant assessment years. Further, the assessee had also filed computation explaining disallowances to be made under section 14A r.w. Rule 8D(2)(iii) of the Income Tax Rules, 1962, which is part of paper book filed by the assessee. But, fact remains that these details are not forthcoming from the orders of the lower authorities and further, the assessee has filed computation explaining manner and method of computing disallowance under Rule 8D(2)(iii) for the first time before this Tribunal. Therefore, we are of the considered view that this issue also needs to go back to file of the Assessing Officer for further verification. AO is directed to examine claim of the assessee and recompute disallowance in line with our discussions given hereinabove and restrict disallowances to the extent of exempt income, in case, disallowance computed by the Assessing Officer for any assessment year exceeds exempt income in light of decision of the Hon ble Delhi High Court in the case of Joint Investments [ 2015 (3) TMI 155 - DELHI HIGH COURT] Disallowance of employees contribution to PF ESI u/s.36(1)(v) r.w.s 43B - HELD THAT:- We find that this issue is squarely covered in favor of the assessee by the decision of the ITAT., Chennai in the case of M/s. Adyar Ananda Bhavan Sweets India Ltd [ 2021 (12) TMI 558 - ITAT CHENNAI] after considering amendment made to the provisions of Sec.36(1)(va) of the Act, by the Finance Act, 2020, held that amendment brought u/s.36(1)(va) of the Act, is applicable from assessment year 2020-21 and employees contribution to approved funds including PF ESI remitted beyond due date specified under respective Acts, but paid within due date for filing return of income u/s.139(1) of the Act cannot be disallowed u/s.36(1)(va) of the Income Tax Act, 1961. In this case, it was claim of the assessee that all payments have been made on or before due date for filing return of income for the relevant assessment years, however, no such details have been filed before us. Therefore, we are of the considered view that this issue needs to go back to the file of the Assessing Officer for verification. Hence, we set aside the issue to file of the Assessing Officer to verify dates of payment of employees contribution to ESI and in case, the assessee has remitted the amount on or before due date for filing return of income u/s.139(1) of the Act, then additions made u/s.36(1)(va) r.w.s.2(24)(x) should be deleted. 2022 (6) TMI 968 Grant of deduction u/s 54F - assessee purchased India bulls property jointly along with his wife. Therefore, the assessee was not the full owner of the property which was required by section 54F - HELD THAT:- We are inclined to hold that the issue raised by the assessee is squarely covered in favour of the assessee by the judgment of Dr. Smt. P .K Vasanthi Rangarajan [ 2012 (7) TMI 563 - MADRAS HIGH COURT ] and the assessee cannot be denied exemption under section 54F of the Act merely because he was the holder of 50% of the share jointly with Smt. Saroj Aggarwal of the property situated at Siddarth Extension Residential Scheme and the AO was not justified in denying claim of the assessee under section 54 of the Act and the first appellate authority was incorrect in upholding the action of the AO on this issue. Finally, in view of our foregoing discussion, we dismiss the action of the AO as well as impugned order pertaining to the claim of deduction under section 54F of the Act and the AO is directed to allow the same to the assessee. We find from the records that the Indiabulls property was under construction and the possession was handed over to the assessee only on 28.12.2016, till such time income from the said property was not chargeable under the head Income from house property and hence the condition stipulated in clause (b) of proviso to sec. 54F (1) disentitling claim u/s 54F is not satisfied. - Decided in favour of assessee. 2022 (6) TMI 967 Bogus purchases - estimated additions on the basis of GP rate in the past years of the assessee-company - HELD THAT:- The assessee, in the instant case, has declared a whopping turnover of Rs.1155.79 crore and also declared an income pegged in the vicinity of Rs.9.98 crore. The assessee therefore cannot be reckoned as anybody from the street. The amount of bogus purchases alleged is minuscule in the context of the voluminous business of the assessee. The documentation showing movement of goods towards impugned purchases also involves state government machinery as well as Central Excise Department. The purchases are carried out through banking channel and backed by documents showing movement and delivery thereof. Revenue has miserably failed to dislodge the sanctity of such formidable evidences in any manner except a statement of third person whose connection with the supplier has not been established. This apart, Shri Bhatia, i.e., witness has not been confronted to the assessee to unearth the truth. The assessee is entitled to cross-examine Shri Bhatia for a just and fair decision making. The Revenue has denied this valuable right and thus infringed the salutary principles despite request from the assessee before the lower authorities. Thus, the statement of Shri Bhatia is to be regarded as an extraneous to the determination of the issue. Once the statement of Shri Bhatia has excluded, the conclusion is obvious in the light of the documentary evidences towards its bona fides as claimed. Therefore, we find merit in the plea of the assessee for reversal of unjustified additions. Consequently, the order of the CIT(A) is set aside and the additions made towards bogus purchases are reversed. Appeal of assessee allowed. 2022 (6) TMI 966 Correct head of income - interest income received by the assessee from its short term fixed deposit as income under the head income from other sources OR income from business - HELD THAT:- The funds that have been deposited by the assessee are not extra funds but these are part of the loans, therefore, the netting is a right principle to be applied against the interest income. The arguments of ld AR that the amount in Flexi account are not deposited by the assessee but the amount transferred to the bank also hold water. Admittedly, when the money transferred to flexi account from current account generate certain interest income. This interest income is also liable to be set off against the interest outgoing. We are not adjudicating as to whether this interest income is to be assessed under the head income from business or income from other sources as these interest income have gone to reduce the interest burden on the assessee s loans taken and the set off is to be granted to the assessee against interest outgo. In these circumstances, the disallowance as made by the AO and confirmed by the ld CIT(A) on this issue stands deleted. AO is directed to give the benefit of set off of the interest income against the interest expenditure. Our view finds support from the decision of Hon ble Supreme Court in the case of National Co-operative Development Corporation [ 2020 (9) TMI 496 - SUPREME COURT] wherein held that income has to be determined on the principles of commercial accountancy. In the case of a business, the profits must be arrived at on ordinary commercial principles. The scheme of the I.T.Act requires the determination of real income on the basis of ordinary commercial principles of accountancy. To determine the real income , permissible expenses are required to be set off . Disallowance made by the AO under the head prior period expenses - HELD THAT:- Admittedly, as per the provisions of section 32 of the I.T.Act, 1961, whether the assessee claimed the depreciation or not, the depreciation is compulsory to be allowed to the assessee. It is also an admitted fact that the assessee has been formed on account of demerger from GRIDCO. The depreciation breakup of the earlier years relate to the depreciation allowable to the assessee in respect of demerger of GRIDCO. These figures would not have been available to the AO for granting the depreciation u/s 32 of the Act, especially when this has come to his notice only during the relevant assessment year. Similarly, it is admitted that certain expenses have been incurred during the earlier years but that does not mean that the assessee loses the benefit of such expenses. Admittedly, the stand of the AO that prior period expenses relate to earlier years cannot be considered during the relevant assessment year is a valid stand. This being so, the issue in respect of prior period expenses is restored to the file of the AO with a direction that said expenses are to be considered and allowed for such of the earlier years in respect of which the said expenses relate to. Hence, this issue stands partly allowed. 2022 (6) TMI 965 Revision u/s 263 - PCIT setting aside the assessment order on the issue of applicability of provisions of section 14A, examination of unsecured loan taken by the company,examination of TDS claim,examination of interest income earned, examination of depreciation claim on lease hold assets of the company,examination of expenses on corporate social responsibility incurred and directing the assessing officer for re-examination of the same - HELD THAT:- A perusal of above finding of the Ld. PCIT and also considering the judicial precedence referred therein, we find that neither any details were filed during the course of revisionary proceedings before the Ld. PCIT nor any details were filed before this Tribunal. There is no discussion on the alleged issues referred to show cause notice in the assessment order. All these facts indicate that the issues raised by the Ld. PCIT in the show cause notice giving rise to revisionary proceedings has not been examined by the Ld. AO and the same needs to be examined as per direction given by the Ld.PCIT in the impugned order. We, therefore, find no reason to interfere in the finding of the Ld. PCIT given in the impugned order passed u/s. 263 of the Act. Accordingly, all the grounds raised by the assessee are dismissed and revisionary proceedings u/s. 263 of the Act are held to be valid and hold that the Ld. PCIT has rightly invoked the jurisdiction and carried out the revisionary proceedings u/s. 263 - Decided against assessee. 2022 (6) TMI 961 Slump sale u/s 2(42C) - Scope of business transfer agreement - HELD THAT:- CIT (A) has minutely examined the business transfer agreement and noted that the unit was not sold as a going concern but the assets were sold as individual assets, the valuation has been done separately, the valuation of the land has been separately mentioned in the valuer s report and that the assessee has not transferred the undertaking with all the assets and liabilities. Further, all financial assets available with the assessee up to the date of transaction, were not transferred but retained by the assessee. Further, the assessee had assumed all the liabilities including the statutory liabilities till the date of transfer and therefore, held that the transfer cannot be treated as a slump sale under Section 50E of the Act. The Tribunal re-examined the facts and found that the transferee has not taken over all the loans and liabilities. - Decided against revenue. Disallowance of Bad debts - debts were written off as trade debt - HELD THAT:- The business transfer agreement was examined and it was noted that as on the date of transfer the sundry debtors were not transferred to the joint venture company and therefore held that there is no reason to reject the claim of bad debts made by the assessee. The Tribunal affirmed the said order by taking note of the terms of the agreement between the parties and also the fact that the bad debts claimed by the assessee in the year under consideration were recovered in the subsequent assessment year 2006-07 and offered for taxation which fact could not be denied by the revenue. Thus, we find that the CIT (A) and the Tribunal rightly interpreted the factual position and granted relief to the assessee and there is no reason for us to interfere with the said orders. Accordingly, substantial questions of law are answered against the revenue. Compensation received from M/s. Batenfeld, UK - AO was of the view that the entire amount of compensation had reduced the cost of the machinery and therefore, denied relief to the assessee - HELD THAT:- Tribunal after considering the findings recorded by the CIT (A) examined the settlement which was executed between the assessee and the UK Company which show that the compensation was given on account of non-achievement of performance parameters. After noting the relevant clauses in the settlement agreement, the Tribunal held that the condition specified in Section 143 (1) of the Act for directing the actual cost from value of the machines were applicable to the compensation amount paid to the assessee. We find there is no error in the approach of the Tribunal or that of the CIT (A) for us to interfere. Accordingly, substantial questions of law are answered against the revenue. Belated payment of the employee s contribution to Provident Fund Organisation - HELD THAT:- Tribunal granted relief to the assessee by following a decision of this Court in Vijay Shree Ltd [ 2011 (9) TMI 30 - CALCUTTA HIGH COURT ] - However, we note that other appeals have been admitted on the said issue and are pending before this Court. In any event a need may not arise to decide the said issue because the tax effect on the said issue is only Rs. 50,289/- and therefore, the revenue cannot pursue the appeal on the said issue on the ground of low tax effect. Therefore, the substantial question of law No. 9 is left open as a tax effect on the said issue is only Rs. 50,289/-. - Decided against revenue. 2022 (6) TMI 960 Reopening of assessment u/s 147 - Allowability of Expenditure on account of freebies incurred in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2022 is not admissible under Section 37(1) - HELD THAT:- Petitioner had truly and fully disclosed all material facts necessary for the purpose of assessment. They were carefully scrutinized and figures of income as well as deduction were carefully reworked by the Assessing Officer at the time of original assessment. In fact, in the reasons for reopening, there is not even a whisper as to what was not disclosed. This is not a case where the assessment is sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of assessee to disclose truly and fully all material facts that were necessary for computation of income but this is a case wherein the assessment sought to be reopened on account of change of opinion of the Assessing Officer about the manner of computation of income. The same is not permissible, in view of proviso to Section 147. - Decided in favour of assessee. 2022 (6) TMI 959 Income accrued in India - PE in India - as per revenue as detected at the time of survey u/s. 133A wherein the Assessee has carried out all the business activities from the Liaison office - Whether ITAT is correct in holding that the Assessee s case does not constitute the PE as per Article 5(2)(c) of Indo-Mauritius DTAA? - HELD THAT:- The argument advanced by Appellant based on Article 5(2)(c) of the Treaty overlooks Clause (3) of Article 5, wherein it is stated that notwithstanding Clause (2), the term permanent establishment will not include certain categories. Article 5(3)(e) excludes certain categories. We have gone through the order of the Tribunal. Tribunal has elaborately discussed the evidence produced through documents impounded during the survey. The Tribunal noted the documents exchanged by the persons co-ordinating in the activities carried out at the site and the list of messages, including fax and radio messages. Tribunal referred to the employees at this office and examined the roles performed by each of the employees. The Tribunal found that the role of employee Mr.Tarkar was only logistic and coordination, whereas Mr.Rodrigues looked after arranging meetings. Two other employees were only looking after communications. Tribunal, having considered this material, recorded a finding that none of the documents showed any business done from the office. The documents such as the departmental paper-book and daily progress report, which were examined, showed that the work provided backend operations. It was not established by the Appellant- Revenue that any substantial business has been done from the office. After considering these documents, Tribunal found that the concerned place of business was only for the supply of information having preparatory or auxiliary character. Accordingly, the Tribunal concluded that the same would fall under Article (5)(3)(e)(ii). This finding of fact, recorded by the Tribunal after due consideration of the material on record, cannot be considered as perverse. The view taken by the Tribunal is a possible view, and that being the position, the question of law (a) sought to be presented as a substantial question of law is a factual question, and the Commissioner (Appeals) and the Tribunal having recorded concurrent findings on the factual issue, we hold that it does not arise for consideration. 2022 (6) TMI 958 Revision u/s 263 - As per CIT AO failed to enquire on the applicability of provisions of section 56(2)(vii)(b) (ii) - Whether Tribunal was justified in holding that there was no lack of enquiry by the Assessing Officer but the PCIT had considered the order erroneous and prejudicial to the interest of revenue without assigning any reasons? - HELD THAT:- The view taken by the learned ITAT is based on logical findings. While rendering the judgment, the learned ITAT has relied upon various judgments of different High Courts and considered the provisions of 56(2)(vii) pre-amendment and post-amendment. Learned ITAT has held that law contained in Section 56(2)(vii)(b) as stood on the date of allotment letter (on 11.11.2009), falling in assessment year 2010-11, did not contemplate the situation of a receipt of property by the buyer with inadequate construction. The learned ITAT has held categorically that the amended provisions of Section 56(2)(vii)(b)(ii) could not be applied and they have relied upon the judgment of Bajranghlal Naredi Vs. ITO [ 2020 (1) TMI 1359 - ITAT, RANCHI] . It is held time and again by the Apex Court qua the admission of appeal on substantial questions of law, more specifically in the case of Commissioner of Customs-I Vs. Aasu Exim Pvt. Ltd. [ 2017 (12) TMI 107 - SUPREME COURT] and Steel Authority of India Ltd. [ 2017 (4) TMI 881 - SUPREME COURT] if the learned ITAT, on consideration of material and relevant facts, had arrived at the conclusion which is a possible conclusion, the same must be allowed to rest even, if this court is inclined to take another view of the matter. In the case at hand, logical reasonings was given by the learned ITAT and there is no gross violation of the procedure or principles of natural justice occasioning a failure of justice. - Decided against revenue. 2022 (6) TMI 957 Reopening of assessment u/s 147 - Change of opinion - Deduction under section 35 (1)(ii) to an extent of 175% of the donation - HELD THAT:- Indisputable fact that the assessment in the case of M/s. Jindal Aluminium Limited was completed even before the completion of the survey proceedings [though the assessment proceedings in the other two writ petitions are completed after the aforesaid survey] and the nature of the information shared by the petitioners Account Officer, this Court must opine that the threshold bar for initiation of the reassessment proceedings is satisfied. This Court must conclude, at this stage, that the AO s subjective prima facie opinion, though is based on the records made available during the assessment proceedings, is because of further enquiry into the affairs of M/s. Herbicure, and this is not a case of change of opinion . As regards the contention that the petitioners, whose only obligation in law once approval is granted under Section 35[1][ii] of the I-T Act is to file a copy of the approval and the details of the donations made, and if the approval is later withdrawn because of certain allegations against the entity which has granted approval, even if such approval is withdrawn retrospectively, the concluded assessment proceedings cannot be reopened, it would suffice for this Court to opine that this will have to be examined as part of the reassessment proceedings based on the further material that would be available on record by the petitioner and would not be a reason for interference at this threshold. 2022 (6) TMI 956 Reopening of assessment u/s 147 - absence of mandatory service of notice - HELD THAT:- There is no proof of service of notice u/s 148 of the Act by the AO to the assessee. The order sheet noting recorded on 21.03.2016 only suggest that notice u/s 148 was issued with the prior approval of the Ld. Pr. CIT, Ghaziabad. Therefore, the submissions of the assessee that notice u/s 148 was not served on the assessee could not be controverted with evidences by the Revenue. In the case of RK Upadhyaya Vs. Shanabhai P. Patel [ 1987 (4) TMI 5 - SUPREME COURT] held that section 148(1) provides for service of notice as a condition precedent to make the assessment order. The Hon ble Supreme Court held that once a notice is issued within the period of limitation jurisdiction becomes vested in the Assessing Officer to proceed to make reassessment. Further, it was held that the mandate of section 148(1) is that reassessment shall not be made until there has been service of notice. Alsi in the case of CIT Vs. Chetan Gupta [ 2015 (9) TMI 756 - DELHI HIGH COURT] wherein the Hon ble High Court held that where notice u/s 148 was not served on the assessee in accordance with law the reassessment made consequent thereto was without jurisdiction and liable to be quashed. In the case on hand as the Revenue could not prove the service of notice u/s 148 on the assessee in accordance with law the re-assessment made u/s 147 read with section 144 pursuant to such notice is void ab initio and bad in law. Hence, the reassessment order made u/s 144 read with section 147 is quashed. - Decided in favour of assessee. 2022 (6) TMI 955 Exemption u/s 10B - allocation of all expenses of non-EOU unit to EOU unit, whereby the exemption claim under section 10B of the Act was reduced - HELD THAT:- In the present case, it is not in dispute that assessee is having manufacturing units in respect of agrochemicals as well as Pharma products, which are EOU as well as non-EOU units. As is evident from the copy of assessment order for assessment year 2002 03, forming part of the paper book, the incinerator plant at Dombivali was set up in financial year 2001 02. Further, from the statement of profit and loss account for the year ending 31/03/2002, it is also evident that services were availed by Non-EOU Mahad unit and EOU Taloja unit from the Dombivali unit in respect of which internal unit transfers were made and income was earned by the Dombivali unit. There is no examination by the Assessing Officer whether the EOUs were utilising the services of the other units or of Maharashtra Pollution Control Board for incineration process during the period Dombivali unit was non-operational. Further, if that be the case then allocation of expenditure of Dombivali unit to EOU, without availing any service, will result in additional allocation of expenditure to the EOU of the assessee. We are of the considered view that all the aspects in respect of this issue have not been examined by any of the lower authorities and in such a scenario, the impugned allocation of expenditure of Dombivali unit only to the Taloja EOU of the assessee, while computing deduction under section 10B of the Act, is set aside. We, further, deem it appropriate to remand this issue to the file of Assessing Officer for de novo adjudication after examination of all the aspects as mentioned above. Allocation of R and D expenditure to EOU units - As relying on own case [ 2021 (3) TMI 1371 - ITAT MUMBAI] we hold that there is no need to allocate expenses to EOU units and that assessee would be eligible for deduction u/s 35(1)(iv)and the same need not be allocated to EOU units. Setting off of loss of non-EOU against income from EOU - As relying on own business losses of a non-eligible unit, whose income is not eligible for deduction u/s 10A of the Act, cannot be set off against the profits of the undertaking eligible for deduction u/s 10A for the purpose of determining the allowable deduction u/s 10A 2022 (6) TMI 954 Reopening of assessment u/s 147 - validity of sanction as accorded by PCIT - Addition u/s 68 - HELD THAT:- Approval to reopen the assessment in the present case and issue notice under Section148 of the Act to the assessee was accorded by the learned Principal Commissioner of Income-tax by recording his satisfaction in one word Yes and even the learned DR has not disputed this position. While seeking approval to reopen the assessment and issue notice under Section 148 of the Act, the Assessing Officer is required to submit the reasons recorded by him to the competent authority and merely because such reasons recorded by the Assessing Officer are available before the competent authority while according the approval, it cannot be said that the application of mind by the competent authority is presumed and there is no requirement for him to record the proper satisfaction and it is sufficient for him to say only Yes . In the case of United Electrical Co. Pvt. Ltd [ 2002 (10) TMI 86 - DELHI HIGH COURT] relied upon by the learned Counsel for the assessee, the Hon ble Delhi High Court held that the requirement of approval by the higher authority to reopen the assessment and issue notice under Section 148 of the Act by the Assessing Officer is a safeguard to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment. It was held that the Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer and the said power cannot be exercised casually and in a routine manner. In the said case, the Commissioner had simply mentioned approved while according sanction to the Assessing Officer to reopen the assessment and issue notice under Section 148 of the Act and the same was held to be without any application of mind - Decided in favour of assessee. 2022 (6) TMI 953 Income accrued in India - taxation of interest income - assessee is a company incorporated and fiscally domiciled in the Republic of Japan - streams of income from its India operations - income from its permanent establishment in India - HELD THAT:- Taxability under Article 7 or Article 14 is a sine qua non for triggering the exclusion clause under Article 11(6). There is no finding to, or even indication of, that effect. Unless the AO gives that finding, excluding interest income from gross basis taxation under Article 11(6) cannot come into play. In any event, triggering of exclusion under Article 11(6) does not, by itself, result in taxation of interest income at the normal rate of tax-unless the interest income is taxable under Article 7(1) or under Article 14(1). AO has simply proceeded on the basis that since the assessee has a permanent establishment in India, it can be said to be connected with such a PE, and, accordingly, taxation at the normal rate at which business profits are taxed in the hands of the foreign companies is permissible. That approach is inherently flawed. Even if the interest income is connected with the assessee company s permanent establishment, it can only be brought to tax in India, under Article 7, when the interest income is directly or indirectly attributable to the permanent establishment. It is not even the case of the AO that the permanent establishment played any role in the supplier credit, which is the debt claim leading to the impugned interest income, being extended to the Indian customers who have paid interest on the suppliers credit. As such, no part of interest income, by any stretch of logic, can be said to be directly or indirectly attributable to the Indian permanent establishment of the assessee company. As alleged that the Indian parties from whom the assessee has received interest income are also the clients of the assessee in India with whom contracts were executed through the Permanent Establishment in India and the assessee has received fees for technical services in a previous year from them, but then the performance of contracts through the PE or receipt of fees for technical services from such clients is irrelevant as long as the interest income is not demonstrated to be attributable to the permanent establishment. Such an attribution cannot be inferred or assumed; there has to be cogent material to establish the fact that the income in question, i.e. interest income in this case, is attributable to the permanent establishment. There is not even a whisper of a suggestion to that effect. For interplay of Article 11(6) and Article 7(1), in our considered view, the expression effectively connected with such permanent establishment must mean a situation in which the interest income in question can be said to be directly or indirectly attributable to the permanent establishment and can be brought to tax under article 7(1) as such. That is not even the case of the Assessing Officer before us. - Decided in favour of assessee. 2022 (6) TMI 952 Levy of late filing fees u/s 234E - intimation u/s 200A for a period prior to 01-06-2015 - assessee submitted that there was a delay in payment of TDS by the assessee as they were facing severe cash problems - as argued Department ought to have appreciated that levy of fees u/s 234E of the Act was not permissible adjustment as contemplated u/s 200A of the Act for the period prior to 01-06-2015 - HELD THAT:- D.R fairly conceded that in all these cases the late fee has been charged u/s 234E of the Act prior to 01-06- 2015. We have also examined the assessment years involved and the quarterly payment details of TDS and corresponding filing of TDS returns and we are convinced that the action taken by the subordinate authorities is prior to 01-06-2015 - See MARSHALL BREEDERS PVT. LTD. VERSUS THE ACIT (CPC-TDS) , GHAZIABAD [ 2020 (7) TMI 503 - ITAT PUNE] Thus the legal parameters are absolutely crystal clear that prior to 01-06-2015 there was no enabling provision in sec. 200A of the Act for raising a demand in respect of levy of fees u/s 234E of the Act. Therefore, we hold that intimation u/s 200A of the Act as confirmed by the ld. CIT(A) so far as the levy of fee u/s 234E of the Act is therefore set aside and the fees levied are deleted. The grounds raised by the assessee are allowed. 2022 (6) TMI 951 Exemption u/s 11 - Charitable activity u/s 2(15) - whether assessee society is a charitable organization despite the fact that the assessee society was doing business within the meaning of amended provisions of section 2(15)? - HELD THAT:- CIT(A) elaborately noted all the submissions of the assessee. Thereafter, he referred to the earlier order of the Ld. CIT(A) in assessee s own case and order of the ITAT [ 2016 (4) TMI 1400 - ITAT DELHI] Hon ble Delhi High Court [ 2011 (10) TMI 173 - DELHI HIGH COURT] in assessee s own case. The issue has been decided in assessee s favour. 2022 (6) TMI 950 Penalty u/s 271(1)(c) - bogus short-term capital loss - revised computation filed post assessment proceedings seeking short-term capital loss may be treated as a speculative loss - HELD THAT:- CIT(Appeals) has rightly confirmed the penalty imposed by the Ld. Assessing Officer. The assessee had made bogus claim of short-term capital loss in the return of income. When, after due investigation, the same was detected by the Ld. Assessing Officer during the course of assessment proceedings, the assessee filed revised computation and requested that the short-term capital loss may be treated as a speculative loss . No reason for this revised stand/position was given by the assessee Assessing Officer confirmed additions in respect of this bogus short-term capital loss and the assessee did not file appeal against the above addition in quantum proceedings. The Ld. CIT(Appeals) has correctly pointed out that it is only when the incorrect claim of bogus short term capital loss was detected by the Ld. Assessing Officer that the assessee offered to pay tax in respect of the same. Accordingly, the Ld. CIT(Appeals) confirmed the penalty u/s 271(1)(c) correctly - Decided against assessee. 2022 (6) TMI 949 Recognition of income - scope of AS -9 - addition being the amount already realized and shown as income in the FY 2013-14 as per arbitration award - HELD THAT:- As noted that it is not the case that the assessee had made a fair, honest estimate of it s loss, so that it is only the difference, plus or minus, that would require to be claimed set-off of or offered as income on award of compensation. That is, the assessee invokes AS-9 without following the accounting precepts, making a reasonable accounting estimate in the light of the facts of the case and the law in the matter. The matter thus reduces to one of reasonableness subject to the terms of the agreement, being the guiding criteria. It is only where so that it can be said that, applying AS-9, any amount beyond this sum cannot, despite its claim, be regarded as arisen to the assessee, being uncertain as to its realisation, de hors which it becomes a bald claim. We have on facts found that to be the grievance or cause of objection of the buyer-company. Though it may appear that the decision by the first appellate authority, which stands confirmed by us, has been due to the availability of the award, it is not so. The award only provides a ready figure of a reasonable compensation and, thus, adopted as a surrogate measure therefor, which would otherwise need to be worked out, and toward which we have suggested a formula based on PSA itself. The loss awarded by the Commission is on 109.74 MU (million units), which were agreed to be sold at Rs. 5/5.50 per unit. The profit (loss) as per the P L A/c, assuming the sale of excess power at that rate, as against that obtaining, would easily yield the extent of the loss suffered by the assessee, which, where in excess of Rs. 2 per kwh (Rs. 21.89 cr.), is to be capped at that sum. The assessee made an exorbitant claim, which led to its non-acceptance. It is for this reason that we have found the facts of the case and, therefore, the issue at hand, as squarely covered by Chunilal V. Mehta Sons P. Ltd. ( 1971 (8) TMI 4 - SUPREME COURT] with reference to which, as indeed the order of MPERC read with PSA, the parties were required to address their arguments during hearing, though choose to do so de hors the same. There is no mention of the nature and extent of the dispute in FGP Ltd. [ 2008 (6) TMI 343 - BOMBAY HIGH COURT ] in which case the Hon ble Court did not have the benefit of the arbitral award, available in the instant case even before the AO. The matter of accrual, pertain as it does to the accrual of a right to income, is necessarily to be defined in terms of money value, de hors which it carries no meaning. It is for example nobody s case that there is no accrual of a right to the assessee to any sum on the non-scheduling of agreed power by LANCO, and which, to the extent it does, is only for the current year. We, accordingly, find no reason for any interference with the order of the ld. CIT(A), who has, following Chunilal V. Mehta Sons P. Ltd. [ 1971 (8) TMI 4 - SUPREME COURT] unfortunately not relied upon by either party before us, held the accrual of income only at Rs. 14.06 cr. and, further, for AY 2011-12. We decide accordingly. Provision for terminal benefits to it s employees disallowed for want of production of payment vouchers - suo moto disallowance made by assessee - HELD THAT:- We know, some part of the balance provision for the current year, i.e., Rs. 20.60 lacs (Rs.130.89 lacs Rs. 110.29 lacs) may have been paid by the due date of filing of the return for current year u/s. 139(1), in which case the same also qualifies for deduction u/s. 37(1) r/w s. 43B. The order of the ld. CIT(A), who has allowed the assessee a relief of Rs. 21.47 lacs is, thus, on the face of it, incorrect. He, in doing so, allows the assessee credit for Rs. 130 lacs paid on 31/03/2011, even as he specifically notes that the assessee did not file any confirmation for payment of Rs.130 cr. from the M.P. Terminal Benefit Trust during appellate proceedings. Rather, his order is wholly inconsistent with and without regard to that by the AO, the basis of disallowance by whom is the non-production of payment vouchers by the assessee before him, which finding or infirmity therefore survives the impugned order. Suo motu disallowance by the assessee - As the payment/s made against each provision, as also if the same is to an approved fund. It is only when armed with this information, which he is at liberty to verify, that the AO could allow the assessee s claim in respect of payment of Rs. 240.29 lacs (Rs. 130 cr. + Rs. 110.29 cr.) made during the current year, as indeed that qua the current year provision made in the following year, i.e., up to the due date of filing the return of income u/s. 139(1). And which we, vacating the finding/s by the ld. CIT(A), subject to his satisfaction, direct the AO to and, further, to record his dissatisfaction, if any, per a speaking order, to the extent the said deduction is not allowed by him. Assessee s appeal is partly allowed 2022 (6) TMI 948 Revision u/s 263 by CIT - whether there is complete lack of enquiry by the ld. AO while framing assessment? - HELD THAT:- PCIT referred to two transactions, firstly, transfer of Rs. 11,00,000/- to the assessee s account from M/s. Patra Bastraiaya. Another transaction was of Rs. 27,00,000/- reflecting in the assessee s bank account received from M/s. Santosh Agency on 14.06.2010. Source and nature of transaction of Rs. 27,00,000/- with M/s. Santosh Agency remained unverified. No verification was done to this effect in the course of assessment. Also the connection between the transaction of Rs. 11,00,000/- with M/s. Patra Bastraiaya and the transaction with M/s. Santosh Agency remained unexamined. We notice that all the above observations made by ld. PCIT in the impugned order were alleged not to have been verified by the ld. AO. The submissions made by the assessee before ld. PCIT appearing in the impugned order are not sufficient to explain the said transactions. No detailed discussion is made in the assessment order also. No paper book has been filed by the assessee to demonstrate that whether ld. AO raised necessary queries/conducted enquiry on the issues referred herein above and whether the assessee had furnished a detailed reply including relevant documents to satisfy the AO. We find no reason to interfere in the finding of ld. PCIT holding the assessment order dated 07.12.2018 u/s 147 r.w.s. 143(3) of the Act as erroneous and prejudicial to the interests of the Revenue and setting aside the same for afresh adjudication. Thus, since a valid jurisdiction has been invoked by ld. PCIT, we confirm the finding in the impugned order and dismiss all the grounds raised by the assessee in the instant appeal. Appeal of the assessee is dismissed. 2022 (6) TMI 947 Disallowances of expenses - ad-hoc disallowance - HELD THAT:- We note that the assessee is LLP and is engaged in the construction business. A perusal of profit loss account shows that during the year construction expenses including other institutional expenses incurred for construction of flat has been carried forward as a closing work-in-progress. Administrative expenses and depreciation has only been claimed in the profit loss account and the same has been claimed against the other income. Out of all the disallowances made by the ld. AO some of them confirmed by CIT(A) are those expenses which have not been claimed as an expenditure during the year. AO in the assessment order has observed that the assessee has furnished required details but without pointing any specific error or discrepancy in the expenses so claimed by the assessee, had made these disallowances which are prima facie ad-hoc in nature. Disallowance of motor car expenses - HELD THAT:- Assessee has only claimed motor car expenses at Rs.72,250/- during the year in the profit loss account and depreciation of Rs. 2,00,093/- on the motor car. Revenue has failed to bring any evidence to show that this motor car was not used for business purposes. Giving a general remark that it was used by the partner will not be sufficient to hold the disallowance. However, considering the facts and circumstances of the case and being fair to both the parties, we confirm disallowance of motor car expenses only to the extent of Rs. 15,000/- and delete the remaining disallowance confirmed by the ld. CIT(A). Hence, this ground is partly allowed. Disallowance at the rate of 10% on the telephone expenses, conveyance charges and general expenses - HELD THAT:- Firstly, the actual expenditure incurred during the year on these three heads is at Rs. 3,94,966/- and out of this sum Rs. 2,84,147/- was not claimed in the profit loss account. The balance amount claimed as an expenditure during the year is only Rs. 1,10,819/- and, therefore, 10% of it i.e. 11,082/- is confirmed and the remaining disallowance is deleted. Hence, ground no. 3 is partly allowed. Disallowance on account of interest on service tax, TDS, penalty for P. tax - HELD THAT:- On examining the facts of the case, we find that the actual amount in these heads is only 87,981/-. Out of Rs. 87,981/- amount of Rs. 67,021/- already stands disallowed in the computation of income suo-moto by the assessee and the remaining amount of Rs. 20,960/- has not been claimed as an expenditure during the year as it has been transferred to construction work-in-progress. Therefore, under the given facts and circumstances the disallowance of Rs. 99,593/- was uncalled for and the said disallowance is deleted. Hence, ground no. 4 is allowed. Disallowance being 10% of business promotion expenses confirmed by ld. CIT(A) - HELD THAT:- On going through the records, we find that firstly, the alleged business promotion expense has not been claimed by the assessee in the profit loss account but has been shown in the construction work-in-progress account and secondly, the correct amount of the expenses is Rs. 1,63,272/-. Since, the business promotion expenditure has not been claimed in the profit loss account, there remains no scope to make any disallowance of the expenditure. Accordingly, we reverse the finding of the ld. CIT(A) and delete the ad-hoc disallowance of Rs. 23,935/- made on account of business promotion expenses. Computation of income by considering the returned loss which was not done in the assessment order - HELD THAT:- Through this ground the assessee has stated that in the computation of income as well as ITR filed for the year under appeal, loss of Rs. 1,32,760/- has been shown. Return of income is filed before due date of filing return of income u/s 139(1) of the Act. However, ld. AO has shown NIL income in the assessment order while computing total income of the assessee. We find merit in the contention of the ld. Counsel for the assessee and on observing that loss has been declared in the return of income filed on 22.09.2014, the same ought to have been captured in the assessment order. We, thus, direct the Revenue authority to make necessary rectification and income from business as per return should be taken as loss. Thus, ground of the assessee is allowed. 2022 (6) TMI 946 Valuation of property - cost of construction of the property which was let out to Incor Hospitals - unexplained investment U/s. 69B - matter referred to DVO - CIT (A) granted relief towards construction above Terrace B and towards steel fire escape - HELD THAT:- AR demonstrated before us from the DVO s report dated 29/06/2017 that the construction above Block-B Terrace and steel fire escape is included in the valuation report submitted by the DVO. AR pleaded that this was also demonstrated before the Ld. CIT(A) and hence the Ld. CIT(A) granted relief on this issue. We also note DVO has considered the valuation in valuing the construction of the property. AR pointed that these expenses were incurred by the lessee and hence adding it to the cost of construction of the assessee is not valid. We find from the valuation report of the DVO that this cost of construction has been included in the valuation report and being considered as cost of construction of the assessee. We therefore find merit in the arguments of the Ld. AR and from the materials placed before us, we find that there is no infirmity in the order of the Ld. CIT(A) on this ground and hence no interference is required. Addition to cost of lifts - As submitted by the Ld. AR the copies of bills have been made available to us and before the Ld. CIT(A). CIT(A) has therefore rightly considered the cost of invoices given by Kone Elevator India Private Limited for Rs. 16,05,000/- for 13 passenger capacity and Rs. 10,82,000/- for 8 passenger capacity. The cost of lifts is evidenced by the invoices issued by the supplier which was also produced before us. Therefore, on going through these documents and the facts involved in this issue, we find no infirmity in the order of the Ld. CIT(A) and hence no interference is required on this ground. Cost of transformers estimated by the DVO - We find from the paper book page No. 66 that the invoice from Esennar Transformers Pvt Limited is placed before us where the cost of transformer is only Rs. 5,14,609/- and the Ld. CIT(A) has rightly considered the same in his order. We therefore find no infirmity in the order of the Ld. CIT(A) and hence no interference is required on this ground. Allowing of rebate of 25% (15% towards difference between CPWD rates and local rates and 10% towards self supervision) as against 7.5% granted by the DVO - We find merit in the argument of the Ld. AR that CPWD rates are generally higher than the State PWD rates which was not at all considered by the DVO. The DVO has erred in adopting the CPWD rates in lieu of local State PWD rates in the valuation of the property. CIT(A) has referred to the Hon ble ITAT, Vizag Bench decision in many cases cited by the assessee before him and allowed the rebate of 15% towards the difference between the CPWD rates and State PWD rate and also allowed the relief of 10% towards self-supervision from the cost estimated by the DVO. We find that the Ld. CIT(A) has rightly observed the difference between the CPWD rates and local State PWD rates and we find that the rates adopted by Ld.CIT(A) is reasonable and we are of the considered view that there is no infirmity in the order of the Ld.CIT(A) and no interference is required. Cost of construction of the property subsequent to handing over of possession to the lessee - DR could not demonstrate that the capital work in progress shown in the books of accounts pertains to any other property. We find force in the argument of the Ld. AR and we are of the considered view that the construction activities as disclosed in the books of accounts for the impugned property after the submission of documents from GVMC on 2/4/2013 deserves consideration towards cost of construction. The Ld. CIT(A) has rightly considered the same and therefore we find no infirmity in the order of the Ld. CIT(A) and no interference is required on this ground. DVO has not submitted the report within six months as specified U/s. 142A of the Act and therefore it is not valid - Ld. DR countered that section 142A(6) came into force only from 1/10/2014 and the case of the assessee pertains to AY 2014-15 and hence no limitation applies in the instant case. We agree with the contentions of the Ld. DR that since the amendment came into force from 1/10/2014, the limitation specified therein shall be applicable for the AY 2015-16 and shall not be applicable for the AY 2014-15. 2022 (6) TMI 945 Addition u/s 41 - cessation of liability towards unsecured loans availed from financial institutions in terms of order of the BIFR - assessee is a sick company under Sick Industrial Companies (Special Provisions) Act - assessee argued that remission of capital liability by virtue of scheme sanctioned by the BIFR cannot be brought to tax u/s.41(1) of the Income Tax Act, 1961, because the BIFR has granted immunity from taxation by specific direction in their order - HELD THAT:- As from the order of the BIFR, it is very clear that reliefs and concessions allowed towards repayment of liability cannot be brought to tax u/s.41(1) of the Income Tax Act, 1961. Further, as per the provisions of section 32 of Sick Industrial Companies Act, 1985, order of the BIFR is binding on the Assessing Officer, because once there is direction, it overrides all other provisions, including provisions of Income Tax Act, 1961. In this case, there is a specific direction from the BIFR to the income-tax department to allow immunity from the provisions of section 41(1) and other relevant provisions of the Income Tax Act, 1961. Therefore, we are of the considered view that once there is immunity from the provisions of section 41(1) of the Income Tax Act, 1961, whatever amount credited to profit loss account on account of remission / cessation of liability, then same cannot be brought to tax u/s.41(1) of the Income Tax Act, 1961. This view is fortified by the decision of M/s.Kriloskar Oil Engines Ltd. [ 2012 (7) TMI 736 - ITAT, PUNE] where the Tribunal, after considering relevant facts has held that directions given by the BIFR is binding on the Assessing Officer and thus, remission / cessation of liability cannot be brought to tax u/s.41(1) of the Income Tax Act, 1961. Amount credited to profit loss account towards remission of liability by the order of BIFR is capital liability and thus, remission of such liability cannot be brought to tax u/s.41(1) of the Income Tax Act, 1961. This legal principle is supported by the decision of CIT Vs Mahindra Mahindra Ltd [ 2018 (5) TMI 358 - SUPREME COURT] where it has been considered an identical issue and held that waiver of loan for acquiring capital assets cannot be treated as remission of trading liability and brought to tax u/s.41(1) of the Income Tax Act, 1961 or u/s.28(iv) of the Income Tax Act, 1961. Therefore, we are of the considered view that the Assessing Officer has erred in assessing cessation of liability towards unsecured loans availed from financial institutions in terms of order of the BIFR u/s.41(1) of the Income Tax Act, 1961. Hence, we direct the Assessing Officer to delete additions made towards remission/ cessation of liability u/s.41(1) Liability pertains to advance from customers and loan from others - liabilities mentioned in Table 2 of the assessment order, except fixed deposits are capital advances. However, facts with regard to nature of advances and purpose of taking such advances are not clear from details filed by the assessee, Although, the assessee has filed MoU with M/s. Pioneer Embroideries Ltd., but based on said MoU alone, it cannot be decided that liabilities are in the nature of capital liability, which is outside scope of section 41(1) -Therefore, we are of the considered view that remission of liability to the extent of advance received from customers and loan from others needs verification from the Assessing Officer. Therefore, we set aside this aspect to the file of the Assessing Officer and direct the Assessing Officer to re-examine the issue in light of various details filed by the assessee and also obtain confirmation from parties regarding nature of liability. In case, parties confirm fact that advances are for sale of assets, then the Assessing Officer is directed to delete additions made towards remission/cessation of liability - Appeal filed by the assessee is treated as allowed for statistical purposes. 2022 (6) TMI 944 Addition made in respect of bonus to employees unpaid - Before the ld. CIT(A) the assessee had submitted that the deduction in respect of payment of bonus should have been allowed as it was paid before the filing of the return - HELD THAT:- We find that there is no documentary evidence available on record in respect of the claim of payment made by the assessee of Rs.5,20,300/- on 27.09.2015 even though it has been claimed to have been so paid. In the given set of facts, we find it proper to remit this matter to the file of Ld. AO for the limited purpose of verification of fact averted by the assessee. We direct the Ld. AO to consider the claim of the assessee if the verification reveals that the amount has been paid by the assessee before filing of return for which no addition is called for. However, if the verification reveals otherwise, the addition shall remain sustained. Accordingly, this ground of appeal of the assessee is allowed for statistical purposes. Disallowance in respect of expenditure incurred by the assessee for purchase of store items like knives, wrenches etc. which costs less than Rs. 5000/- per piece - HELD THAT:- The expenditure should be laid out or expended wholly or exclusively for the purpose of the business. The expression wholly emphasizes the quantification of the expenditure, whereas expression exclusively provides that such expenditure should be only for the purpose of the business. The objection raised by the ld. Assessing Officer is that how these expenditures are related to the business of the assessee. To our mind, ld. Assessing Officer failed to appreciate the nature of the business of the assessee which is cultivation and manufacturing of tea. Also, the ld. CIT(A) has given stereotyped findings by stating the observation of the ld. AO for sustaining the addition, without dealing with the matter on merit. These expenses incurred by the assessee towards general expenses for garden are not covered as described in section 30 to 36, these are not capital in nature or personal expenses of the assessee, it being a widely held company. Ld. Sr. DR placed reliance on orders of authorities below. There is nothing brought on record to suggest that these are not wholly and exclusively for the purpose of the business of the assessee. We, therefore, direct to delete the disallowance made in this respect. Accordingly, this ground of appeal of assessee is allowed. Ad-hoc disallowance from the miscellaneous/general expenses claimed by the assessee by applying an estimate rate of 20% - HELD THAT:- These expenditures are general expenses incurred in respect of garden both at the work site and the Kolkata office of the assessee. Ld. Counsel further pointed out that visits to the tea garden of the assessee included officers of various inspection agencies and customers of the assessee. Accordingly, there is no justification for an ad hoc and estimated disallowance by adopting a rate of 20% of the expenses so claimed. These are also covered by the provisions of section 37(1) of the Act. Ld. Sr. DR placed reliance on orders of authorities below. We note that the assessee is in the business of cultivation and manufacturing of tea and these expenses are in relation to business activities of the assessee. The conditions stipulated in section 37(1) of the Act as noted in our finding given for ground no. 2 above, are also applicable in respect of this ground and in the given set of facts, we do not find any reason to sustain the addition. We, thus, direct to delete the addition - This ground of appeal of assessee is allowed. Addition on the basis of entries reflected in Form 26AS - Interest receipts as different shown in P L Account - HELD THAT:- We find that the explanation given by the Ld. Counsel of the assessee relating to the ledger account of Elder Pharmaceuticals Ltd. for FY 2012-13 and thereafter needs to be verified by the ld. AO to ascertain the correct fact as to accounting treatment given in respect of interest income. We thus, set aside this issue before the Ld. AO for a limited purpose to make proper examination and verification of the claim of the assessee and decide it in accordance with law. Needless to say that the assessee be given reasonable opportunity of being heard and make any further submission in this respect. Accordingly, this ground of appeal by the assessee is allowed for statistical purpose. Addition u/s. 14A - AO noted that assessee has earned dividend Income - HELD THAT:- CIT-A directed the AO to recalculate the disallowance by taking investments which yielded dividend income. Ld. CIT(A) further directed the AO to verify and recompute the disallowance u/s. 14A read with Rule 8D and hence, allowed this ground of appeal before him for statistical purpose. Before us, by referring to the provisions of section 250 of the Act, Ld. Counsel submitted that Ld. CIT(A) ought to have deleted the addition made by the AO as there is no power available to the Ld. CIT(A) to remand the matter to the file of AO. We find that the claim of the assessee that its own funds are far in excess of the investments made and thus we direct the Ld. AO to verify the claim of the assessee and recompute the disallowance u/s. 14A read with Rule 8D in terms of the judicial precedents relied upon by the assessee supra. Accordingly, this ground of appeal of assessee is allowed for statistical purpose. Disallowance towards expenditure in cash in excess of Rs.20,000/- as prescribed u/s. 40A(3) - HELD THAT:- As considering the facts on record and explanation furnished by the ld. Counsel which requires verification of the records, we find it proper to set aside this issue to the file of ld. AO for limited purpose of verification and examination of documents furnished by the assessee and decide the matter in terms of law. Accordingly, this ground of appeal is allowed for statistical purpose. 2022 (6) TMI 943 Disallowance in respect of partner s remuneration and interest on partner s capital - HELD THAT:- We find that the sole reason for disallowance of the partner s remuneration as well as interest on partner s capital is on account of non furnishing of the partnership deed, during the course of assessment proceedings, at the same time, it is the matter of record that the assessee has duly filed the copy of the partnership deed, with the return of income for A.Y. 2006 07 and which is available as part of the assessment records with the Assessing Officer. Given the statement of the ld. AR at the Bar that there has been no change in the constitution or contents of the partnership deed and taking into account, the entirety of facts and circumstances of the case, we hereby direct the deletion of partner s remuneration as well as interest on the partner s capital account. - Appeal of assessee allowed. 2022 (6) TMI 942 Allowable business expenditure - Proof of Set - up of business - manufacturing activity of the assessee was part of composite business activities and the same had not commenced because the construction of building and installation of plant machinery was in progress - HELD THAT:- As it could be said that business could be said to have been set-up from the date when one of the categories of business activity is started and it is not necessary that all the categories of its business activities must start either simultaneously or that the last stage must start before it can be said that the business was set-up. What is required to be seen is whether one of the essential activities for the carrying on of the business of the assessee company as a whole was or was not commenced. When a business is established and is ready to commence, then it can be said that business has been set-up. The business would be set-up when the necessary infrastructure was acquired by the assessee and the assessee started paying salaries and allowance of the experts. The assessee, in the present case, had achieved the process of establishing the business. We concur with the submissions of Ld. AR that the assessee s business was already set-up during AY 2012-13. Therefore, the business expenditure as claimed by the assessee would be allowable deductions in both the years. We order so. Accordingly, the appeals, for both the years, stands allowed. AO is directed to recompute the income in terms of our above order. 2022 (6) TMI 941 Reopening of assessment u/s 147 - addition u/s 68 - unexplained cash credits - Assessee submitted that the deposit represents return-back of advance made by the assessee for the purchase of agricultural land - HELD THAT:- Assessee had, entered into a sale agreement which was cancelled and the money so received by the assessee was deposited in ICICI Bank Account. However, it could be seen that pursuant to sale agreement dated 08.04.2010, the assessee has paid a sum of Rs.20 Lacs to the seller which fall in this year and therefore, the assessee was obligated to prove the source of payment. No doubt, the assessee being a retired employee may have accumulated savings and certain cash-in-hand, however, the onus to prove the source of payment with cash flows was not completely discharged by the assessee. Pertinently, the assessee had deposited another Rs.13.40 Lacs in another Bank Account held with Indian Overseas Bank which also could not be fully explained. CIT(A) has sustained addition to the extent of Rs.20 Lacs which would mean that the assessee was able to explain the source to a certain extent. Therefore, on the given factual matrix, we deem it fit to restore the matter back to the file of Ld. AO with another opportunity to the assessee to prove the source of remaining Rs.20 Lacs. The assessee is directed to substantiate the same. Needless to add that sufficient opportunity of hearing shall be granted to the assessee. AR has submitted that reasons to reopen the case have not been provided to the assessee. However, it could be seen that the assessee has asked for reasons only during September, 2021 which is much even after the date of impugned order. The case was reopened as early as during the year 2014. The assessee did not file return of income for the year under consideration. Therefore, in such a case, the only direction that could be given to Ld. AO is to provide the copy of reasons record, if available on record. Assessee appeal stand allowed for statistical purposes. 2022 (6) TMI 940 Business expenditure allowable u/s. 37(1) - whether expenses incurred by the assessee are claimed as deductable which are incurred in the course of business towards club membership or whether they are in respect of availing of services and facilities at the club? - HELD THAT:- Section 37(1) of the Act provides that expenditure incurred which are fully and exclusively for the purpose of business are to be allowed. Accordingly, we find it proper to remit the matter back to the file of the Ld. AO for the limited purpose of verification of these expenses claimed by the assessee as club membership and subscription expenses for the purpose of allowability. AO is directed to ascertain under which bucket these expenses fall as referred in (i) (ii) of para 9 above. Based on his examination and verification and categorization of expenses in each of the two bucket referred above, the amount of expenses incurred in respect of club membership and subscription fees only shall be allowed as business expenditure u/s. 37(1) of the Act. Needless to say, the assessee be given reasonable opportunity of being heard and be at liberty to make all of its submissions to justify its claim. Accordingly, the appeal of the assessee is allowed for statistical purposes. 2022 (6) TMI 939 Revision u/s 263 - Case selected for limited scrutiny for the reason of cash deposit in savings bank accounts is more than the turnover - HELD THAT:- AO has completed the assessment without making enquires or verification which should have been made in respect of deposit of cash in the savings bank accounts of the assessee with HDFC bank and Axis bank, more particularly when the case was selected for assessment with limited scrutiny for the reason that cash deposit in savings bank accounts is more than the turnover . We do not find any reason to interfere with the consideration arrived at by the Ld. PCIT in invoking the revisionary proceedings u/s. 263 of the Act for holding the order passed u/s. 144 dated 26.10.2017 as erroneous in so far as it is prejudicial to the interests of revenue and thereby setting it aside with a direction to the AO to call for all the details in respect of sources for the deposit of cash and verify them to make fresh assessment order by giving adequate opportunity to the assessee. Accordingly, the appeal of the assessee is dismissed. 2022 (6) TMI 938 Deduction u/s 80IA(4) - container terminal developed by assessee - HELD THAT:- After going through the adjudication of Ld. CIT(A), we find that second container terminal under consideration was jointly developed by the assessee and CITPL and it was a new infrastructural facility. The assets owned by the assessee and CITPL were expressly identified and listed in the exhaustive license agreement dated 07.03.2007. Assessee, as a licensor, provide reasonable access to the licensee to all infrastructural facilities and utilities including water, electricity and telecommunication facilities necessary during the construction stage or operational phase for the project facilities and services in accordance with the agreement. The assessee was vested with the authority of developing and providing infrastructural facilities for ports. The container terminal developed was a part of Chennai Port. The term Port is mentioned as an infrastructural facilities in the explanation (d) to Sec.80IA(4). The term port as defined in CBDT Circular No. 10 dated 16.12.2005 includes structures at the ports for storage, loading and unloading etc. The project fulfilled all the stipulate conditions. The gross revenue was split at source level between the assessee and CITPL. The same is further supported by the certificate from CITPL wherein it was certified that the profits / losses of CITPL were arrived at by considering their respective revenue share only. The other entity has been allowed similar deduction and there is no reason as to why the deduction is not available to the assessee. Thus, the adjudication in the impugned order could not be faulted with - Decided in favour of assessee. Disallowance u/s 14A - AR made a limited prayer that while computing the disallowance u/r 8D(2)(iii), only those investments should be considered which has yielded exempt income during the year - HELD THAT:- Accepting AR prayer we direct Ld. AO to recompute disallowance u/s 14A r.w.s. 8D(2)(iii) by considering only those investments which have actually yielded any exempt income during the year. This ground stands partly for statistical purposes. The assessee s appeal stands partly allowed for statistical purposes. Suo moto allowance made by assessee - AY 2013-14 - We direct Ld. AO to re-compute disallowance u/r 8D(2)(iii) by considering only those investments which have actually yielded any exempt income during the year. The disallowance u/r 8D(2)(i) 8D(2)(ii) stand confirmed. The suo-motu disallowance as offered by the assessee shall be adjusted from the aggregate disallowance. Finally, the income / loss of the assessee shall be re-computed by taking correct figures of aggregate disallowance as made u/s 14A. The assessee s appeal stands partly allowed for statistical purposes. 2022 (6) TMI 937 Deduction u/s. 80P(2)(d) - AO disallowed the claim of deduction of interest income earned from Villupuram District Co-operative Bank - HELD THAT:- As assessee could not deny that the assessee has earned interest from Villupuram District Co-operative Bank and Villupuram District Co-operative Bank is not a bank and co-operative society. He admitted that the Villupuram District Cooperative Bank is holding the license from RBI and is governed by Banking Regulation Act, 1949. Once the assessee has deposited amount with Villupuram District Co-operative Bank, which is a bank regulated by RBI and Banking Regulation Act, 1949, the interest earned from the deposits made with the same cannot be claimed as deduction u/s. 80P(2)(d) of the Act, because it does not fulfill the condition as prescribed under clause (d), which says that the deduction can be claimed in respect of any income by way of interest or dividend derived by co-operative society from its investment with any other co-operative society and not with the bank or co-operative bank governed by the regulation of RBI and the Banking Regulation Act, 1949. In view of the above, we dismiss the appeal of assessee. 2022 (6) TMI 936 Deduction u/s 80P - Denial of interest received from TAICO Bank claimed as deduction - CIT(A) allowed the claim of the assessee u/s. 80P(2)(a)(vi) - HELD THAT:- There is a judicial precedence by the Hon ble High Court of Madras in THE SALEM AGRICULTURAL PRODUCERS CO-OPERATIVE MARKETING SOCIETY LTD. [ 2016 (9) TMI 699 - MADRAS HIGH COURT] carrying force of binding nature covering the case of the assessee in its favour on the issue of claim of deduction u/s. 80P(2)(d) of the Act, affirming the decision of the coordinate bench of ITAT, Chennai [ 2014 (6) TMI 921 - ITAT CHENNAI] Reliance placed by the Ld. CIT(A) on the decision of PCIT vs Totgars Cooperative Sale Society [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] is not a jurisdictional court and possibly the judgment of Hon ble Jurisdictional High Court of Madras (supra) was not placed before him. Considering the aspect of judicial discipline and hierarchy, respectfully following the decision of the Hon ble Jurisdictional High Court of Madras in the case of CIT vs The Salem Agricultural Producers Co-operative Marketing Society Ltd. (supra), we are of the view that the assessee is entitled to claim deduction u/s. 80P(2)(d) of the Act in respect of interest received from Co-operative bank at Rs. 68,47,885/- derived from The Tamilnadu Industrial Cooperative Bank Ltd. (TAICO Bank) which is also a co-operative society. Accordingly, the grounds of appeal are allowed. 2022 (6) TMI 935 Correct head of income - income arising from sale of shares - to be taxed under the head capital gains or Income from business - HELD THAT:- As the undisputed position that emerges is that the aforesaid transactions have been classified by the assessee in the Books of Accounts as investments. Despite the fact that the main object of the assessee was dealing in shares and securities, it is well settled position that the assessee was entitled to maintain separate portfolios i.e., one for investment and other one as trading assets. See GOPAL PUROHIT [ 2010 (1) TMI 7 - BOMBAY HIGH COURT] . CBDT Circular No. 6/2016 dated 29.02.2016, as relied upon by Ld. CIT(A), clearly provide that in respect of listed shares and securities held for a period of more than 12 months, if the assessee desires to treat the income arising thereof as capital gains, the same not be put to dispute by AO - This stand once taken by the assessee in a particular year shall remain applicable in subsequent years also and the taxpayer shall not be allowed to adopt a different/contrary stand in this regard in subsequent years. Considering the same, the adjudication of Ld. CIT(A), in this regard, could not be faulted with. As in the case of CIT V/s NSS Investments P. Ltd. ( 2005 (4) TMI 45 - MADRAS HIGH COURT] support the case of the assessee wherein Hon ble Court dismissed revenue s appeal and held that where shares were never treated by assessee as stock-in-trade and they were held for earning dividend only then the profit on sale of shares in question was to be treated as capital gains instead of business income. Applicability of Sec. 47(v) with respect to transactions of CUBL - We find that Ld. CIT(A) has already verified the documentary evidences submitted by the assessee and thereafter, reached a conclusion that it was a case of transfer of asset by subsidiary company to holding company and therefore, the transaction would be out of purview of capital gain in terms of Sec. 47(v) - These facts remain uncontroverted before us. Upon perusal of assessee s financial statements, we find that the assessee is 100% subsidiary company of IEPL and this transaction was covered u/s. 47(v). This plea was taken by the assessee before Ld. AO which was not dealt with even in the remand proceedings. Therefore, the impugned order, in this regard, could not be faulted with. We order so. 2022 (6) TMI 934 Revision u/s 263 - Unexplained cash deposits in the bank during demonetarization period - HELD THAT:- As limited scrutiny case being selected under CASS for examination of cash deposits made in the bank during demonetarization period and, therefore, the authorities below ought to have restricted their examination and enquiries limited for the purpose of cash deposits made by the appellant during the period of demonetarization only. By expanding the scope of scrutiny beyond the issue of cash deposits during demonetarization period, amounts to exceeding the jurisdiction by the PCIT without following the prescribed procedure and the administrative guidelines under the law. After considering the documentary evidences filed by the assessee in compliance to the enquiries caused by the AO and scrutiny of the documents in respect of the cash deposits, AO has accepted the cash deposits in the bank during the period of demonetarization made by the appellant as duly explained. AO to his satisfaction accepted the cash deposits in the bank account of the assessee during the period of demonetarization as explained money in accepting the returned income of the assessee under section 143(3) - In our view, the ld. PCIT was not justified in adversely commenting on the said cash deposits of the assessee and adopting a divergent view where two views are possible that too on the issues of agricultural income and unsecured loans, which were not even parameters of selection of the case for scrutiny under CASS. The case laws relied upon by the ld. PCIT are distinguishable on the peculiar facts of the case. Respectfully following the Hon ble Rajasthan High Court in the case of CIT vs. Ganpat Ram Bishnoi ( 2005 (8) TMI 106 - RAJASTHAN HIGH COURT] no presumption can be down by the PCIT that the matter has not been enquired into by the AO. Accordingly, we hold that the invocation of jurisdiction by the PCIT is not sustainable. The order passed by the PCIT u/s 263 is hereby set aside. Appeal of assessee allowed. 2022 (6) TMI 933 Disallowance of expenditure pertaining to salary wages, job work and other expenses - Addition made on incomplete bills and vouchers - HELD THAT:- There is no dispute with regard to the fact that the three items of the expenses have been disallowed on estimate basis. The basis of such disallowances is said to be incompleteness of the bills and vouchers. However, the Assessing Officer has not pointed out as to which bills and vouchers were found to be wanting. See TRIPAT KAUR [ 2012 (9) TMI 1012 - ITAT DELHI] . As in the present case also the assessing authority has disallowed the expenses purely on the basis of estimation without specifying the instances where the vouchers were found to be incomplete or missing. Therefore, respectfully following the binding precedence, we direct the Assessing Officer to delete the addition. Grounds of appeal are allowed. 2022 (6) TMI 932 Revision u/s 263 by CIT - whether the issues raised by the Pr.CIT were in fact issues which could have given rise to an order u/s.263 ? - HELD THAT:- A perusal of the order of the ld. Pr.CIT shows that the show cause notice issued u/s.263 of the Act has been issues only on 1st March, 2019. Admittedly, the assessee has responded to the show cause notice though on 26.03.2019. In the said reply, the assessee has stated that he would submit the details of the bills on 29.03.2019, which is evident from the extract as made by the Pr.CIT. What happened to that bills is not coming out of the order of the Pr.CIT. The reply filed by the assessee has also admittedly not been looked into nor considered by the ld. Pr.CIT. A perusal of para 12 of the order of the Pr.CIT, shows that he has practically in verbatim extracted the issues from the show cause notice Then he says that the AO has not examined and verified many of the relevant issues either factually or from the angle of relevant provisions of the Act before allowing such claims and due to paucity of time, it is not possible to probe further at this stage. A perusal of the consequential order clearly shows that the additions which have been proposed by the Pr.CIT, more so the issues that have been raised by the Pr.CIT have not resulted into any of the addition in the assessment. Obviously, if the Pr.CIT had done cursory verification of the details that has been produced by the assessee in the course of proceedings u/s.263 of the Act, maybe, the Pr.CIT himself would have dropped the proceedings. However, having invoking the powers u/s.263 of the Act, no addition on the said issues has been made. The additions have been made on other issues; clearly shows that the issues raised in the proceedings u/s.263 of the Act are unsustainable and liable to be quashed. We are not going into merits of the additions made in the consequential order. Only on the ground that no specific addition has been made in respect of specific issues which have been raised in the proceedings u/s.263 of the Act, therefore, the order passed u/s.263 of the Act is hereby quashed. - Decided in favour of assessee. 2022 (6) TMI 931 Disallowance u/s 14A r.w.r. 8D - whether or not it is obligatory for the Assessing Officer to record his satisfaction as to why the claim of the assessee in respect of expenses incurred for earning of exempt income? - HELD THAT:- In case the A.O, or, the CIT(A) in exercise of his powers which are coterminous with that of an A.O, sought to disallow the claim of the assessee that no expenses could be attributed to earning of the exempt dividend income by him, then, there was an innate obligation cast upon them to have recorded the requisite satisfaction that having regard to the accounts of the assessee, as placed before them, it was not possible to generate the requisite satisfaction with regards to the correctness of the aforesaid claim of the assessee. At this stage, we may herein observe, that the Hon ble High Court of Bombay in the case of CIT v. Sociedade De Fomento Industrial Pvt. Ltd. [ 2020 (11) TMI 277 - BOMBAY HIGH COURT] referring to the facts involved in the case before it, had observed, that though the Assessing Officer had discussed the provisions of section 14A(1) of the Act, but had not justified how the expenditure which the assessee had incurred during the relevant year related to the income not forming part of its total income and, had straightaway applied rule 8D, then, in the absence of proximate relationship between the expenditure and the exempt income the disallowance made by him was rightly vacated by the Tribunal. Accordingly we are of the considered view, that as there is a clear lapse on the part of the lower authorities in validly assuming jurisdiction for dislodging the assessee s claim that no disallowance u/s.14A of the Act was called for in its hands, therefore, the disallowance worked out by the Assessing Officer u/s 14A r.w Rule 8D(2)(iii), which thereafter, had been sustained by the CIT(Appeals) is liable to be vacated. We, thus, set-aside the order of the CIT(A) and vacate the disallowance made by the A.O u/s 14A r.w Rule 8D(2)(iii). 2022 (6) TMI 908 Deduction u/s. 80P(2)(a)(vi) - Claim denied as society is under the control of NLC Limited and the actual labour member had no independent right carry out the activities of the society - society has provided voting rights to individual/persons who are nominated by the NLC - HELD THAT:- As decided in own case [ 2018 (6) TMI 1097 - ITAT CHENNAI] the board of the assessee society is responsible for the affairs of the assessee society and not the NLC board. The ultimate authority of its administration is vested with the General Body of the members. NLC or its nominated members, if any, do not have voting rights in elections of the assessee society as per Rule 22 of its Byelaws. NLC has been coopted as a member only for operational ease and convenience to assist the board of the assessee society in administration, without which the smooth running of the assessee society will be practically difficult. Further, the registration of the society has not been revoked under law for violation of the provisions of TNSCA, 1983. On such facts and circumstances, the order of the CIT(A) does not require any interference and hence the revenue s appeal is dismissed. Customs 2022 (6) TMI 930 Refund of amount deposited during Investigation - Payment was voluntary or under Coercion / Threat - Benefit of partial exemption from CVD - Seeking for declaration and striking down the word excisable in the phrase used in the manufacture of excisable goods appearing in Column No.3 of Sr. No.107 of the Notification No.50/20170-Cus. dated 30th June 2017 - violative of Article 14 of the Constitution or not. HELD THAT:- Coercion is committing or threatening to commit any act forbidden by the Indian Penal Code or detaining or threatening to detain, to the prejudice of any person whatever, the property of another - Coercion has to be pleaded and proved. Respondents officials had visited the premises of the petitioner during the investigation. The larger issue is involved in the writ petition. The petitioner has challenged the Notification which the petitioner claims that the partial exemption under Sr.No.107 of Notification No.50/2017-Cus. dated 30 th June 2017 r/w. Concessional Rate of Duty Rules, 2017 is available for Denatured Ethyl Alcohol used for manufacture of Ethyl Amine. The law permits payment of amount on the basis of own ascertainment of duty during the investigation and prior to the service of notice. The question is payment made by the petitioner of Rs.2.5 Crores is voluntary or involuntary. For concluding the existence of coercion greater degree of proof would be required. It is trite that the respondents cannot employ coercion during investigation. The question is whether the payment is made under coercion. The payment of Rs.2.5 Crores is supported by the letter of the petitioner. The letter is issued by the petitioner to the respondents along with payment. The covering letter presented with the payment of Rs.2.5 Crores as made by the petitioner to the respondent consequent to the search proceedings on 9th February 2021 suggests that the petitioner accepts the issue raised by the officers of the DRI and as a token of cooperation on ongoing investigation, the petitioner submits the demand draft of Rs.2.5 Crores and requested the respondents to consider the said payment towards differential duty liabilities - The draft letter prepared by the petitioner is not forwarded to the respondents wherein the petitioner wish to contest the issue on merit. We are not inclined to consider the request of the petitioner for refund of the amount at this interim stage. The said relief can be considered at the time of final disposal of the petition - The deposit of Rs.2.5 Crores would be subject to final outcome of the petition. 2022 (6) TMI 929 Provisional release of seized imported goods - determination of redemption fine - Copper cathode - mis-declaration with regard to origin of goods - goods are of Zambian origin or of Iranian Origin - section 110A of Customs Act, 1962 - HELD THAT:- Though power to seize has inhered, and as it should, in Customs Act, 1962 from the very beginning, and, indeed, as legacy carried over from section 178 of Sea Customs Act, 1878, for close to a century and half, it was only by section 26 of Taxation Laws (Amendment) Act, 2006, incorporating section 110A in Customs Act, 1962, that provisional release of seized goods by Commissioner of Customs pending order of the adjudicating officer found acknowledgment in law. The transition from statutorily mandated continuation of unilateral deprivation of custody till conclusion of adjudication to that of reverting custody can only be described as facilitating. Undoubtedly, it was intended to benefit the importer but it was not at the cost of advantage to the State - The law does not intend that the State is enriched by fines arising from breach of the law or by substituting for the importer to trade in goods seized or even confiscated. The judicial approval was not forthcoming for the several strands of deployment of section 110A of Customs Act, 1962 that was manifested in ways and means of retention of seized goods till adjudication and beyond, upon confiscation, till appellate remedy was exhausted. The implementation of the incorporation for provisional release appeared to be founded on the belief that the said mechanism for conditional restoration of possession to the owner was restrictive and a measure to safeguard revenue. Before section 110A was incorporated in Customs Act, 1962, seized goods, upon confiscation, were offered for redemption on payment of fine and goods, subject to confiscation proceedings without the preliminary of retention by operation of common practice , could be saddled with fine in lieu thereof. Over the years, the quantification of fine has been placed within the practical framework of offsetting the potential for windfall deriving from the breach for which the goods are confiscated. Rarely would it be the value of goods; some proportion thereof suffices. There can be no golden formula for it and it is here that the discretion of the authority is called for - It is moot if a tentative estimation prior to adjudication can hold a candle to the assured accrual to the State after adjudication, subject, of course, to appellate determination - the extent of mandatory pre-deposit should, in most cases, be the benchmark for quantification of reasonable security. At least, as far as the impugned goods are concerned. The provisional release of the seized goods is permitted subject to furnishing of bond for the value of the goods and execution of bank guarantee of Rs. 50,00,000 - appeal disposed off. 2022 (6) TMI 928 Classification of imported goods - old and used self-propelled platform supply vessel Sagar Fortune - Classifiable under tariff item 8901 9000 of the First Schedule to Customs Tariff Act, 1975 or not - non- inclusion of freight, insurance and other charges, incurred before arrival - HELD THAT:- Any vessel expends her entire life in waters - domestic or international - and, similar to aircraft, are remunerative to the extent that they are on the move. Though every arrival at the harbour or airport involves, technically, import from outside the country, the personality of the vessel/aircraft as conveyance entitles separate treatment; the alternative would generate inconvenience bordering on chaos in international travel and traffic. Nonetheless, for certain statutory requirements attended upon ownership, and appendant privileges, vessel/aircraft may have to be imported as goods requiring compliance with attendant customs procedures. That, however, does not derogate from its functionality as conveyance which is the purpose of, and defines, its very existence as vessel/aircraft - It is, therefore, of utmost essence that assessing authorities tread that tightrope with extreme caution lest the universally acknowledged freedom of the seas and freedom of the skies be compromised at the altar of revenue harvest beyond the intent of law. Valuation of goods - HELD THAT:- The declared price may be discarded in favour of the actual transaction value , subject to availability of evidence of direct or indirect flow of additional consideration to the seller, for conformity with the concept enshrined in section 14 of Customs Act, 1962 without recourse to any provision other than rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Any other substitution of declared value as transaction value must conform to one of the situations envisaged in rule 4 to rule 9, taken sequentially, for validation of assessment for determination of duty of customs after recourse to rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - In the present dispute, we are concerned with recourse to rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 for adoption of the value estimated by the Chartered Engineer appointed by customs authorities and the last of the specifics in rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 for evaluation of the enhancement upheld in the impugned order. The justification offered for invoking rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, i.e., alleged misdeclaration of tariff item in First Schedule to Customs Tariff Act, 1975, does not logically pan out without evidence that such technical distinction, even if uncontested, impacts value of the vessel. The impugned order has not allotted any space for such scrutiny. Recourse to sequential application of rule 4 to rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is, thus, without authority of law. Classification of goods - HELD THAT:- In the light of the inadequacy, we are unable to firm up on the applicable classification for want of determination in the impugned order between heading 8905 and heading 8906 of the First Schedule to Customs Tariff Act, 1975. That gap must be bridged to enable which we set aside the impugned order and remand the matter back to the original authority for a fresh decision on the claim of the appellant for fitment within heading 8906 of First Schedule to Customs Tariff Act, 1975. As this remand is intended to arrive at the appropriate classification, the appellant may also make its submissions for fitment within the original classification, in addition, should they choose to do so. The enhancement of value of the impugned vessel is set asidea. The sole issue that remains is the choice of the appropriate classification. The controversy is contentious and the alternative classification proposed by customs authorities is based upon reliance on technical features to distinguish it from a capability inherent in all vessels that put out to sea in terms of subordination to its principal function - the benefit of an exemption has been sought to be availed does not, of itself, render such claim to be with intent to evade duty. Furthermore, the role of these individuals in the misdeclaration of stores and bunkers is not evident in the impugned order - penalties set aside. With this limited remit of decision on classification in remand proceedings, the four appeals are disposed off. Corporate Laws 2022 (6) TMI 927 Prosecution proceedings for Non-disclosure of contribution in the Profit and loss Account - political contribution/donation to the tune of Rs. 10.00 lakhs each in two occasion to a particular party during a financial year 2016-17 - company failed to disclose the political contribution in its profit and loss account - violation of provisions of sub-section (3) of Section 182 of Companies Act - HELD THAT:- On perusal of the records, the petitioner is said to be the Company registered under the Companies Act and it is alleged that during the year 2016-2017, the company has donated Rs. 10.00 lakhs each to a political party but they have not declared the same to the Registrar of the Company as per Section 182 of the Companies Act. Thereby, there is a violation of Sub-section 3 of Section 182 of the Companies Act, whereas the petitioner though admitted regarding donation given to a political party i.e., Aam Aadmi Party (AAP) and it is alleged that they declared the same in the income tax returns in profit and loss account, assets and liabilities statement and in the information sent to the Registrar of Companies and in the format, they have mentioned as miscellaneous expenditure which includes the donations. The expenditure was offered on the show cause notice issued by the respondent, therefore, it is contended that there is no offence committed for violation of Section 182 of the Companies Act. A detailed explanation is given to the respondent regarding resolution, payment and declaration in the profit and loss account in the head of donations. Therefore, it is contended that there is no violation of Section 182(3) of Companies Act. Once the company has disclosed the political donations in the name of miscellaneous expenditure and declaring the same before the Income Tax authorities in the ITR and claimed the exemption and also properly explained in their reply to the show cause notice, it cannot be said that the petitioner-company has committed any violation under Section 182(3) of the Companies Act. Looking to the facts and circumstances of the present case, it cannot be said that there is a criminal intention for not specifically mentioning the name of the political party as political contribution. When there is no specific column in the format of the disclosure of the financial status of the company, the question of allegation for non disclosure of political donation does not arise. There is no criminality or non disclosure which amounts to violation for constituting the offence under Section 182(3) of the Companies Act, therefore, conducting proceedings is abuse of process of law and hence, it is liable to be quashed - Petition allowed. Insolvency & Bankruptcy 2022 (6) TMI 926 Maintainability of the Civil Revision Petition under Article 227 of the Constitution - petitioner has got remedy before the National Company Law Appellate Tribunal - HELD THAT:- On a perusal of the recent judgments of the Apex Court, it is clear that when an appeal remedy is provided under the Act, the aggrieved party should exhaust the said remedy by filing an appeal before the Appellate Forum and the Writ Petition/Civil Revision Petition filed by them under Articles 226/227 of the Constitution is not maintainable. When the petitioner can raise all the grounds available to them under law before the Appellate Forum, the filing of the Civil Revision Petition under Article 227 cannot be entertained. Reliance can be placed in the case of M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. VERSUS STATE OF KARNATAKA OTHERS [ 2019 (12) TMI 188 - SUPREME COURT ] where it was held that Though NCLT and NCLAT would have jurisdiction to enquire into questions of fraud, they would not have jurisdiction to adjudicate upon disputes such as those arising under MMDR Act, 1957 and the rules issued thereunder, especially when the disputes revolve around decisions of statutory or quasijudicial authorities, which can be corrected only by way of judicial review of administrative action. Hence, the High Court was justified in entertaining the writ petition and we see no reason to interfere with the decision of the High Court. The Civil Revision Petition filed under Article 227 of the Constitution challenging the order passed by the National Company Law Tribunal is not maintainable - the Civil Revision Petition is dismissed as not maintainable. 2022 (6) TMI 925 Homebuyers/allottees - Non-execution of sale deeds of allottees - pendency of non-registration of sale deed in favour of such allottees - possession given without completion of certain auxiliary works - HELD THAT:- It is not in dispute even by the Respondent that the Appellants /allottees are not in possession of their respective units since 2015 - It is also not in dispute that the exchange of letters /emails are not there between the CD and the Appellants including the issue of registration of the units. No doubt, the Appellants were raising the issues like certain fit ins, parking area in basement, toilets, fire safety/fire alarm/springle issue, maintenance issue etc. raised with the CD apart from the issue of registration of property and completion certificate. What the Respondent/RP has pointed out that the CD is the owner of the Commercial Space and has accepted that the possession was with the Appellants admittedly. The Appellants are allottees of commercial space in Coral Brio. Although the CD had handed over the possession of Commercial space to the Appellants, admittedly, no sale deed was executed by the CD in favour of allottees prior to the commencement of CIRP. The rights of home buyers cannot be affected adversely in the Corporate Insolvency Resolution Process and their interest is to be appropriately preserved and protected within the parameters of the I B Code, 2016. This Appellate Tribunal is not in a position to sustain the order of the Adjudicating Authority and accordingly, this Tribunal sets aside the impugned order dated 16.01.2020, and directs the Resolution Professional to execute the sale deed after collecting Dues and Costs, if any, remaining unpaid, including the Costs of Registration, Penalty and other incidental Costs, till date, etc. - Appeal allowed. 2022 (6) TMI 922 Summon of petitioners - vicarious liability - offences punishable under Sections 31(1), 74(3) and 235A of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Against the decision of the NCLAT in the case of Committee of Creditors of Amtek Auto Ltd. [ 2019 (8) TMI 877 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI ], the Insolvency and Bankruptcy Board of India filed Civil Appeal Diary No. 32731/2019 wherein, vide order dated 23rd September 2019, [ 2019 (9) TMI 1652 - SC ORDER] the Hon ble Supreme Court stayed the impugned judgment and held that the order dated 23rd September 2019 will not affect the progress of the other criminal cases and they shall proceed uninfluenced by the impugned order. As regards the second issue taken up by the learned Senior Counsel for the petitioners that the petitioner Nos. 2, 3 and 4 could not have been summoned in their individual capacity by the learned Special Judge when the complaint was filed only against the company through petitioner Nos. 2, 3 and 4, prima facie, there appears to be merit as Section 74(3) of the I.B.C. does not impose a vicarious liability. List on 13th April 2022. 2022 (6) TMI 921 Seeking approval of the Resolution Plan - exemption under the provisions of clause (c) and (h) of Section 29A read with Section 240A of the Code - section 30(6) of the Insolvency and Bankruptcy Code, 2016 (Code) read with Regulation 39 (4) of the IBBI )Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- One of the justifications for approval of this resolution plan is that the amount proposed under the plan is higher than liquidation value of the Corporate Debtor - The RP has complied with the requirement of the Code in terms of Section 30(2)(a) to 30(2)(f) and Regulations 38(1), 38(1)(a), 38(2)(a),38(2)(b), 38(2)(c) 38(3) of the Regulations. The RP has filed Compliance Certificate in Form-H along with the Plan. On perusal the same is found to be in order. The Resolution Plan includes a statement under regulation 38(1A) of The Regulations as to how it has dealt with the interest of the stakeholders in compliance with the Code and the Regulations - The Resolution Plan has been approved by the CoC in the with 76.69% votes in terms of Section 30(4) of the Code. In COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ] the Hon ble Apex Court clearly laid down that the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved. In view of the discussions and the law thus settled, the instant Resolution Plan meets the requirements of Section 30(2) of the Code and Regulations 37, 38, 38(1A) and 39 (4) of the Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law - The Resolution Plan submitted by Mr. Rakesh Ranjan jointly with M/s Equilibrated Venture CFLOW Private Limited is hereby approved. Application allowed. 2022 (6) TMI 920 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - pendency of suit before the Small Cause Court with respect to the same claim - HELD THAT:- The Operational Creditor had given the premises on lease to the Corporate Debtor vide Leave and License Agreement dated 20.06.2014 for period of 55 months starting from 01.07.2014 to 30.12.2018. The lease was terminated by the Operational Creditor vide its E-mail dated 19.09.2018. The Operational Creditor raised Invoices dated 16.11.2018 and dated 08.01.2019 - The Corporate Debtor contended that there is no Operational Debt as the dues are arising out of non-payment of lease rent. The Operational Creditor stated that the Operational Creditor raised invoice for the use of additional car parking space even after the termination of the Leave and License Agreement. This Bench is of view that the provision for use of additional space by the Corporate Debtor was not incorporated in the Leave and License Agreement and hence the Operational Creditor cannot raise invoice against the Corporate Debtor for the use of additional space without the consent of the Corporate Debtor. Further, it was observed by this Bench that the L.D. Suit is pending before the Small Cause Court with respect to the same claim. The Corporate Debtor has filed Suit for Permanent Injunction and raised issues with respect to claim prior to issue of Demand Notice by the Operational Creditor. The Corporate Debtor has replied to the said Demand Notice denying and disputing the claims of the Operational Creditor. Hence, this Bench is of the view that the claim of the Operational Creditor cannot be admitted being there is pre-existing dispute between the Corporate Debtor and the Operational Creditor. Petition dismissed. 2022 (6) TMI 919 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - date of default - HELD THAT:- The Corporate Debtor in its Affidavit in Reply dated 22.11.2021 stated that the Financial Creditor had not provided any documentary evidence which would prove that the initial default i.e. Date of Default had occurred on 01.01.2020. On perusal of the documents submitted by the Applicant Financial Creditor, it is clear that there exists a financial debt and the debt is in default. However, the Bench is of the view that the date of default is 01.10.2020 as mentioned in the NESL Report as annexed by the Financial Creditor himself at p.502 as Annexure N1- N8 of the petition to show the record of default available with the Information Utility as on 01.10.2020 and not 01.01.2020 as mentioned by the Financial Creditor in Part IV of the petition. This petition, therefore, falls within the period of enforceability of Sec. 10A of IBC, 2016. The proviso to the Section 10A of the IBC prescribes that no insolvency proceedings can ever be instituted against any entity whatsoever for the default caused/committed in the period between 25.03.2020 to 24.03.2021. This petition is therefore liable to be dismissed. This Bench is of the view that because of insertion of Sec 10A in IBC, this case is clearly attracted by the provisions of Sec 10A as the date of default in this case is 01/10/2020. As per Sec 10A, no IBC proceedings can be initiated against the Corporate Debtor for the default which has occurred between the period from 25/03/2020 till 24/03/2021, keeping in view of the extended period of Sec 10A, the application filed by the Operational Creditor against the Corporate Debtor cannot succeed and is hereby dismissed. 2022 (6) TMI 918 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Financial Debt or not - Dishonor of Cheque - time limitation - HELD THAT:- Admittedly, Mrs. Maya Goel has given the loan amount in the Financial Year 2011-12, 2012-13 and 2013-14 whereas Mr. N.C. Goel has given loan in the Financial Year 2011-12, 2013-14 and 2015-16. In the absence of any documentation, the date of default cannot be established. The date of default can only be calculated when the tenure of the loan is established, or when there is a demand for repayment. In the present case there is nothing to establish this. In summary jurisdiction, without adequate documentation, it is difficult to establish the purpose for which the money was lent and accepted. It is also not possible to establish whether there was any interest required to be paid. The time value of money is an important factor to be considered in order to establish whether this is a financial debt. Ex facie, this appears to be a petition which has been filed for recovery of money and not for resolution of the corporate debtor. The Insolvency Bankruptcy Code, 2016, should not be allowed to be used as an easy way of recovery of money. The present petition cannot be admitted under section 7 of the Code, and the same shall stand dismissed. - Petition dismissed. 2022 (6) TMI 917 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- On perusal of clause 35, there are no hesitation in holding that even on this basis, no legal obligation can be said to have arisen on the part of the respondent to repay the loan, which was taken by the vendor from the applicants herein. This Clause simply provides that confirming party is to receive the sale consideration from the vendor and vendor has also confirmed that he has received the payment from the confirming party (Applicant herein) and who have also said that they had no objection as regard to this sale deed. From the perusal of other clauses and specifically schedule of payment, it is noted that the four cheques of sale consideration were handed over to the vendor who in turn was liable to give the same to the applicant. In our view, in case of any failure by the vendor to do so, also does not result into a situation whereby such liability is to be met by the respondent herein. As regard the amount of Rs. 20,00,000/- being given by the Financial Creditors to the respondent herein, it is noted that it has been given on 29.04.2017 just a day prior to the execution of sale deed dated 1st May, 2017, which fact lends credence to the claims made by the respondent that such money was given to the respondent to execute the sale deed - the Financial Creditors have not been able to controvert the claim made on behalf of the respondent that such money was given as assurance money nor any documentary evidence has been produced to show that this money was in fact a loan, which was to be returned by the respondent. Further, in the absence of any agreement to this effect as well as no recall notice or other documentary evidence, we are of the view that even the facts of the amount being due and payable, cannot be ascertained, hence, there arises no question of default. In the present case, there is no relationship of Financial Creditors and Corporate Debtor between the applicants herein and the respondent. We further hold that there is no transaction of the nature of financial debt between the parties within the meaning of provision Section 5(8) of IBC, 2016 - Petition dismissed. Service Tax 2022 (6) TMI 924 Validity of SVLDRS-3 issued to petitioner - non consideration of the CENVAT credit claimed by the Petitioner - SVLDRS-3 challenged on the ground that the same is issued without deducting the eligible CENVAT amount - HELD THAT:- The entire CENVAT credit claimed by the Petitioner was not allowed by the adjudicating authority while passing the order in original. The Appeal filed against the said order was also dismissed on the ground of limitation. The stand of the Respondent is that the Petitioner never produced on record the documents to justify the claim of CENVAT credit - In the present case, it is not disputed that the Petitioner was given opportunity of hearing. Written submissions were also placed on record by the Petitioner. Judgments relied by the Petitioner are basically on the point that the amount of pre-deposit made has to be considered. There cannot be any dispute with the said proposition. In the present case, the factum of the CENVAT credit as claimed by the Petitioner is in dispute. According to the department, Petitioner could not produce any document to justify the claim of the CENVAT credit i.e. dis-allowed by the adjudicating authority. No doubt Petitioner would be entitled for the benefit of CENVAT credit. The Petitioner will have to justify the same by necessary documentary evidence. Once the CENVAT credit is disallowed, in absence of proof of it, it would be difficult for the court to conclude about the justification to claim the benefit of CENVAT credit - In absence of the proof, of the Petitioner having paid the tax to which the Petitioner is entitled for the benefit of CENVAT, the documents would be necessary to come to the conclusion. It is not the case that the Petitioner was not accorded with the opportunity. The show cause notice were issued to the Petitioner giving the details. Claim of the Petitioner for CENVAT credit to a large extent was disallowed. In view of disallowance, it is difficult to arrive at a conclusive finding that the Petitioner would be entitled for the entire CENVAT credit as claimed by the Petitioner so as to negate SVLDRS-3 - Petition dismissed. 2022 (6) TMI 923 Refund of Service Tax paid - Business Support Service - Management and Repair Service - export of services or not - applicability of time limitation - period 2006-07 2007-08 and 2008-09 - HELD THAT:- In terms of the distributor agreement, the appellant entered into, the appellants are appointed as distributors. In terms of Clause-2 a, the appellants as distributors as its own expense, exert its best efforts, through advertising and other promotional devices to sell and promote the sale and use of the Products throughout the Territory. Distributor s efforts will include use of facility signage, showroom display kits and other display and advertising materials described in the HAAS Factory Outlet manuals, Distributors shall obtain the prior approval of HAAS for any advertising and promotional materials not prepared by HAAS, which approval shall not be unreasonably withheld or delayed. Tte appellants have no case on merits as far as machine commissioning charges and office expenses are concerned. There is no clause in the agreement about the payment of commissioning charges and office expenses though as a distributor the payment of commission is understandable. Moreover, liability to service tax does not depend only on the wordings of the agreement and the essence of the agreement needs to be considered provided the other aspects of levy are decided. In case of machine commissioning charges, the appellant is a service provider and the Indian purchaser of the machine is the service recipient. The appellant may have rendered the service as an agent of his overseas principals and may have received the consideration from them towards such service. Service Tax being Destination Based Consumption Tax , as the service is rendered and consumed in the country, the service cannot be said to have been exported. For this reason, the contentions of the appellants are not acceptable. Reimbursed office expenses - HELD THAT:- There are no service aspect in the same. Even if one assumes that it is a service rendered by the appellant, it is a service rendered to themselves. Therefore, the service tax is not leviable. Commission received by the appellants - HELD THAT:- There is an element of service and the same appears to have been rendered to the overseas principals. Time Limitation - HELD THAT:- Apex Court in the case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT] has categorically held that all refunds are governed by the provisions of Section 11B - Hon ble Madras High Court in a recent judgment in the case of M/S. M.G.M. INTERNATIONAL EXPORTS LTD. VERSUS THE ASSISTANT COMMISSIONER OF SERVICE TAX, CHENNAI [ 2021 (4) TMI 1167 - MADRAS HIGH COURT] held that the refund of tax if any borne by the petitioner had to be made only within a period of limitation prescribed under Section 11B of the Central Excise Act, 1944 . Appeal allowed in part. 2022 (6) TMI 916 Refund of service tax paid, which was not required to be paid - services provided in relation to sports stadium - commercial or industrial construction service - Providing and fixing of seating system - Laying of Synthetic athletic track - nature of civil structure is not of commercial - principles of unjust enrichment - time limitation - HELD THAT:- The service of providing and laying of Synthetic Athletic Track has been provided in respect of sports organization of Government, Centre or State. It has been argued by the appellant that the service provided by them is squarely covered by the description of services given in a commercial and industrial construction service as defined in Section 65 (25b), however, since the said services are provided to Government facilities which are not of commercial nature, the same do not fall under the category of commercial or industrial construction services as defined in Section 65 (25b) - It is seen that the installation of chairs in a stadium would clearly be an activity similar to the activity of acoustic application or fittings or of the nature of fencing and railing. In that sense the activity of fixing chairs in a commercial establishment would be covered the description of service in the commercial or industrial construction service as defined in Section 65 (25b). The activity of laying of Synthetic Athletic Track Surface is akin to the activity of floor and wall tiling, wall covering and wall papering. The activity is of civil nature and, therefore, would be covered by the activities described in the definition of commercial or industrial construction service, however, since the same have been provided in respect of sport facilities owned by Government, State or Centre, the same would not be chargeable to tax. It is seen from the impugned order that since it was held that no refund is admissible, the ground of unjust enrichment as well as limitation were not examined - Since the issue of unjust enrichment, limitation and the implication of the decision of Apex Court in the case of ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT] has not been examined by the lower authorities, its needs to be sent back to original Adjudicating Authority. In so far as the taxability of service provided is concerned it is held that the services provided by the appellant are not taxable. For decision on the other issues, the matter is remanded back to the original Adjudicating Authority - Appeal allowed in part. 2022 (6) TMI 915 Penalty - Suppression of facts or not - Extend period of limitation - Service tax paid on Reverse Charge Mechanism and credit was availed even after issuance of SCN - whether the Ld. Adjudicating Authority was correct in invoking section 80 of the Finance Act, 1994 to drop the penalty as proposed in the SCN for delay in payment of service tax? - HELD THAT:- The present issue involved in this appeal is no more resintegra in view of the decision of the Tribunal in the case of M/S BHORUKA ALUMINIUM LIMITED. VERSUS THE COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, MYSORE [ 2016 (11) TMI 1292 - CESTAT BANGALORE] where it was held that Except mere allegation of suppression, the Department did not bring any material on record to prove that there was suppression and concealment of facts to evade payment of tax. Consequently, in my opinion, the imposition of penalty under Section 78 of the Act is not justified and bad in law. The Commissioner should have dropped the demand for the extended period of limitation in view of our finding in this case that there was no suppression of facts. However, the confirmation of demand has not been assailed by the respondent, possibly because it was entitled to the CENVAT credit of whatever service tax it paid. Hence, we cannot modify the impugned order with respect to the confirmation of the demand. Thus, invoking section 80 to waive the penalties was correct and invoking extended period of limitation for confirmation of demand was not. In the case of Mahindra Mahindra, a larger bench of Supreme Court clarified the position of law regarding invocation of larger period of limitation alleging suppression of facts in cases where there is revenue neutrality. It would be essential to examine the background. In the case of AMCO BATTERIES LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, BANGALORE [ 2003 (2) TMI 66 - SUPREME COURT] the charge of suppression of facts was dismissed on the ground of Revenue neutrality. A question may arise that if it is found that the elements necessary to invoke extended period of limitation were not available and therefore, Revenue could not have demanded duty for an extended period, can the respondent seek refund of the service tax so paid voluntarily by it? It cannot, for the reason the charge of service tax is not under section 73 but is under the charging sections (whether under forward charge or under reverse charge). There is no limitation on the charge of the service tax and it does not extinguish with the efflux of time. Only the remedy available to the department to recover the service tax not paid is enabled and also limited by section 73. If the charge is proven or is uncontested, and the assessee pays the tax, though it is beyond the limitation, it cannot seek refund of the service tax so paid. It is like a time-barred debt. As we have found that even extended period of limitation could not have been invoked in the factual matrix of this case, we find nothing inconsistent wrong in the Commissioner invoking section 80 to waive the penalties. We fully endorse the views expressed by the Commissioner that there were reasonable causes for failure of the respondent not paying service tax. Appeal dismissed - decided against Revenue. 2022 (6) TMI 914 Classification of Services - recipient of GTA services or not - whether Respondent can be treated as service recipient of the GTA services as the same was on account of the farmers and only payment was made by the Respondent as the price was fixed upto delivery to the Respondent s factory? - HELD THAT:- The issue whether the Respondents can be termed recipient of GTA services in such cases has been decided by the Tribunal in the case of M/S. NANDGANJ SIHORI SUGAR CO. VERSUS CCE. LUCKNOW [ 2014 (5) TMI 138 - CESTAT NEW DELHI] where it was held that there will be no Service Tax liability on the appellant sugarcane mills, as they have not received the service from a Goods Transport Agency. In the instant case also the Respondent have pleaded that there was no issuance of any consignment notes by the transporters and they cannot be stated to have received GTA services to attract Service Tax liability on RCM basis. The said plea was also taken by the Respondent in their reply to the Show Cause Notice. However the Ld. Adjudicating authority has decided the matter on the ground that the Respondent cannot be stated to be the recipient of transport services. Appeal dismissed - decided against Revenue. 2022 (6) TMI 913 Exigibility to tax of service rendered in the exclusive economy zone (EEZ) of India - Period between July 2009 and February 2010 - HELD THAT:- In view of the settled finding of the Hon ble High Court of Bombay in M/S. GREATSHIP (INDIA) LTD. VERSUS COMMISSIONER OF SERVICE TAX, OIL AND NATURAL GAS COMPANY LTD. [ 2015 (4) TMI 1006 - BOMBAY HIGH COURT] in view of non-taxability between July 2009 and February 2010, insofar as the drilling undertaken by the appellants herein for oil exploration in the continental shelf and exclusive zone (EEZ) is concerned, the impugned orders are set aside. Petition allowed. Central Excise 2022 (6) TMI 962 Levy of excise duty and NCCD under the Central Excise Act, 1944 - levy and collection of National Calamity Contingency Duty (NCCD for short) on tobacco and tobacco products - Whether after coming into force of Constitutional 101st Amendment Act, w.e.f 01.07.2017, the levy of Basic Excise Duty and levy of NCCD which is a duty of excise on tobacco and tobacco products is constitutionally valid? - simultaneous levy of GST under Article 246-A and levy of basic excise duty and NCCD under Article 246 qua tobacco and tobacco products - Excise duty has been levied on a separate and distinct aspect namely manufacture of tobacco products or not? - levy of NCCD as surcharge on tobacco products - levy of excise duty on tobacco and tobacco products is violative of Article 14 of Constitution of India or not? HELD THAT:- It is a well settled rule of statutory interpretation that a non-obstante clause is appended to provision in the beginning with a view to give the enacting part of the Section, in case of a conflict, an overriding effect over the provision or Act mentioned in the non-obstante clause. It is equivalent to saying that in spite of provision of Act mentioned in the non-obstante clause, the enactment, following it, shall have its full operation or that the provisions embraced in non-obstante clause will not be an impediment for operation of the enactment - Article 246 (1) and (2) as well as Article 246A (1) begins with non-obstante clause. In Article 246-A (1), the expression subject to has also been used. The said expression means as one conveying a limitation/restriction on the exercise of power. The said expression neither circumscribes power nor enlarges the same. It is evident that the power under Article 246-A is an independent power and can be exercised not withstanding anything contained in Article 246 and Article 254. Article 246-A is unique as it contains the source of power as well as field of legislation and therefore, the the same is held to be simultaneous power of taxation - In the instant case, the levy of excise duty on tobacco and tobacco products under Entry 84 List I read with Article 246 is independent and co-exists without being impacted by the levy of GST on the same product under Article 246-A as both the Articles are mutually exclusive of each other and can coexist. The Central Excise duty and GST are levied under different sources of power and fields of legislation and do not overlap each other in any manner. For the aforementioned reasons, the issue whether after coming into force of Constitutional 101st Amendment Act, w.e.f 01.07.2017, the levy of Basic Excise Duty and NCCD which is a duty of excise on tobacco and tobacco products is constitutionally valid, is answered in the affirmative. Article 245 and 246 of the Constitution describe the source of power and classify the same into three categories. In contrast Article 246A does not envisage a sole power either to the Union or to the States - the Central Excise Duty and GST have distinct sources of power and fields of legislation and therefore, do not overlap each other. It is pertinent to note that in the writ petition, there are no pleadings that action of levy of excise duty on tobacco and tobacco products amounts to hostile discrimination and is violative of Article 14. In the memorandum of appeal, it has been stated that tobacco and tobacco products are the only goods which have been singled out for hostile and discriminatory treatment subjecting it to two regimes of indirect taxations and therefore, it is violative of Article 14 - The levy of excise duty on tobacco and tobacco products is a matter of public policy and this Court in excise of writ jurisdiction would not interfere with the same. The appellants have failed to demonstrate that levy of excise duty either suffers from manifest arbitrariness or is discriminatory. Accordingly it is held that the levy of excise of duty of tobacco and tobacco products is not violative of Article 14 of Constitution of India. Appeal dismissed. 2022 (6) TMI 912 CENVAT Credit - availment of credit fraudulently without receipt of inputs - whether appellant M/s. Santram Metals Alloys Pvt. Ltd. are eligible to Cenvat credit on the basis of documents which are claimed to have been received along with inputs invoices issued by the units located at Jammu? - HELD THAT:- The officers visited the appellant s factory on the basis of information that the appellant availed the Cenvat credit on invoices, without actual receipt of the goods. However revenue did not find any shortage/excess of inputs or finished goods in factory of Appellant. Officers also seized records/ documents related to the receipt of the goods and availment of cenvat credit. The Revenue could not bring any evidence from the Appellant s factory by which it can be shown that the goods covered under the invoices were not received by them. In the entire investigation the evidences which were relied upon are related to transporters/ RTO check post. On the basis of such third party evidences revenue alleged that goods were not received by the appellant in their factory. Contrary to these evidences the fact that the appellant have recorded the receipt of the goods in their cenvat account, the purchase of the goods under the invoices in question were booked in books of account and raw material receipt account, the said purchased goods also shown for use in manufacturing of dutiable finished goods. Merely on the basis of the transporter records and RTO check-post reports, it cannot be concluded that the inputs were not received by the appellant. In the absence of any evidence to the contrary, we find that the denial of Cenvat credit on the basis of the investigations conducted at the third party end cannot be adopted as the sole basis for denial of credit. The allegation of the Revenue that the appellant have not received the inputs made against the appellant are not sustainable and thus, the impugned orders are liable to be set aside - Appeal allowed - decided in favor of appellant. 2022 (6) TMI 911 Invocation of extended period of limitation - non-inclusion of differential cost of Sponge Iron in the cost of MS Ingots consumed captively for manufacture of MS Round cleared on transaction value during the disputed period - applicability of Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - violation of principles of natural justice - time limitation - HELD THAT:- The show cause notice demands major part of Central Excise duty liability for the period beyond five years from the date of the show cause notice and the Adjudicating authority has also confirmed the same, which has been further upheld by the Ld.Commissioner(Appeals). It is found that the show cause notice is issued on 31.10.2011 while the demands have been confirmed for the period from 01.04.2004 to 31.10.2006 - the provisions of Section 11A of the Central Excise act, 1944 mandates recovery of the tax not paid/short paid for a period of up to five years by invoking extended period. The show cause notice dated 31.10.2011 definitely cannot demand Central Excise duty liability for the period prior to October 2006. To that extent, demand of Central Excise duty liability which is confirmed for the period from 01.04.2004 to 31.09.2006 is liable to be set aside. Remaining demand for the period i.e. October 2006 falling under five years of limitation and beyond one year of limitation - HELD THAT:- Apart from the general aversion, there is no evidence to show that duty has not been paid by way of fraud or suppression of facts with intention to evade payment of duty. The case has been booked on the basis of audit objection by scrutinizing the financial records of the Appellant. It is well settled law and as held by the Tribunal in the case of ADITYA COLLEGE OF COMPETITIVE EXAMINATIONS VERSUS COMMISSIONER OF CENTRAL EXCISE, VISAKHAPATNAM [ 2009 (4) TMI 134 - CESTAT, BANGALORE] and M/S. MEGA TRENDS ADVERTISING LTD. VERSUS COMMR. OF CENTRAL EXCISE SERVICE TAX, LUCKNOW [ 2019 (5) TMI 1027 - CESTAT ALLAHABAD] that extended period of five years cannot be invoked in the case of audit objection. There is no evidence in respect of mala fide intention on the part of the Appellant hence the present show cause notice is barred by limitation. The impugned order is not sustainable and the same is set aside - Petition allowed. Indian Laws 2022 (6) TMI 910 Dishonor of Cheque - validity of cheque - application filed by the petitioner/accused to examine the fingerprint and handwriting expert has been dismissed - HELD THAT:- The application in question had been moved for examining the fingerprint and handwriting expert to compare the handwriting of the signatures and the handwriting in which the remaining particulars of the cheque were filled in as the ink used in affixing signatures on the cheque in question was different from the ink used in filling the remaining particulars of the cheque in question. The response of the complainant therein was that a complaint was filed on 10.10.2014 and the application had been moved after almost five years on 24.07.2019 with a view to delay the trial one way or the other. A perusal of the judgments in T. Nagappa [ 2008 (4) TMI 789 - SUPREME COURT ], would clearly establish that when a contention is raised that the complainant has misused the cheque by filling up the body of the same, even in a case, where a presumption can be raised under Section 118(a) or 139 of the Negotiable Instruments Act, an opportunity must be granted to the accused for adducing evidence in rebuttal thereof. As the law places burden on the accused, he must be given an opportunity to discharge it. The complainant will invariably not disclose that the body of the cheque has been filled up by him or at his instance even where the signatures on the cheque has been accepted by the accused. Without doubt, the holder of the cheque has the authority to fill the same and the cheque would be a valid instrument but to start with, the first step available with an accused to rebut the presumption that the cheque had been issued for the discharge of a legally enforceable debt is by examining a handwriting expert to testify that the signatory and the author of the body of the cheque are different persons. Even if the difference in writing is established, the accused will still have to rebut the presumption under the Act, that the cheque is a valid tender and that he had made the payment to the complainant but despite that fact, the complainant filled up the cheque and presented the same leading to it being dishonoured. The judgment in T. Nagappa s case [ 2008 (4) TMI 789 - SUPREME COURT ] lays down the law more elaborately and accurately than the judgments in Bir Singh s case [ 2019 (2) TMI 547 - SUPREME COURT ], which only reiterate the position of law that the signatory of the cheque need not filled in the body of the cheque for the cheque to be a valid cheque. The application of the petitioner-accused is allowed. 2022 (6) TMI 909 Scope of the Drawer or Maker or acceptor under Negotiable instrument act - recovery from the surety - Recovery of amount jointly and severally, from the first and second Defendants together with interest at 18% per annum on the principal sum - allegation is that the first Defendant repeatedly engaged in fraudulent activities by taking delivery of goods and not paying for the same - HELD THAT:- In the absence of a contract to the contrary (see added emphasis in Section 37 supra), in the context of a bill of exchange, only the drawer until acceptance, and the acceptor thereafter is liable as principal debtor. If this provision is read with Section 33, only the drawee, including a person named in the bill as a drawee for need, or an acceptor for honour are liable as principal debtors. Any other party to the bill would be liable only as surety unless there is a contract to the contrary. In this case, the bill does not indicate that there is a drawee in case of need. The requirements of Section 100 of the NI Act in relation to an acceptor for honour, whereby the bill should be noted or protested for non-acceptance or better security were also not satisfied - As regards the second Defendant, such contract may even impose liability as primary obligor or principal debtor and not only as surety. With this background, the evidence on acceptance should be examined. Section 37 of the NI Act does not prescribe any requirements for a contract to the contrary, whether with regard to form, parties, etc. - The admitted position, in this case, is that second Defendant was the buyer/first Defendant s bank and the third Defendant was the seller/Plaintiff s bank. As the seller s bank, the third Defendant discounted the bill. Subsequently, in correspondence between the seller s bank and the buyer s bank, which were copied to the buyer, the buyer s bank, on being called upon, agreed categorically that it will pay amounts due under the bill of exchange to the seller s bank. In my view, this qualifies as a contract under which the buyer s bank agreed to co-accept the bill for payment as a principal debtor and not as surety in the event of default by the buyer. Thus, it is evident that the first Defendant/Buyer accepted the bill in September 2017 and sought an extension of 30 days to honour the bill. Although such acceptance was not by making an endorsement on the bill as prescribed in Section 7 of the NI Act, for reasons set out earlier, the liability of the first Defendant as the buyer of goods is not contingent on valid acceptance of the bill - When the evidence on record is considered cumulatively, it may be concluded that there is a contract that has the effect of varying the prescription in Section 37 read with Section 33 of the NI Act as regards acceptance of liability as a primary obligor by a person other than the drawee or drawee in need or acceptor for honour. On the facts of this case, however, it does not make a material difference whether the second Defendant s obligation is as principal debtor under a contract to the contrary or as surety because the first Defendant failed or refused to pay for goods received, thereby triggering the liability of the second Defendant even if considered as a surety. Both the first and second Defendants are jointly and severally liable in respect of the claim of Rs.1,02,49,709/-. The Plaintiff has also claimed penal interest of Rs.3,84,154/- on the basis of the communication dated 17.04.2018 from the third Defendant to the Plaintiff, whereby the third Defendant informed the Plaintiff that this amount was being debited from its account as penal interest. On examining the communication dated 17.04.2018(Ex.P12), it is clear that the third Defendant informed the Plaintiff that the sum of Rs.1,02,49,709/- was debited under the OCC account of the Plaintiff so as to close Bill No.0012 - By taking into account the interest rate prevailing from November 2017 till date, interest is awarded at the rate of 9% per annum on the suit claim. In accordance with the loser pays principle, the first and second Defendants are liable to pay costs to the Plaintiff. By taking into account the sum of Rs.1,18,629/-, which was paid as court fee, reasonable lawyer s fee and other expenses, the first and second Defendants are directed to pay a sum of Rs.3,00,000/- as costs to the Plaintiff. The suit is decreed by directing the first and second Defendants to pay the Plaintiff, jointly and severally, a sum of Rs.1,06,33,863/- along with interest at the rate of 9% per annum from 07.11.2017 till the date of realization. The first and second Defendants shall also pay the plaintiff a sum of Rs.3,00,000/- as costs, which includes the court fee of Rs.1,18,629/-, lawyer s fees and other expenses - Application disposed off.
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A: Government's "Make in India" Logo Requires Explicit DPIIT Permission B...

A: China's Reforestation Success: Key Lessons for India in Combating Dese...

A: India's Economic Roadmap: Achieving 7-8% Growth Through Manufacturing,...

A: Kanauj's Ancient Perfume Industry Faces Modern Challenges While Herita...

H: Managing Director's Remuneration Within Companies Act Limits Not Exces...

H: Tax Authorities Cannot Disallow Legitimate Journal Entries Without Evi...

H: Compounding of FEMA Offenses Cannot Be Claimed as Right After Adjudica...

H: Non-bailable warrants quashed in GST evasion case as accused previousl...

H: GST Amnesty Scheme Under Section 128(A) Offers Relief from Interest an...

H: GST Penalties Reversed: Authority Must Compensate Hindu Undivided Fami...

H: GST Assessment Order Challenged as Non-Speaking: Petitioner Granted Li...

H: Revenue Department Must Grant Personal Hearing Before Recovery of Exce...

H: Writ Appeal Partly Allowed: Court Sets Aside Automatic Restoration Cla...

H: Limitation Period for Returns After GST Best Judgment Assessment Is Di...

H: GST Taxpayer Granted Two Weeks to File Rectification Application Under...

H: Assessment Order Without Officer's Signature and DIN Ruled Invalid Und...

H: Property Acquisition Deemed Complete Upon Full Payment, Not Registrati...

H: Income Tax Reopening Under Section 147 Quashed Due to Vague Reasons an...

H: Gold Hire Charges Paid to Directors Deemed Valid Business Expense When...

F: Single Invoice Series Allowed for Multiple Billing Locations Under Sam...

F: Principal Must Pay GST on Materials Sent to Absconding Job Worker Unde...

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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter June 23, 2022

Articles

1. Simplified Practical FAQs on TDS U/s 194R on benefits and perquisites

2. Govt. Clearance is must for appointment as directors in Indian Companies

News

1. Minutes of the Monetary Policy Committee Meeting, June 6 to 8, 2022 [Under Section 45ZL of the Reserve Bank of India Act, 1934]

2. Income Tax Department conducts searches in Rajasthan and Mumbai

Notifications

1. 13/2015-20 - dated 21-6-2022 - FTP

2. G.O.Ms.No.432 - dated 8-6-2022 - Andhra Pradesh SGST

3. 07/2022-State Tax - dated 6-6-2022 - Gujarat SGST

4. (05/2022) FD 07 CSL 2022 - dated 17-6-2022 - Karnataka SGST

5. G.O. Ms. No. 12 - dated 14-6-2022 - Puducherry SGST

6. 461/X1-2-22-9(47)/17-T.C.184-U.P.Act-1-2017-Order-(237)-2022 - dated 20-6-2022 - Uttar Pradesh SGST

7. 67/2022 - dated 21-6-2022 - IT

Highlights / Catch Notes

GST

Court Denies Anticipatory Bail in Fraudulent Tax Credit Case; Evidence Beyond Co-Accused Statement Justifies Further Probe.

Income Tax

Assessment Reopening for Freebies Violation Dismissed; Change of Opinion Not Allowed u/s 147 Proviso.

Assessee's Liaison Office in India Deemed Preparatory, Not a Permanent Establishment, Confirms High Court Under Article (5)(3)(e)(ii).

Court Validates Reassessment u/s 147: No Change of Opinion in Donations Inquiry u/s 35(1)(ii.

PCIT's Approval for Reopening Tax Assessment Invalid Due to Lack of Proper Evaluation u/s 147.

Japanese Company Interest Income Taxation in India: Interplay of Tax Treaty Articles 11(6) and 7(1) Examined.

Income Recognition Under AS-9: Arbitration Award Confirms Addition as Income for FY 2013-14 Despite Non-Scheduling by LANCO.

Supreme Court Rules Loan Waiver for Capital Assets Not Taxable Under Income Tax Act Sections 41(1) or 28(iv.

Assessment Revised u/s 263 for Inadequate Inquiry into Cash Deposits Exceeding Reported Turnover in Savings Account.

Tax Deduction Approved for Chennai Port Container Terminal u/s 80IA(4) as Infrastructural Facility.

CBDT Circular: Income from shares held over 12 months is capital gains; consistent classification required yearly.

Tax Authority's Estimations Overturned Due to Lack of Evidence on Incomplete Bills and Vouchers.

CIT's Section 263 invocation leads to new issues, original concerns deemed unsustainable and dismissed.

Court Vacates Disallowance u/s 14A, Rule 8D Due to Authorities' Failure to Record Satisfaction for Jurisdiction.

Customs

Petitioner Seeks Refund of Rs.2.5 Crores Paid Voluntarily During Investigation, High Court Denies Relief.

Redemption Fines for Seized Goods: Balancing Pre-Adjudication Estimates and State Accruals with Proportional Value Approach.

Court Challenges Valuation of Vessel; Questions Application of Rule 12, Customs Valuation Rules 2007, Citing Lack of Evidence.

Corporate Law

Company Cleared of Charges for Not Disclosing Political Contributions in 2016-17 Due to Format Limitations.

Indian Laws

Accused Must Rebut Presumption of Valid Cheque Despite Writing Discrepancies; Court Allows Handwriting Expert as Defense Witness.

Liability of Drawer or Maker Altered by Contract Under Negotiable Instruments Act; Defendants Jointly Liable for Debt.

IBC

Homebuyers Struggle with Unregistered Sale Deeds Amid Corporate Insolvency; Rights at Risk Under Insolvency and Bankruptcy Code, 2016.

Service Tax

High Court Dismisses Petition Over Disallowed CENVAT Credit Claim Due to Lack of Payment Proof Under SVLDRS-3.

Appellant Denied Service Tax Refund: Services Rendered Domestically, Not Qualified as Exports Under Business Support Service.

Refund Approved for Service Tax on Non-Commercial Sports Stadium Construction; Conditions Apply on Unjust Enrichment & Limitation.

No Suppression of Facts Found in Service Tax Payment Case; Extended Limitation Period Not Applicable, No Penalty Imposed.

Central Excise

Court Upholds Excise Duty on Tobacco; No Violation of Article 14 Found in Levy of NCCD Under Central Excise Act.

CENVAT Credit Denial Unjustified Without Concrete Evidence Beyond Third-Party Transporter Records and RTO Reports.

Case Laws:

GST

Income Tax

Customs

Corporate Laws

Insolvency & Bankruptcy

Service Tax

Central Excise

Indian Laws

Quick Updates:

TMI Tax Updates - e-Newsletter
June 23, 2022