Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 13, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Protective demand - rejection of refund claim - forged ITC - The fact that an appeal has been preferred by the petitioner, which is pending adjudication, persuades to hold that, at this stage, the impugned show-cause notice is premature - the impugned demand notice dated 14.06.2022 is set aside, with liberty to the respondent to trigger the process under Section 75 of the Act and the attendant rules, once clarity is attained with regard to the outcome of the pending appeal lodged by the petitioner. - HC
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Revocation of registration of petitioner - time limit for applying for the revocation of registration was expired or not - The petitioner filed an appeal and possibly, by bona fide mistake, did so on 20.11.2021. This can only be seen as a availing of a wrong remedy by the petitioner. If that date was taken as the application for revocation, the period of the application for revocation can be treated as one filed within time. - This writ petition is allowed - HC
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Benefit of exemption from GST on establishment charges received from the State Government - the applicant undertakes the procurement of drugs, surgical equipment, etc, and raises an invoice in the name of MD, APMSIDC. In addition to the above, the charges are received from the State Government as 'establishment charges' for handling and monitoring the activity. By all means, the principal activity is the procurement of goods and the ancillary activity is the service component of handling and monitoring of the supply, for which establishment charges are received as 2% as mentioned by the applicant. - Benefit of exemption from GST not available - AAR
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Levy of GST - GST on interest - interest amount receivable on the balance land cost - In the instant case the applicant, APIIC had given a facility to the beneficiaries, by extending the service of fixation of annual instalments with an interest Pi 16°/o p.a for delayed payment of 75% of total consideration over a period of time. In such a case, the interest on the credit facility allowed by the applicant is part of the value of taxable supply and shall be liable to GST. - AAR
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Classification of goods - Rate of tax - solvent Extracted spent Earth oil - Considering the basic characteristics of the spent earth oil, it's merely a vegetble oil extracted from spent earth and it is certainly neither a 'mixture of vegetable oils' nor 'a preparation of vegetable oils'. Even more, it becomes immaterial in the present context, whether it's further qualified by the parameter of being 'inedible' or not. - 'spent earth oil' merits classification under Heading 1518, and taxable at 5% - AAR
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Classification of services - pure services or not - Supply of Manpower - the transaction covers the procurement of goods as well in addition to the services, disqualifying the present supply to be covered under the concept of 'pure services'. Hence the exemption clause is not applicable - AAR
Income Tax
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Deduction u/s 80IC - whether the remission of Value Added Tax (VAT) extended to the respondent/assessee pursuant to a scheme formulated by the State Government can be claimed as a deduction under Section 80IC ? - This remission obviously is a business receipt because the assessee is allowed to retain the amount for the growth of the business and, therefore, the VAT remission in the hands of undertaking is very much business income. - HC
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TP Assessment proceedings - period of limitation - the proviso which has altered the original time limit from 24 months to 21 months vide amendment in Finance Act, 2006 with effect from 01.06.2006 and the second proviso inserted by Finance Act 2007, extending the time for completion of assessment, when a reference has been made to TPO, during the course of assessment proceedings, have to be read in tandem and together. Our decision is also fortified by the fact that Section 153 was repealed and substituted with effect from 01.06.2016, where under Section 153 (1) it is clearly mentioned that the period of assessment is 21 months and under 153 (4), it is clearly mentioned that in case of reference under 92CA (1) during the course of assessment proceedings, the period of assessment would be extended by twelve months clarifying the mischief caused on account of the interpretation adopted by the officials. - HC
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Capital gain computation - Since the building was semi finished with only RCC roof and walls, the cost of construction could not be considered at the value of Rs.400 per sft as given by the Registration and Stamps Department. We are of the considered view that the rate of Rs. 400 per sft is for the completed building and not for the semi-finished building. In view of the discussion above, we find no infirmity in the order of the Ld. CIT(A) wherein he has rightly considered the cost of construction @ Rs. 300 per sft which works out to 75% of the SRO value and hence no interference is required - AT
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Deduction u/s 54 - investment in two different houses - The Hon’ble Court’s opinion is that, the physical structure of a new residential house whether it is literal or vertical, should not come in the way of considering the building as a residential house and there can be several independent units can be permitted in a single building for allowance of the deduction u/s 54/54F. But in the present case, the assessee has admittedly claimed deduction u/s 54 with respect to two different houses i.e. purchase of a new house and for repayment of loan borrowed for acquisition of another house which is situated not only in different building but also in a different area. Therefore, the judgment relied by the Ld. Counsel for the assessee is not applicable to the present case. - AT
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Exemption u/ 11 - claim denied as assessee is maximizing profits by selling the properties by auction - the assessee is a charitable entity u/s 2(15) of the 1961 Act, being engaged in the advancement of object of general public utility, with the predominant object of tackling problems of town planning and urban development in a planned manner, and shall be eligible for exemption u/s 11 of the 1961 Act. - AT
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Disallowance of claim of Provision for expenses - unascertained liability or not - By belated receipt of bills, the payment only gets postponed, but not the liability that has already accrued to the assessee. It is also fact that the assessee has been providing for known expenses and losses year after year and the said provision has been verified by the statutory auditors of the assessee company. - the tax authorities are not justified in holding that the Provision for expenses is an unascertained liability. - AT
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Disallowance of brokerage paid on acquisition of investments - whether the expenditure is in the nature of capital expenditure and forms a part of cost of asset - When it is not the claim of the ld AO that valuation of securities held as stock in trade at the end of the year is not valued higher to the extent of commission and brokerage incurred on these securities to determine “at cost” valuation , we do not find any reason to uphold disallowance made by the ld AO. - AT
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Addition u/s 68 on account loan which was held as unexplained cash credit - once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the year or later years. - No additions - AT
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Revision u/s 263 - Error in computing capital WIP - vis a vis the issue of accounting for income by the assessee whether in accordance with the Guidelines of the ICAI, we find that there is no error in the order of the AO who had accepted the method followed by the assessee, i.e Project Completion, on being demonstrated that it was in accordance with the Guidelines issued by the ICAI, which fact has not been controverted by the Ld.PCIT when demonstrated to him also during revisionary proceedings. - Revision order set aside - AT
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Disallowance u/s 14A - CIT-A restricted the addition - when no exempt income is earned or disallowance u/s 14A upto the the exempt income only - Since the assessee could not show to the AO as on the basis of what methodology the suomo to disallowance was made by the assessee, therefore, the AO proceeded to compute the disallowance by applying Rule 8D. A perusal of the assessment order reveals that the same is a detailed and speaking order recording the reasons on the basis of which the AO was not satisfied with the suo moto disallowance made by the assessee. - the explanation to section 14A inserted by Finance Act 2022 being clarificatory in nature has retrospective effect, the impugned order of the CIT(A) is not sustainable in the eyes of law - AT
Customs
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Classification of imported goods - dried pomegranate seeds/anardana - The contention of the Revenue that the Import Policy is in the nature of delegated legislation albeit correct, would not make any difference in the context of the present case as the policy condition in the Export/Import Policy specifically includes pomegranate seeds – as ‘anardana’ under sub-heading 1209.99.00, whereas the Schedule to the Customs Tariff Act, 1975 merely reproduces the Heading and the sub-heading of the HSN, without specifically including or excluding pomegranate seeds under the sub-heading 1209.99. - SC
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Valuation of imported goods - The Commissioner (Appeals) completely failed to advert to the crucial aspect that the importers had themselves accepted the enhanced value. The Commissioner (Appeals) in fact, proceeded to examine the matter as if the assessing officer had enhanced the declared value on the basis of other factors and not on the acceptance by the importers. This casual observation is not based on the factual position that emerges from the records of the case. - the importers had accepted the enhanced value and there was, therefore, no necessity for the assessing officer to determine the value in the manner provided for in rules 4 to 9 of the Valuation Rules sequentially. - AT
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Detention of goods - Antiquity or not - appellant is a manufacturer of handicraft of stone etc - The adjudication order is non-speaking, arbitrary and against the directions of this Tribunal. Accordingly, the impugned order is set aside and the appeal is allowed. The Department is directed to return the goods to the appellant or allow export of goods forthwith - AT
IBC
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Initiation of CIRP - recognition of WhatsApp message - If the operational creditor had acknowledged all other whatsapp msg, and did not deny having received them, there was no question of disowning the one in which it admits all the amount received, particularly when all the whatsapp msgs were sent from the same mobile no. This conduct of the operational creditor puts a big question mark on the fair conduct of the operational creditor. - Tri
Service Tax
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Valuation - non-inclusion of certain expenses incurred by the service recipient - Insurance Auxiliary Services - Illegal recovery of service tax from the insurance agent - though, it can be argue, that the expenses on pre- recruitment training/ re-furbisher training should have been born by the agents themselves in order to obtain a license from the Regulatory Authority, the explanation to Section 67 as above does not provide for inclusion of any expenditure that could have been borne by the service providers - AT
VAT
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Extension of time limit for completion of assessment - Considering from the perspective of administrative law, the time limitations are restrains placed by the legislature to regulate exercise of administrative power. They are intended to enforce discipline in governance and could therefore be compelling guidelines or even mandatory prescriptions. The Court must therefore, examine the provisions in the context of balance between need for executive flexibility and the quest against arbitrariness. It is the duty of the Court to synthesize these competing claims keeping in mind the public interest of good governance. - Matter to be placed before 3 member bench - SC
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Levy of tax on turnover - long drawn argument - Once that explanation came to be furnished and the same was not found to be patently false or bogus, the issue became debatable. Unless evidence were led, the assessing officer could not have brushed aside the explanation furnished by the assessee. - HC
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Levy of penalty - onus to prove - false representation - The allegation that the commodities electrical goods, Restolene paste and Chemicals are not "industrial stores" is not found to have been proven. The issue is not to be decided on a common sense perspective of the matter. Once the charge had been levelled, it became the burden of the revenue to prove it. If some evidence had been led whether documentary or oral, the onus may have shifted on the assessee to lead evidence in rebuttal. That was not done - the merit of the explanation furnished by the assessee cannot be relied by the revenue to sustain the penalty. - HC
Case Laws:
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GST
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2022 (7) TMI 509
Validity of impugned assessment order - the order has been passed rejecting the adjournment application of the petitioner, followed by rectification order - Violation of the principle of natural justice - HELD THAT:- The first notice was given by the respondent no.2 to the petitioner on 15.03.2022 granting 15 days' time to submit reply with respect to the allegedly unverified transaction of Rs.3,19,22,729/-. On 30.03.2022, the petitioner submitted online adjournment application seeking 15 days' time. Undisputedly, that application was the first adjournment application of the petitioner. The cause shown for taking adjournment was not disbelieved by the respondent no.2 and, yet, the adjournment application has been rejected and liability to tax has been assessed in the impugned orders. Thus, it is evident that the impugned orders have been passed by the respondent no.2 in gross breach of principles of natural justice. The impugned assessment order under Section 74 of the UPGST Act dated 31.03.2022 and the rectification order under Section 161 of the UPGST Act dated 11.04.2022 are, hereby, quashed. The matter is remitted back to the respondent no.2 to pass a fresh order in accordance with law, after giving reasonable time to the petitioner to submit his reply and after affording reasonable opportunity of hearing to the petitioner. The writ petition is disposed of.
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2022 (7) TMI 508
Protective demand - rejection of refund claim - forged input tax credit (ITC) - principal plea of the petitioner is that a show-cause notice (SCN) issued earlier i.e., SCN dated 08.02.2021, has already been adjudicated by the concerned authority, via the order dated 12.05.2022 - HELD THAT:- The record shows that the matter was listed before the Court for the first time on 29.06.2022. On the said date, the Court had issued notice in the instant writ petition. The coordinate bench, via the very same order, placed the matter before the roster Bench (which is the instant bench) today i.e., on 06.07.2022. It is clear that once the petitioner s refund claim was rejected on the ground that it was founded on forged ITC, the petitioner would be liable to pay tax, interest and perhaps also penalty, in the event the adjudication order is sustained. The fact that an appeal has been preferred by the petitioner, which is pending adjudication, persuades to hold that, at this stage, the impugned show-cause notice is premature - the impugned demand notice dated 14.06.2022 is set aside, with liberty to the respondent to trigger the process under Section 75 of the Act and the attendant rules, once clarity is attained with regard to the outcome of the pending appeal lodged by the petitioner. Petition disposed off.
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2022 (7) TMI 507
Revocation of registration of petitioner - time limit for applying for the revocation of registration was expired or not - HELD THAT:- The facts of this case show that the registration the petitioner was cancelled on 02.02.2021. The petitioner had time of 30 days from 02.02.2021 to file an application for revocation. The said period of 30 days could be extended by a period of 30 days by the Joint Commissioner, going by the provisions contained in Section 30 of the CGST Act. If one were to apply the directions issued by the Hon ble Supreme Court in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2021 (3) TMI 497 - SC ORDER ] to the periods of limitation prescribed by Section 30 of the CGST Act, it can be held, without any difficulty, that the petitioner had time till 28.05.2022 to file an application for revocation. The petitioner filed an appeal and possibly, by bona fide mistake, did so on 20.11.2021. This can only be seen as a availing of a wrong remedy by the petitioner. If that date was taken as the application for revocation, the period of the application for revocation can be treated as one filed within time. This writ petition is allowed and it is directed that if the petitioner files a fresh application for revocation within seven days from the date of receipt of a certified copy of this judgment, the same shall be treated as one filed on 20.11.2021 and the orders shall be passed by the 1st respondent, treating the application as one filed within time.
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2022 (7) TMI 506
Violation of principle of natural justice - opportunity of personal hearing in spite of specific request made by the petitioner, not provided - HELD THAT:- The impugned order dated is set aside and the matter is remanded back to the officer concerned for passing a fresh order after giving opportunity of personal hearing to the petitioner within four weeks from the date of communication of this order. Petition disposed off.
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2022 (7) TMI 505
Classification of services - rate of GST - Pure services or not - Processing and disposal of the legacy municipal solid waste near Kakulamanu tippa, Tirumala through Bio- remediation Bio- mining as is where is bais to be provided by the applicant to the Superintending Engineer, Tirumala Tirupati Devasthanams, Tirupati - eligibility for exemption under SI.No.3 of Notification No.12/2017 dt: 28.07.2017 as amended. HELD THAT:- We concur with the opinion of the applicant after a thorough examination of the nature of the services of the applicant by classifying them under SI.No.32 of Heading 9994 of Notification No: 11/2017 Central Tax (Rate) dt. 28.06.2017. Whether services provided by the applicant is exempted under SI.No.3 of Notification 12/2017 dated 28.07.2017 as amended? - HELD THAT:- SI.No.3 of the above notification describes pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a panchayat under article 243G of the constitution or in relation to any function entrusted to a Municipality under article 243W of the constitution. The activity of M/s. Zigma Global falls under this exemption notification, but it has been amended further vide Notification No. 16/2021-Central Tax (Rate) dated November 18, 2021, w.e.f. January 1, 2022 - services provided by the Applicant are no longer exempted under SI.No.3 of Notification No.12/2017 dated 28.07.2017 as amended further by Notification No. 16/2021 - Central Tax (Rate), dated: November, 18, 2021.
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2022 (7) TMI 504
Supply u/s 7 of CGST/SGST Act - procurement and distribution of drugs, medicines and other surgical equipment by APMSIDC on behalf of government without any value addition, and without any profit or loss, without even the intent to do business - exemption from GST on establishment charges received from the State Government as per G.O.Rt 672 dated 20-5-1998 and G.O.Rt 1357 dated 19-10-2009 by APMSIDC - exemption as per Entry 3 or 3A of Notification 12/2017-Central Tax (Rate). HELD THAT:- For a transaction/activity to be qualified under 'business', it need not be for a pecuniary/ monetary benefit. Similarly, the absence of profit motive will not shield any transaction from being included under business - in the excerpt from the 'Tender Notice', payment is made and the invoices are raised in the name of MD, APMSIDC, Mangalagiri, Andhra Pradesh, for the supply of goods, which is an established fact as submitted by the applicant himself. Therefore, the procurement and distribution of drugs, Medicines and other surgical equipment by APMSIDC, is essentially a 'supply', as per the provisions of the Act. Whether the establishment charges received from the State Government as per G.O.Rt 672 dated 20-5-1998 and G.O.Rt 1357 dated 19-10-2009 by APMSIDC is eligible for exemption as per Entry 3 or 3A of Notification 12/2017 Central Tax (Rate)? - HELD THAT:- The applicant claims that corporation does not incur any profit or loss on any of the commodities and hence the remuneration earned by Corporation is for the pure services alone. But, as a matter of fact, the applicant undertakes the procurement of drugs, surgical equipment, etc, and raises an invoice in the name of MD, APMSIDC. In addition to the above, the charges are received from the State Government as 'establishment charges' for handling and monitoring the activity. By all means, the principal activity is the procurement of goods and the ancillary activity is the service component of handling and monitoring of the supply, for which establishment charges are received as 2% as mentioned by the applicant. Thus, there is a clear cut involvement of both goods and services in the instant transaction and it is not in any way, a pure service, thus not eligible for exemption.
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2022 (7) TMI 503
Levy of GST on interest - credit facility extended against the taxable supply - annual installment with interest - entire interest income on the balance land cost is being recognized in the Financial Year in which the sale agreement is executed - Supply of goods or supply of services - HELD THAT:- It is clear that APIIC allots the land to the SC/ST/BC entrepreneurs by collecting 25% of the land cost from the entrepreneurs at the time of allotment of land, while the remaining 75 k of the land cost will be collected from the entrepreneur in 8 equal annual instalments @ 16% p.a rate of interest duly providing 2 years moratorium period. The entire interest income on the balance land cost is being recognized in the Financial Year in which the sale agreement is executed. The applicant sought clarification regarding the taxability of the interest amount receivable on the balance land cost. In the instant case the applicant, APIIC had given a facility to the beneficiaries, by extending the service of fixation of annual instalments with an interest Pi 16 /o p.a for delayed payment of 75% of total consideration over a period of time. In such a case, the interest on the credit facility allowed by the applicant is part of the value of taxable supply and shall be liable to GST.
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2022 (7) TMI 502
Levy of GST - renting of Land - whether the activity of Fish/Prawn Farming is covered under services relating to rearing all life forms of animals- by way of renting or leasing of vacant land and eligible for GST exemption as per SI.No.54 of notification No.12/2017 central tax (Rate) dt: 28.06.2017 and corresponding notification under Andhra Pradesh GST? - HELD THAT:- Cultivation of plants is essentially 'agriculture' while 'rearing of all life forms of animals' is 'animal husbandry'. Animal husbandry is the branch of agriculture where animals are reared, bred and raised for commercial purposes like meat, fibre, eggs, milk and other food products. Fish farming is not an agricultural activity as no basic agricultural operation 'directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing', as enumerated in sl.no. 54 (a) is carried out on that vacant land. Furthermore, in case of fish/prawn farming, any of the processes as listed in the sl.no.54 (c) of the notification such as 'tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such other operations which do not alter the essential characteristics of agricultural produce' are not carried out on the vacant land. Hence, fish/prawn farming is not covered under services to agriculture as enumerated under SI.No.54 of the notification. The absence of explicit intention in the lease agreement for the purpose of which the land is used would negate the eligibility criterion for exemption in the instant case. Thus, essentially it is this condition of sl.no 54 (d) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 that is not meted to consider the renting activity of vacant land as services relating to rearing of all life forms of animals.
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2022 (7) TMI 501
Levy of GST or exempt supply? - educational institutions or not - Printing of Pre examination items like question papers, OMR sheets (Optical Mark Reading), Answer booklets for conducting of an examination by the educational boards - Printing of Post examination items like marks card, grade card, certificates to Educational Boards (up to higher secondary) after scanning of OMR Sheets and processing of data in relation to conduct of an examination - Scanning and processing of results of examinations - applicability of Serial Number 66 of Notification No.12/2017-CGST[Rate] dated 28-6-2017 as amended - HELD THAT:- In the instant case, the educational institutions as referred to by the applicant for whom the supplies of the services of printing of examination related material are made/ intended to be made are Andhra University, Visakhapatnam, Satavahana University, Board of Secondary Education, Andhra Pradesh; Krishna University, Board of Higher Secondary Examination, Government of Kerala and Dr B R Ambedkar Open University. All these institutions invariably fall under the category of educational institution as they fulfil the criterion of 'institution providing services by way of,-(ii) education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force. Further, with reference to the services provided by the applicant, they are nothing But 'services relating to admission to, or conduct of examination by, such institution' falling under SI.No.66 of the said exemption notification of No.12/2017-CGST [Rate] dated 28.06.2017 as amended. Thus all the supplies are treated as exempt supply.
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2022 (7) TMI 500
Classification of goods - Rate of tax - solvent Extracted spent Earth oil - whether spent earth oil merits classification under HSN 1518 0039 on which GST tax rate is 12 % as per SI.No. 27 of Schedule II of Notification No.1/2017? - HELD THAT:- Recovery of oil adsorbed in the spent bleaching earth (SBE) is extracted by solvent extraction method using hexane as the solvent. The extracts obtained from the process will be filtered and the solvent will be removed under reduced pressure and at defined temperature in a rotary evaporator. In this extraction method, it is very vital to choose the most suitable solvent for extracting the targeted components because different solvent polarity will dissolve different compounds. The boiling point of hexane is 65 0C which makes it used widely as a solvent. After the extraction, the oil-solvent is then separated between the oil from hexane which requires large amount of energy. To remove the hexane from crude oil, the miscella (the oil/solvent mixture leaving the solvent extractor is commonly referred to in the industry as 'miscella') is treated in a vacuum distillation process. The hexane evaporated during the distillation is condensed and separated from water in a decanter. The recovered hexane is then reused in the extractor. Sl.no 90 is examined in light of the solvent extraction method. The processes adopted as per the entry are boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified. In the instant case, Spent Earth Oil is obtained/ extracted by or blown by heat at certain temperatures, in the presence of food grade solvent Hexane, which is an inert gas. Hence, the processes indicated above apply to the present case on hand. Coming to the Sl.no 27, the first limb of the entry deals with 'Animal fats and animal oils', which is irrelevant to the case at hand, as it's a vegetable oil - the Revenue argues that the second limb is applicable to the present case that spent earth oil is inedible in nature as it's end use is intended for 'soaps and poultry feed'. But, as a matter of fact, the above entry describes 'inedible mixtures or preparation of Vegetable fats or Oils'. Considering the basic characteristics of the spent earth oil, it's merely a vegetble oil extracted from spent earth and it is certainly neither a 'mixture of vegetable oils' nor 'a preparation of vegetable oils'. Even more, it becomes immaterial in the present context, whether it's further qualified by the parameter of being 'inedible' or not. Thus, 'spent earth oil' merits classification under Heading 1518, and taxable at 5 % as per SI.No.90 of Schedule I of notification No. 01/2017 Central Tax (Rate) Dt.28.06.2017.
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2022 (7) TMI 499
Classification of services - pure services or not - Supply of Manpower for preparation and serving of spot Electricity Bills' services provided to Andhra Pradesh Central Power Distribution Corporation Limited for Andhra Pradesh Rural Electrification including distribution of electricity (APCPDCL) - APCPDCL is a 'Local Authority' or not - eligible for exemption from Central Goods and Service Tax and SI.No.3 (Chapter 99) of table mentioned in G.O.Ms.No.588 - (Andhra Pradesh) State Tax (Rate) Dated 12/12/2017 and accordingly eligible for exemption from Andhra Pradesh Goods and Service Tax or not. Whether the services of the applicant are 'Pure Service'? - HELD THAT:- 'Pure services' are not defined in the Act, but as per common parlance they cover all the contracts where there is no supply of goods i.e., to say any supply which is either deemed as services under Schedule II of CGST Act or which are not covered under the definition of goods shall be categorized as pure services - In the instant case, the Scope of the supply as mentioned by the applicant includes supply of both goods and services. Thus the transaction covers the procurement of goods as well in addition to the services, disqualifying the present supply to be covered under the concept of 'pure services'. Hence the exemption clause under entry SI.No.3- (Chapter 99) of table mentioned in Notification No.12/2017- Central Tax (Rate) dated 28.06.2017 is not applicable for the instant case. In view of the above, the rest of the issues like APCPDCL being a 'Local Authority' or the supply being one of the functions entrusted to panchayat under Article 243G of the Constitution, find no relevance to take up for further discussion.
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Income Tax
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2022 (7) TMI 498
Deduction u/s 80IC - whether the remission of Value Added Tax (VAT) extended to the respondent/assessee pursuant to a scheme formulated by the State Government can be claimed as a deduction under Section 80IC ? - HELD THAT:- the facts of the case in Merinoply Chemicals Ltd. [ 1993 (8) TMI 29 - CALCUTTA HIGH COURT ] are more or less identical to the case on hand. In the said case the assessee was a manufacturer of plywood and has its unit in a backward area and was entitled to certain benefits under a scheme formulated by the State Government. However, on facts, the assessee therein claimed the transport expenditure to be incidental expenditure of the assessee s business and while considering the said plea, it was pointed out that the subsidy recoups and that the purpose of recoupment is to make up the possible profit for operating in a backward area and the subsidises were inseparably connected with the profitable conduct of the business and, therefore, the assessee was entitled to the benefit of Section 80IC - The Hon ble Supreme Court in Meghalaya Steels Ltd. (supra) held that the decision in Merinoply Chemicals Ltd. [ 1993 (8) TMI 29 - CALCUTTA HIGH COURT ] correctly appreciated the legal position. Undisputed facts of the case on hand is that the assessee had set up their business in a backward area. Consequently, they were entitled to the benefit of a scheme under which the assessee upon collection of VAT from the customer on sale is entitled to a remission of 99 per cent as issued by the Commercial Tax Department. This remission obviously is a business receipt because the assessee is allowed to retain the amount for the growth of the business and, therefore, the VAT remission in the hands of undertaking is very much business income. The Hon ble Supreme Court in Sahney Steel and Press Works Ltd. [ 1997 (9) TMI 3 - SUPREME COURT ] pointed out that when subsidy is given for the purpose of operating an industry more profitably, the subsidy would be revenue receipt and being revenue receipt, it has to be taxed in accordance with law meaning thereby that the profits and gains derived from or derived by, an industrial undertaking in a case, where operational cost is reduced by providing subsidy, in any form, the profits and gains earned, because of such subsidy, would be eligible for deduction under Section 80IC or 80IB, as the case may be. Hon ble Supreme Court in CIT Vs. Rajaram Maize Products [ 2001 (8) TMI 13 - SC ORDER ] and CIT Vs. Eastern Electro Chemcial Industry [ 1999 (8) TMI 921 - SC ORDER ] held that when a subsidy granted by the Court, is operational in nature, which helps in generation of profits for any industrial undertaking, such a profit, is indeed, covered by the provisions embodied under Section 80IB or 80IC of the Act. In the light of the above discussions, we are of the view that the tribunal had rightly allowed the appeals filed by the assessee and no grounds have been made out to interfere with the said order. Accordingly, the appeal fails and the same is dismissed and the substantial questions of law are answered against the revenue.
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2022 (7) TMI 497
TP Assessment proceedings - period of limitation - sufficient compliance of the procedures as contemplated under Section 153 or not? - Whether the reference to TPO is barred by limitation or not? - HELD THAT:- If the time provided to the TPO to pass an order and for the assessee to submit their objections as per 144C (2) are also considered along with the time period for the DRP and the assessing officer, it is beyond any doubt that the extended period is 12 months and not 9 months. Further, when one proviso provides a time limit and when another proviso extends such time under certain circumstances, it cannot be held that both the provisos are independent. Therefore, the proviso which has altered the original time limit from 24 months to 21 months vide amendment in Finance Act, 2006 with effect from 01.06.2006 and the second proviso inserted by Finance Act 2007, extending the time for completion of assessment, when a reference has been made to TPO, during the course of assessment proceedings, have to be read in tandem and together. Our decision is also fortified by the fact that Section 153 was repealed and substituted with effect from 01.06.2016, where under Section 153 (1) it is clearly mentioned that the period of assessment is 21 months and under 153 (4), it is clearly mentioned that in case of reference under 92CA (1) during the course of assessment proceedings, the period of assessment would be extended by twelve months clarifying the mischief caused on account of the interpretation adopted by the officials. Therefore, when the extended time provided for the department is 12 months, the department cannot contend that it is only 9 months as because the reference was not made in time. Similarly, we also disagree with the findings of the Learned Judge, who has embarked much on the circular regarding the necessity for more time for TPO and the reason for the amendment losing sight of the time provided in the amendment and period within which the reference is to be made. Contention on estoppel - We have already held that the question of limitation is a legal plea, which goes to the root of the jurisdiction of the authorities. A legal plea can be raised at any stage of the proceedings. Waiver of a statutory right - legal plea can be raised at any stage and there cannot be any waiver of a statutory right - In the present case, though the appellant/ petitioner has participated in the proceedings before TPO and the assessing officer, it is their specific stand that they have raised the issue before the DRP and also that, when they submitted their objections and documents to the TPO, the date of reference was not known to them. This stand is not factually objected by the department. Further, there is no acquiescence, waiver or estoppel in taxing laws. The law on this point is well settled. The Levy and collection of tax must be within the four corners of law in compliance with the substantial and procedural mandates of connected legislations. Therefore, we again disagree with the findings of the learned Judge. If the reference is bad, then as a sequitur, all further proceedings, in furtherance of the same are also bad. In the present case, because of a reference after the permissible period, the time line has been missed by the department at every stage. Therefore, the appellant is entitled to succeed in the appeal.
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2022 (7) TMI 496
Capital gain computation - exclude the cost of land while calculating the sale consideration - inclusion of the cost of land relinquished by the assessee in the deemed sale consideration received by the assessee - determination of full value of consideration received on transfer of capital asset (undivided proportionate area of land, constructed area of the flat and common area of the building are also transferred by the assessee as mentioned in the registered sale deed) - whether CIT(A) erred in directing to adopt the rate of constructed area @ Rs. 300 per sq ft without appreciating the fact that the AO has adopted the value as per SRO records, applying the provisions of section 50C which is mandatory when the value adopted by SRO is higher than the actual consideration received by the assessee? - HELD THAT:- We note from the material available on record that the assessee has relinquished her right over 50% of the land to M/s. Datta Constructions and has received a constructed area of 8704 sft including the common areas from M/s. Datta Constructions as per the sale-cum-development agreement. The deemed consideration for relinquishing of the land flows from the cost of construction of the building admeasuring 8704 sft, given by M/s. Datta Constructions to the assessee and hence, the cost of land owned and relinquished by the assessee shall not be included in the deemed consideration. Further, it is noted that M/s. Datta Constructions has delivered an incomplete building which was not disputed by the Revenue. Since the building was semi finished with only RCC roof and walls, the cost of construction could not be considered at the value of Rs.400 per sft as given by the Registration and Stamps Department. We are of the considered view that the rate of Rs. 400 per sft is for the completed building and not for the semi-finished building. In view of the discussion above, we find no infirmity in the order of the Ld. CIT(A) wherein he has rightly considered the cost of construction @ Rs. 300 per sft which works out to 75% of the SRO value and hence no interference is required - Decided in favour of assessee.
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2022 (7) TMI 495
Unexplained investment - Unsecured loans - HELD THAT:- It is apparent from the records that the assessee is given many opportunities to substantiate it s case. But the assessee failed to comply with the notices and appear before the Tribunal. Hence, we are of the view that the assessee is not willing to pursue it s case. Accordingly, we allow the appeal of the revenue on this ground.
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2022 (7) TMI 494
Revision u/s 263 - deduction under section 80P(2)(a)(i)/80P(2)(d) on the FD made with various Co. op Bank Ltd. - HELD THAT:- This tribunal in the case of Shree Keshav Co-operative Credit Society Limited. [ 2022 (7) TMI 79 - ITAT RAJKOT] involving identical facts and circumstances has decided the issue in favour of the assessee. Before us, no material has been placed on record by the ld. DR to demonstrate that the decision of Tribunal as cited above has been set aside / stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of the case referred above nor has placed any contrary binding decision in its support. We hold that there is no error in the assessment framed by the AO under section 143(3) of the Act causing prejudice to the interest of revenue. Thus, the revisional order passed by the PCIT is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed.
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2022 (7) TMI 493
Addition as income from other sources as against agricultural income declared by the assessee - submission of assessee that since the assessee is holding 38.86 acres of agricultural land which is not in dispute, therefore, some benefit of agricultural income should be given to the assessee - HELD THAT:- Holding of 38.86 acres of agricultural land by the assessee is not in dispute since CIT (A) has given a finding on this issue. The allegation of the Revenue is that the assessee failed to produce any evidence regarding the expenditure towards carrying out of such agricultural activities by him, the yield of flowers and vegetables and the sale of such products in the market. At the same time, holding of 38.86 acres of agricultural land is not in dispute. Therefore, in our opinion, some agricultural income should be made available to the assessee. On being a pointed query by the Bench at the time of hearing, the learned Counsel for the assessee submitted that the land is situated at Kurnool and rainfed. Considering the totality of the facts of the case and in the interest of justice, the benefit for the A.Y 2003-04, for the A.Y 2004-05 and for the A.Y 2005-06, as agricultural income, in our opinion, will meet the ends of justice. We hold and direct accordingly. The order of the CIT (A) for the above 3 years are accordingly modified and the AO is directed to give the benefit of agricultural income for A.Y 2003-04, for the A.Y 2004-05 and for the A.Y 2004-06 respectively. Grounds raised by the assessee are thus partly allowed.
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2022 (7) TMI 492
Deduction u/s 54 - assessee has sold residential property and earned capital gain and the assessee has claimed deduction u/s 54 with respect to investment in two different houses i.e. purchase of a new house and for repayment of loan borrowed for acquisition of another house - whether the assessee was eligible for deduction u/s 54 with respect to investment in two residential house property? - HELD THAT:- As per Section 54 if an assessee being an individual or Hindu undivided family, the capital gain arises from the transfer of long term capital asset being building or lands appurtenant thereto and being a residential house the income of which is chargeable under the head of income from house property . But the said capital gain not liable to be taxed if the same has been invested in a new residential house which has been either purchase or constructed within the relevant period of time as prescribed by the section 54. In case the assessee fails or commit a default in nesting the same, then there is a mechanism inbuilt in section 54 which safeguard the interest of revenue according to which if the capital gain were not invested within the due date as mentioned u/s 139(1) aforesaid person, then such capital gain required to be deposited with the separate bank account called a capital gain account scheme. There is another safeguard as prescribed by the provision of section 54 which provides that, if there is a proportionate amount of capital gain is invested in purchase or construction of a new residential house, then only the pro- rata deduction is available to the assessee. In the present case, admittedly assessee has used with the long term capital gain for purchase of a new residential house and also used for repayment of a housing loan which is borrowed on a property located. Thus, the assessee has invested a capital gain in purchase of two residential houses. The assessee can take shelter and claim deduction u/s 54 only when the assessee invests the long term capital gain in purchase or construction of a single residential house. The words a one residential mentioned in Section 54 of the Act is refers to only a one house which can be purchased or constructed to the amount of capital gain. The word a residential house cannot be read or interpreted as more than one house in the present case, wherein both the houses situated in separate buildings and in different places. The Hon ble Court s opinion is that, the physical structure of a new residential house whether it is literal or vertical, should not come in the way of considering the building as a residential house and there can be several independent units can be permitted in a single building for allowance of the deduction u/s 54/54F. But in the present case, the assessee has admittedly claimed deduction u/s 54 with respect to two different houses i.e. purchase of a new house and for repayment of loan borrowed for acquisition of another house which is situated not only in different building but also in a different area. Therefore, the judgment relied by the Ld. Counsel for the assessee is not applicable to the present case. Appeal of assessee dismissed.
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2022 (7) TMI 491
Addition of cash receipts - AO made addition by taking a view that in a survey was conducted u/s 133A on 31.12.2009 at business premises of assessee, certain documents were found and impounded, which shows that the assessee company received Rs. 1.239 crore in cash against booking of residential units apart from consideration received in cheque from 37 persons - HELD THAT:- The cash receipt was not shown in the P L Account for A.Y. 2008-09. Before ld CIT(A), the assessee filed detailed written submissions and the supporting documents to substantiate the facts that the cash components received from the 37 booking parties were included in the books of accounts. On the additional evidences filed with the submissions, the ld. CIT(A) directed the assessing officer to file his remand report. The contents of the remand report and the rejoinder filed by the assessee are not repeated herein as the same has been recorded - we find that in the remand report, the assessing Officer instead of verifying whether cash component is recorded in the books of accounts and has been included in the income and offered for tax or not, took a different stand that the genuineness of amount was not proved by the assessee. The real issue during the assessment was that whether the cash received by assessee has been duly impounded for profit or not? - We find that the ld. CIT(A) rightly appreciated the fact that once the advance as per the impounded material is found matching with the Schedule of advances in the final account. There was no reasonable cause to doubt these cash payments as being outside the books. AO has not brought any evidence that the impounded record did not recorded in the final books. It is interesting to note that survey was conducted by survey team in December 2009 and the notice under section 148 was served on 29th March 2014. The assessing officer kept the matter under cold storage for four years. CIT(A) on appreciation of fact, found that the assessee has included the cash component in his regular books of account and deleted the addition. No contrary fact or law is brought to our notice to take other view. Thus, we affirm the order of ld. CIT(A) on deleting the addition of Rs. 1.239 crore. In the result, the ground of appeal is dismissed. Disallowance of interest expenses - AO made the addition by taking a view that assessee received interest of Rs. 45.41 lacs and paid interest of Rs. 35.72 lacs - HELD THAT:- We find that the CIT(A) has given relief to the assessee by holding that though, the borrowings from HUDCO were for the purpose of project only, however, the account shows that a substantial part of borrowing were diverted to various parties on interest and earned interest of Rs. 45.41 lacs from such advances. It was held the department has not to see whether HUDCO permitted the assessee to do or not. The fact is that about 79% of borrowings from HUDCO were diverted for earning interest income. The total interest expenses incurred during the year is Rs. 60,96,751/-, out of this amount proportionate interest expenses of Rs. 35,72,114/- attributable to earning of interest income, has been duly claimed as a set off against the interest income earned. The balance amount of interest expenses of Rs. 25,24,637/- has been added to work in progress (WIP) which is shown in audited P L account. The interest had earned interest income on parking of spare funds, is taxable, however, the interest expenses for earning it is to be allowable. It was held that the claim of assessee in this regard is totally as per accounting practice and law. We find that the ld CIT(A) granted relief to the assessee on appreciation of facts in proper perspective. No contrary fact or law is brought to our notice to take other view. Thus, we affirm the order of ld. CIT(A) on deleting the disallowance of interest expenses. Revenue appeal dismissed.
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2022 (7) TMI 490
Exemption u/ 11 - claim denied as assessee is maximizing profits by selling the properties by auction, where the person offering maximum bid price is sold the property, and hence the assessee is a commercial enterprise existing solely for profits, and is not a charitable entity within the meaning of Section 2(15) - perusal of the audited accounts of the assessee will reveal that it is engaged in business - assessee is a State Government body constituted by separate Act of State Government - object of the assessee are of general public utilities for management, regulation and control of infrastructure falling within Varanasi - HELD THAT:- As the assessee is rendering various services for which necessary charges are recovered by assessee, which are in discharge of onerous and vast responsibilities entrusted to the assessee under the 1973 State Act, more particularly sub-division of property, plan charges, receipt against map sanction and regularization, compounding charges, strengthening charges, development charges sewerage charges, water charges, Malwa fees, land use conversion, F.A.R Fees, map charges etc. - The assessee has also earned income from allotted properties, which obviously is part of its activities to sell properties under various schemes,to carry out planned development of the development area under its jurisdiction. Much is said by Revenue as to earning of interest income by the assessee which as per Revenue shows that the assessee is earning income on commercial lines and thus now entitled for exemption u/s 11, as is reflected in its audited accounts for the year under consideration (placed in paper book filed by the assessee, which is now placed on record in file) The assessee, like, LDA in the case of Lucknow Development Authorit [ 2013 (9) TMI 570 - ALLAHABAD HIGH COURT] was also constituted under the provisions of 1973 State Act, and its activities are paramateria with the activities of LDA.Thus, it could be said based on detailed analysis of the 1973 State Act, activities carried on by the assessee and ratio of aforesaid decisions, that the assessee is engaged in the advancement of object of general public utility, the predominant object being town planning and development of development area under its jurisdiction, in a planned manner, and not otherwise, with no profit motive, while sale of properties etc. being ancillary objects to its predominant object and the assessee is not engaged in any business, trade or commerce. The assessee authority is also constituted under same statute viz. 1973 State Act, and after perusing the vast and onerous responsibilities assigned to the assessee-authority under the 1973 State Act, its audited financial statements and activities carried on by the assessee as elaborately discussed in the preceding para s of this order, we are also of the considered view that the assessee authority predominant purpose is to tackle problems of town planning and urban development in a planned manner, and not otherwise, with no profit motive as its object, while sale of properties etc. are merely ancillary objects for attainment of main and predominant objects, and it could be said that the assessee is not engaged in any trade, commerce or business. Thus we hold that the assessee is a charitable entity u/s 2(15) of the 1961 Act, being engaged in the advancement of object of general public utility, with the predominant object of tackling problems of town planning and urban development in a planned manner, and shall be eligible for exemption u/s 11 of the 1961 Act. Thus, the appeal filed by the assessee stand allowed.
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2022 (7) TMI 489
TPA - Comparable selection - Functional dissimilarity - HELD THAT:- Infosys Ltd.company earns income from both rendering software services and development of products. Despite rendering diverse services, there are no segmental details in respect of the services rendered. The company provides end-to-end business solutions like business consulting, technology, engineering and outsourcing services. In addition, the company offers software products and platforms for banking industry. The company also invests in products which helped the company establish itself as a credible IP Owner. The company owns seven Edge products/platforms and six other product based solutions - the services rendered by the company are not functionally comparable to the routine SWD services rendered by the assessee - we direct exclusion of this company from the final list of comparables. Larsen and Toubro Infotech Ltd. ('L T') is a product company having significant intangibles and is thus not comparable to captive software development service providers such as the assessee who does not own any significant or non-routine intangibles. Further, L T enjoys significant brand value. As a result of this high brand value, the company enjoys a high bargaining power in the market. - this company is consistently excluded from the final list of comparables in cases of assessees which are placed similar to the assessee.We therefore direct that this company should be excluded from the final list of comparables. Persistent Systems Ltd. is functionally dissimilar as it is engaged in rendering IT services and in the development of software products without there being separate segmental information disclosed in its Annual Report for such activities. In the absence of segmental data being made available as regards the IT services and products offered by it, it is not possible to determine whether the company passes the filters applied by the TPO. The operations of the company predominantly relate to providing software products, services and technology innovation covering full life cycle of product to its customers, which is completely different from the services rendered by the assessee. The company also made significant investment in intellectual property led solutions and also had a dedicated team for research and Intellectual Property ('IP') developments. The company also owns several IP solutions, and during the year under consideration, it acquired four products.Persistent Systems, Inc. which is a subsidiary of the company acquired CloudSquads, Inc during the year under consideration. There acquisitions constitute peculiar economic circumstances for which no adjustment can be made to Persistent's mark-up to eliminate the material effects thereof. Thus this company is not comparable to the assessee and ought to be excluded from the list of comparables for the above reasons. Thirdware Solutions Ltd. company is an IT consulting firm engaged in consulting, design, implementing and support of enterprise applications. The company has significant capabilities in the transaction, analytics and cloud layers of enterprise application. The company also renders industry-specific solutions spanning business applications consulting, design, implementation and support. This company is also engaged in development of software products and earns revenues from sale of user licenses for software applications. These diverse services are reported under one segment without any details being available as regards these services. We find that this company is consistently excluded from the final list of comparables in cases of assessees placed similar to that of the assessee. Akshay Software Technologies Ltd., Maveric Systems Ltd. - We find that this Tribunal in the cases of EMC Software and Services India Pvt. Ltd [ 2019 (12) TMI 1279 - ITAT BANGALORE] wherein in the case of an assessee which placed similar to the assessee, the comparability of this company was remanded to the TPO. We accordingly remand the comparability of this company with the assessee to the AO/TPO for a decision afresh. Non-granting of working capital adjustment - HELD THAT:- As in the light of the settled proposition of law that necessary adjustments are to be made to the margins of comparables to give effect to the differences in the working capital positions of the tested party and of the comparables, the TPO ought to have given the assessee the benefit of the same. We direct the TPO/AO to give working capital adjustment in accordance with law. Selection of MAM - determination of ALP in the trading segment - HELD THAT:- We hold that the assessee is a mere distributor and the method applied by it ought to be adopted. Pertinently, in the assessee's own case for assessment years 2015-16 and 2016-17, the TPO accepted the method applied by the assessee in the trading segment. Since the facts and circumstances involved in the year under consideration remain the same in the assessment years 2015-16 and 2016-17, the assessee's method ought to be accepted and is directed to be accepted. We remand the question of determination of ALP to the TPO/AO for fresh consideration and opting RPM as MAM. Restriction of depreciation claimed on computer software - HELD THAT:- As relying in the case of Computer Age Management Services [ 2019 (2) TMI 37 - ITAT CHENNAI] depreciation at 60% is directed to be granted. Disallowance of provision for warranty - AO disallowed the provision created in excess of the utilization, for the reason that the provision created by the assessee at a fixed percentage of sales does not conform to the tenets of a scientific, empirical and statistically consistent method as conceived by the Hon'ble Supreme Court in the case of Rotork Controls India (P.) Ltd. [ 2009 (5) TMI 16 - SUPREME COURT] - HELD THAT:- the utilization against the provision created for FY 2012-13 of Rs. 54,75,988 during the course of the warranty period is Rs. 10,70,053 in FY 2013-14, Rs. 22,09,813 during FY 2014-15 and Rs. 26,45,128 for FY 2015-16. The total utilization therefore amounts to Rs. 59,24,994 which is more than the provision created of Rs. 54,75,988. The conclusion of the DRP that the provision created and actual utilization was less is therefore incorrect. It is thus clear from the facts of the case that the warranty provision was provided by the assessee on a scientific basis based on past experience, historical trend and satisfies the tests laid down by the Hon'ble Supreme Court in the case of Rotork Controls India (P) Ltd. [Sura] and therefore the disallowance of warranty provision cannot be sustained and the same is directed to be deleted. Appeal by the assessee is partly allowed.
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2022 (7) TMI 488
Delay in payment towards Provident Fund, ESIC and any Other Welfare Fund u/s. 36(1)(va) r.w.s. 43B and 2(24)(x) - HELD THAT:- As contributions made by employees on account of PF ESIC were deposited beyond the due date prescribed under the Act. But at the same time it is admitted fact on record that the said payment has been deposited well before the date of filing the return of income by the asses see company. Identical issue has been decided by the Hon'ble Bombay High Court in case of CIT V. Ghatge Patil Transporters Ltd. [ 2014 (10) TMI 402 - BOMBAY HIGH COURT ] by confirming the order passed by the Tribunal that deduction claimed by the asses see on account of employees contribution to PF ESIC well before the due date of filing return of income is allowable deduction. Hon'ble High Court of Bombay in case of Ghatge Patil Transporters Ltd. [ 2014 (10) TMI 402 - BOMBAY HIGH COURT ] held that both employees' and employer's contribution are covered under amendment to section 43B and covered under judgment of Hon'ble Supreme Court in case of CIT vs. Alom Extrusions Ltd. [ 2009 (11) TMI 27 - SUPREME COURT ] and such deduction claimed by the assessee is allowable. Since the amended provisions contained under section 43B read with section 36(1)(va) of the Act are not applicable for the year under consideration i.e. A.Y. 2017-18 as the amendment will be effective from A.Y. 2021-22 and the AO/Ld. CIT(A) have erred in disallowing the same. Consequently, impugned order passed by the Ld. CIT(A) is set aside and appeal filed by the assessee is allowed.
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2022 (7) TMI 487
TP adjustment on account of advertisement and marketing expenses (AMP) - Primary and secondary adjustment - primary adjustment in respect of AMP expenses relating to marking and sales segment and Rs. 162.02 crores relating to manufacturing segment - TPO also made secondary adjustment of Rs.3.51 crores on the AMP adjustment made in manufacturing segment on account of payment made for training to saloon customers and promotional goods treating the same as advance payments - HELD THAT:- We noticed that the issue of primary adjustment relating to AMP expenses and secondary adjustment on account of training, saloon, promotional goods have been deleted by the Coordinate Bench in assessee s own case [ 2020 (8) TMI 795 - ITAT MUMBAI] taking the view that the primary and secondary adjustments made in the hands of the assessee in respect of AMP expenses are not sustainable. Since there is no change in the facts, following the decision rendered by the Coordinate Benches in the earlier years in assessee s own case, we direct the Assessing Officer/TPO to delete primary transfer pricing adjustment made in respect of AMP expenses in both AY 2016-17 and secondary adjustment made in AY 2016-17. Disallowance of claim of depreciation on good will - HELD THAT:- We notice that the issue relating to claim of depreciation on good will has been restored to the file of AO in the immediately preceding year and hence the decision taken by the AO in that year shall have bearing on this claim made during the instant year. Accordingly, we restore this issue to the file of AO for examining it in accordance with the decision taken by him in the immediately preceding year. Disallowance of claim of Provision for expenses - HELD THAT:- There is distinction between accrual of liability and liability to pay for expenses . There should not be any dispute that the accrued liability cannot be considered as unascertained liability . Accrued liability is an ascertained liability, but the liability to pay it has not arisen. We notice that the the tax officials have been carried away by the fact that the liability to pay shall arise upon the assessee only after the receipt of the relevant bills and have not considered its accrual. The fact that there was an obligation upon the assessee to pay for the liability as a result of past event cannot be denied. By belated receipt of bills, the payment only gets postponed, but not the liability that has already accrued to the assessee. It is also fact that the assessee has been providing for known expenses and losses year after year and the said provision has been verified by the statutory auditors of the assessee company. The Ld A.R submitted that the provision for expenses so created has been accepted by the AO in the past. Accordingly, we are of the view that the tax authorities are not justified in holding that the Provision for expenses is an unascertained liability. As per the accounting principles discussed above, it is an ascertained liability and the same is eligible for deduction while computing total income. Accordingly, we direct the AO to delete the disallowance of Provision for expenses.
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2022 (7) TMI 486
Addition u/s 68 - addition by applying the peak credit theory on the ground that the assessee failed to submit proper explanation in support of the deposits and withdrawals in the Axis Bank Account - HELD THAT:- We find the learned CIT (A) sustained the addition made by the Assessing Officer. It is the submission of assessee that the groups as a whole had already disclosed additional income of Rs.22.15 crores on account of any possible errors/omissions and therefore, the addition again will amount to double addition. We find some force in the above arguments of the learned Counsel for the assessee. We find identical issue had come up before the Coordinate Bench of the Tribunal in the case of Shri Mohd.Naseeruddin the brothers of the assessee. We find after considering the submission of the assessee as well as the Revenue, the Tribunalhas deleted the addition made by the Assessing Officer u/s 68 of the Act towards unexplained cash deposits. Since the facts of the instant case are identical to the facts of the case decided by the Tribunal in the case of the brother of the assessee, therefore, respectfully following the same, we set aside the order of the learned CIT (A) and direct the Assessing Officer to delete the addition. The ground raised by the assessee on the issue of addition u/s 68 is accordingly allowed.
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2022 (7) TMI 485
Disallowance u/s 14A - CIT(A) while deleting the addition made by the AO has noted that assessee has not earned any exempt income during the year under consideration - HELD THAT:- Revenue has not placed any material on record to demonstrate that the findings of the CIT(A) that assessee has not earned any exempt income is factually incorrect. We further find that CIT(A) while deleting the addition had relied on the decision of Jurisdictional High Court in the case of Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] AND IL FS Energy Development [ 2017 (8) TMI 732 - DELHI HIGH COURT] As held that the expression does not form part of the total income in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. As far as reliance placed by Revenue on CBDT Circular dated 11.02.2014 is concerned, we find that Hon'ble Delhi High Court in the case of IL FS Energy Development Co. Ltd.(supra) has held that the CBDT Circular dated 11th May 2014 cannot override the expressed provisions of Section 14A read with Rule 8D. Further the decisions relied upon in written submissions made by Learned DR are not applicable to the present facts. Considering the totality of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed.
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2022 (7) TMI 484
Revision u/s 263 - HELD THAT:- Assessee has taken a sum during the relevant assessment year as interest free loans and advances. The Ld. AR's contention is that these interest free loans and advances have been utilized to reduce the cost of interest arising out of interest bearing funds taken by the assessee. We find from the submissions made by the AR that the interest free advance is being utilized in the business which reduced the cost of interest of the assessee arising out of interest bearing advances. We also find merit in the argument of the Ld. AR that there is no one to one matching of the interest free advances given and taken and hence it is considered from the own pool of funds available with the assessee. We also find from the order of the Ld. AO that the AO has rightly disallowed the sum of Rs. 96,616/- @ 12% on the difference between the interest free advances taken and given amounting to Rs. 8,05,137/-. In view of the above discussions, we find that prima facie the order of the Ld. AO is not erroneous in law and prejudicial to the interests of the Revenue and hence the order of the Pr. CIT is hereby quashed.
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2022 (7) TMI 483
Unexplained investment u/s. 68 - assessee failed to prove the genuineness of the investment - HELD THAT:- It is apparent from the records, that the assessee is given many opportunities for pursuing his case, but the assessee failed to comply with the notices given and appear before the Tribunal. Hence, we are of the view that the assessee is not willing to pursue his case and accordingly dismiss the appeal filed by the assessee.
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2022 (7) TMI 482
Unexplained Investment - assessee filed the return of income along with computation of income stating that the assessee sold gold jewellery of 40 Tulas and used her own savings to purchase the above said property - assessee's representative appeared before the CIT(A) and argued that the transaction was between husband and wife and was no real money exchange in the registration - HELD THAT:- We find from the written submissions made by the Ld. AR that the vacant site was purchased on 19/12/2005. The transactions has been registered as a document styled as General Power of Attorney clubbed with possession . Admitted facts are that the husband of the assessee in order to retain the property got the property registered in the assessee's name and has repaid the loans borrowed by him by sale of gold jewellery and personal savings of the assessee. We also find merit in the argument of the Ld. AR that the transactions are between the husband and wife and there was no actual consideration passed on between the husband and wife. The consideration mentioned in the sale deed was only for the purpose of stamp duty determination and hence it cannot be treated as a consideration received by the husband of the assessee nor paid by the assessee. Considering the peculiarity in the nature of transaction in the instant case, we find merit in the Ld. AR's argument that no real consideration has been transferred by the assessee for the purchase of land. In view of the disclosure made by the assessee while filing the return of income as required U/s. 148 of the Act, we are of the considered opinion that section 69 of the Act cannot be invoked as it applies only to the investments which are not recorded in the books of accounts. Actual transfer of money was not done by the assessee to her husband and since the registration was done only to save the property without real consideration, we are of the considered view that the order of the ld. CIT(A) deserves to be quashed and we allow the appeal of the assessee.
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2022 (7) TMI 481
Validity of reopening of assessment u/s 147 - Notice after a period of four years from the end of the relevant AY - TDS u/s 194C - Disallowance u/s. 40(a)(ia) for non deduction of tax at source - Freight charges paid - HELD THAT:- We find from the order of the Ld. AO that the intimation was processed U/s. 143(1) of the Act and the case was selected for scrutiny under CASS. Subsequently, the assessment was completed U/s. 143(3) on 18/12/2007. The AO had issued a notice U/s. 148 on 20/09/2011 for the AY 2005-06. We find force in the Ld. AR's argument that since the assessment was completed U/s. 143(3) of the Act and no new material has been found by the Ld. AO warranting the reopening of assessment U/s. 147 and the assessee has disclosed fully and truly all the material facts before the Ld. AO. AO has scrutinized the tax audit report which proves that the assessee has not failed to disclose any material facts before the Assessing Officer. The Ld. AO erred in inferring non-deduction of tax mentioned in Form 3CD and has resorted to pass rectification order U/s. 154 of the Act which was later on quashed by the Hon'ble ITAT [ 2011 (4) TMI 1539 - ITAT VISAKHAPATNAM] In the instant case, it is noticed that notice U/s. 148 of the Act was issued on 20/09/2011 for the AY 2005-06. The action of the AO while initiating the notice U/s. 148 of the Act after a period of four years from the end of the relevant AY 2005-06 which expired on 31/3/2009, should have examined the conditions provided U/s. 147 of the Act should have been satisfied for reopening of the proceedings to be valid. The Assessing Officer having verified the facts from Form 3CD as mentioned in the AO's order proves the contention of the Ld. AR that in the instant case, the assessee has disclosed fully and truly all the material facts in the course of original assessment proceedings before the AO. The Assessment Order also has not established that the assessee has not made disclosure of fully and truly all material facts. Since in the present case, the conditions stipulated u/s. 147 of the Act have not met, the reassessment proceedings could not be sustained. See M/S. SCHWING STETTER INDIA P. LTD. [ 2015 (6) TMI 497 - MADRAS HIGH COURT] - Decided in favour of assessee.
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2022 (7) TMI 480
Disallowance u/s 14A - CIT-A deleted th addition - as argued disallowance u/s 14A has to be mandatorily calculated as per rule 8D of IT Rules and no discretion is available with the A.O for estimated disallowances - HELD THAT:- AO has not given any finding about the voluntary disallowance offered by the assessee Hon'ble Supreme Court in case of Maxopp Investment Ltd. ( 2018 (3) TMI 805 - SUPREME COURT] held that whether the assessee in his return has himself apportioned the disallowance under Section 14A of the Act, the learned Assessing Officer needs to record his satisfaction having record the accounts of the assessee and that why it is not correct. That means learned Assessing Officer has to give reasons with regard to the accounts of the assessee about incorrectness of the claim of the assessee. In the present case, we find that AO has failed to carry out the necessary exercise before applying the provisions of Rule 8D of the Rules. There is no reference to examination of accounts of the assessee. There is no finding that disallowance offered by assessee is inadequate as envisaged by the books of assessee - No hesitation in holding that the learned Assessing Officer has jumped the queue by invoking Rule 8D of the Rules without recording any satisfaction a holding that quantum of disallowance offered by assessee is inadequate. We reverse the orders of the learned CIT(A) on this ground and hold that in absence of any satisfaction of the learned Assessing Officer about correctness of the disallowance offered under Section 14A of the Act, no disallowance under Section 14A read with Rule 8D of the Rules can be made. Accordingly, we dismiss ground no. 1 of the appeal of the learned Assessing Officer and allow ground no. 1 and 2 of the appeal of the assessee. Disallowance of brokerage paid on acquisition of investments - Whether CIT Appeal was right in directing to delete the disallowances of brokerage paid on acquisition of investments without appreciating that such expenditure is in the nature of capital expenditure and forms a part of cost of asset? - HELD THAT:- All necessary expenditure incurred by assessee for purchase of stock in trade, like, commission/ brokerage are revenue expenditure only. It is not the case of revenue that, despite these securities being stock in trade, it needs to value at cost or market value whichever is less at the end of the year, and commission or brokerage incurred on its acquisition should have formed part of cost of such securities, subject to available market rate. AO has held that commission or brokerage as far as it relates to unsold stock in trade is not allowable during the year of incurring such expenditure, but would be taken in to consideration when securities are sold. The Central Board of Direct Taxes has issued a circular no. 18 of 2015 provides that in view of the decision of Hon'ble Supreme Court in Nawanshahar cooperative bank Ltd ( 2005 (8) TMI 28 - SC ORDER] wherein it has been held that the investment made by banking companies are part of the banking business which is chargeable to tax under the head profit and gains of business and profession and therefore, expenses relatable to investment cannot be disallowed under section 57(i) of the Act. The applicability of deduction of expenditure under section 28 is also to be treated on the same parameters. When it is not the claim of the ld AO that valuation of securities held as stock in trade at the end of the year is not valued higher to the extent of commission and brokerage incurred on these securities to determine at cost valuation , we do not find any reason to uphold disallowance made by the ld AO. In view of this, we do not find any infirmity in the order of the learned CIT (A) in deleting the above disallowance. - Decided against revenue. Disallowance u/s 35D - AO held that since the issue of shares to Qualified Institutional Buyers, does not tantamount to issue of shares to public and therefore, expenditure incurred is not covered under Section 35D - HELD THAT:- As decided in own case [ 2020 (8) TMI 86 - ITAT MUMBAI ] so far the issue was whether QIB is Public or not . The co-ordinate Bench in that case considered whether the allottees Qualified Institutional Buyers is public or not. The coordinate Bench following the decision of ITAT in Deccan Chronicle Holdings Ltd. (supra) hold that QIB is Public so deduction under Section 35D of the Act is allowable. As we have already held that if the issue of shares is through public Subscription assessee is eligible for deduction u/s 35 D, conversely, if the issue of shares are not Public Subscription i.e. such as Private Placement etc, assessee is not eligible for deduction u/s 35 D of the Act . These facts are not on record whether shares issued to QIB are issued in Public Subscription or otherwise. Therefore, the matter needs to be set aside to the file of the ld AO for fresh examination, to show before him that the issue was a public subscription and not otherwise, onus lies on assessee. Ld AO may examine the same; if shares are issued in Public Subscription , deduction may be allowed. Non-admission of additional ground of appeal - allowance of deduction of discount on issue of shares under the Stock Option Plan - HELD THAT:- As in claiming such expenditure, in the original return of income and now raising an additional ground cannot be said to be willful. Assessee is duty bound to file its return of income with proper due diligence, taking plausible stand about taxability of its income, Otherwise, there are severe consequences of penalties. After the assessee has same judicial precedents in its favour rendered by the courts and tribunals. Later on based on that any claim is made by raising additional ground of appeal, It cannot be said to be not a bona fide action of assessee. Assessee cannot be prevented to do so. No malafide can be attributed on part of the assessee in raising these additional grounds. Hence, according to us, it passes the test of section 250(5) of the Act. Therefore, we hold that raising the additional ground by the assessee is not willful and unreasonable failure. The ld CIT (A) ought to have admitted the same. Fresh claims can be raised before the learned CIT (A) or not? - We find assessee has disclosed the preliminary facts with respect to the employee s stock option scheme in its annual accounts. The details with respect to each of the scheme, options granted during the year, exercised during the year and options lapsed during the year along with the closing balance of each of the scheme are shown. It also shows how in the books of accounts the treatments of stock options granted are made. Various assumptions in arriving in the fair valuation of the options showing risk free interest rate, expected life, volatility and expected dividend are also disclosed. The details also show the market price of the shares of the company at the time of grant of options. Therefore, it cannot be said that the primary facts of deduction for ESOP is not available on record. No doubt, the final computation of allowable deduction is required to be produced and verified by the assessee. However, absence of such allowable deduction at the time of assessment stage cannot deprive the assessee in raising the additional claim Had such deduction already computed at the time of filing of the return of income or during the course of assessment proceedings, the occasion would not have arisen, for making this additional claim before the learned CIT A by raising an additional ground - CIT A is not correct in not admitting the additional ground raised by the assessee in respect of deduction of discount on issue of shares Under ESOP scheme. In the result ground, number 6 of the appeal of the assessee is allowed. Disallowance of QIP expenses by noting whether the expenditure are subject to deduction of tax at source or not? - HELD THAT:- We find that in this year the expenditure has not been incurred by the assessee and therefore the question does not arise of disallowance u/s 40 (a)(ia) and (i) of the act. In the result ground, number 6 of the appeal is not required to be adjudicated. Revaluation of securities held as stock in trade - method of valuation followed by the assessee is to value investment at cost of market value in line with the guidelines issued by the reserve bank of India on valuation of investment - AO held that the guidelines issued by the reserve bank of India are not determinative to grant any deduction to the assessee Under the income tax act. Therefore, the entire depreciation provided in the books was disallowed - HELD THAT:- This issue has been decided in favour of the assessee by the learned CIT A but has given a direction to the AO to verify the accounting entries and the method of valuation adopted by the assessee. This issue has also been considered by the coordinate benches in assessee s own case for assessment year 2006 07 and 2007 08 wherein loss in Revelation of securities classified as held for trading in available for sale is held to be a revenue expenditure and allowable as deduction. We do not find any reason to sustain the order of the learned CIT A for the purpose of verification to the file of the learned AO wherein identical deduction is allowed to the assessee in earlier years also. It would be a futile exercise. Ground allowed. Deduction claimed u/s 36 (1) (viia) - why the deduction is disallowed to the assessee is that assessee does not have any rural branches? - HELD THAT:- As we find that deduction u/s 36 (1) (viia) of the act is not restricted to the banks only having the rural branches - As relying on ING VYSYA BANK LTD. [ 2014 (9) TMI 44 - ITAT BANGALORE] lower authorities were not justified in denying deduction u/s 36 (1) (viia) of the act. Therefore, we set-aside the whole issue back to the file of the learned assessing officer to compute the deduction allowable to the assessee Under this Section and grant the same. In view of this ground of the appeal is allowed. Amortization of premium paid for acquisition of held to maturity securities - HELD THAT:- We fully agree with the learned authorised representative that identical issue has been decided by the honourable Bombay High Court in favour of the assessee in CIT versus HDFC bank Ltd [ 2014 (7) TMI 997 - BOMBAY HIGH COURT]
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2022 (7) TMI 479
Addition based on non-availability of vouchers etc. in support of expenses claimed in books of account - it is contended on behalf of the assessee that during the course of assessment proceedings the assessee was required to produce vouchers to substantiate the expenses from the vouchers so produced - HELD THAT:- As observed that the expenses were not completely vouched and were not fully verifiable. It was contended that the AO has made a sweeping statement without specifying the vouchers that were not available. The reliance was placed on the decision of the Tribunal in the case of Pearl Farben Chem (P) Ltd. [ 2010 (11) TMI 995 - ITAT MUMBAI] and DCIT v. M/s EPCOT Securities (P) Ltd. [ 2011 (3) TMI 1615 - ITAT MUMBAI] . There is no dispute with regard to the fact that the disallowances made by the Assessing Officer are purely ad-hoc and has not specified the vouchers that were not available. Hence, in the absence of such findings, CIT(A) was not justified in confirming the addition. Therefore, the Assessing Officer is directed to delete the addition. Addition of expenditure was on account of renovation and replacing of existing worn-out damaged wooden flooring with new wooden flooring by treating it as capital expenditure instead of Revenue expenditure - HELD THAT:- The contention of the DR is that the assessee could not prove that he has not enjoyed enduring benefit of such expenditure. We find force into this contention of the Sr. DR that there is no material suggesting that expenditure did not give enduring benefit to the assessee in the absence of material that such expenditure was of a regular feature and was claimed in earlier years as well and did not give enduring benefit to the assessee - we see any reason to interfere in the finding of the AO. This ground of assessee s appeal is rejected.
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2022 (7) TMI 478
Ad-hoc disallowance of the expenditure - case of the assessee was selected for scrutiny assessment and by making the assessment u/s. 143(3) AO made disallowance of expenditure @ of 10% - CIT(A) restricted the disallowance to the extent of Rs. 50,000/- out of the total disallowance - HELD THAT:- AO has made disallowance purely on ad-hoc basis, there is no material on record suggesting that the Assessing Officer has pointed out discrepancy in the accounts of the assessee. In the absence of such finding, there was no justification for making disallowance, therefore, direct the Assessing Officer to delete this disallowance. The ground raised in this appeal is allowed.
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2022 (7) TMI 477
Additional evidences in contravention to the provisions of rule 46A of the Income Tax Rules - HELD THAT:- It is an admitted fact that the learned CIT-A has called for the remand report from the AO. However, the AO in the remand report objected on the admission of the additional evidences filed by the assessee before the learned CIT-A. However, we note that the CIT-A admitted the additional evidences filed by the assessee after placing reliance on the judgment of Hon ble Gujarat High Court in the case of CIT vs. Kamlaben Sureshchandra Bhatti [ 2014 (3) TMI 151 - GUJARAT HIGH COURT] We hold that the revenue erred in objecting the admission of the additional evidences. In view of the above, we do not find any infirmity in the order of the learned CIT-A and accordingly we uphold the same. Hence the ground of appeal of the revenue is hereby dismissed. Addition u/s 68 on account loan which was held as unexplained cash credit - HELD THAT:- The identity of the party refers existence of such party which can be proved based on evidences. As such the identity of a party can be established by furnishing the name, address and PAN detail, bank details, ITR etc. The next stage comes to verify the genuineness of the transaction. Genuineness of transaction refers what has been asserted is true and authentic. A genuine transaction must be proved to be genuine in all respect not merely on a piece of a paper. The documentary evidences should not be used as a mask to cover the actual transaction or designed in a way to present the transaction as true but same is not. Genuineness of transaction can be proved by submitting confirmation of the party along details of mode of transaction but merely showing transaction carried out through banking channel is not sufficient. We are conscious about the fact that the provisions of Section 68 of the Act are deeming provisions which implies that there are certain transactions which are not the income of the assessee but these are deemed as income under the relevant provisions of the Act. Thus, we have to see the deeming provisions beyond the facts available on record. However, the question arises for the adjudication whether only the credit entries should only be considered for the purpose of cash credit entries as provided under section 68 of the Act after ignoring the debit entries. To our mind the debit entries cannot be set aside for determining the income of the assessee. We are of the opinion that, once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the year or later years. Thus, in the given facts and circumstances, we hold that there is no infirmity in the order of the Ld. CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed. Addition being difference in Cash Bank balance and being differences in current liabilities balances - HELD THAT:- As it is transpired that there is no grievance of the Revenue. Accordingly, no addition in the given case is warranted to be upheld. Thus, we do not find any infirmity in the order of the CIT-A, and thus direct the AO to delete the addition made by him. Hence the ground of appeal of the revenue is hereby dismissed.
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2022 (7) TMI 476
Delayed payment of Provident fund and ESI of employees contribution - HELD THAT:- Assessee has taken due date for payment as prescribed under the respective provident fund law and not the due date of filing of the return of income, which is now being claimed by the assessee as the due date by which the payment should have been made. Based on this, Central processing centre proposed to make an adjustment u/s 143 (1) (iv) stating that disallowance of expenditure is indicated in the audit report but is not taken into account in computing the total income in the return. Such intimation was sent to the assessee on 21/2/2019. We find that indication was made in form number 3CD but disallowance was not made in the computation of total income. The assessee submitted its response on 02/05/2019 , wherein it was stated that that the issue is covered in favour of the assessee by the decision of the honourable jurisdictional High Court and such payments are allowable if same are paid on or before the due date prescribed of filing of the return of income. Assessee also objected that in form number 3CD only information was provided about payment of provident fund and other Funds and therefore that clause cannot be an item of prima facie adjustment. We find that though there is an inconsistency in the details submitted in form number 3 CD by the assessee of the due date as prescribed in respective provident fund law but now assessee is claiming that such due date for payment should be the due date of filing of the return of income, which is also supported by the decision of the honourable jurisdictional High Court, we find that such adjustment cannot be made by the central processing unit. Thus in the present case the initiation of adjustment by invoking the provisions of Section 143 (1) (iv) was proper but the adjustment in view of the decision of the honourable jurisdictional High Court covering the issue in favour of the assessee is not proper. Accordingly we allow ground number in favour of the assessee and direct the learned assessing officer to delete the disallowance on account of delayed payment of Provident fund and ESI of employees contribution Under the respective law but deposited before the due date of filing of the return of income for the reason that same are not this allowable.
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2022 (7) TMI 475
Delayed employees contribution to provident fund ESI - amount deposited before the due date of filing of the return - whether the Central Processing Centre, Bangalore can disallow the late payment of employees contribution to various funds under section 36(1)(va) read with Section 43B? - HELD THAT:- The facts in the present case shows that form number 3 CD where the statement of particulars required to be furnished u/s 44AB of the income tax act 1961 are prepared by the assessee and is not an audit report. Form number 3CA is the audit report wherein the chartered accountant certified that the details mentioned in form number 3CD are true and correct. In paragraph number 20 (b) the assessee has mentioned that contribution received from employees for various funds as referred to in Section 36 (1) (va) there has been delay in depositing employees contribution to the respective funds comparing the due date of payment as prescribed under the respective laws. Undoubtedly, assessee has taken due date for payment as prescribed under the respective provident fund law and not the due date of filing of the return of income, which is now being claimed by the assessee as the due date by which the payment should have been made. Based on this, Central processing centre proposed to make an adjustment u/s 143 (1) (iv) stating that disallowance of expenditure is indicated in the audit report but is not taken into account in computing the total Global Waste Management Cell Pvt. Ltd.; A.Ys. 17-18 to 19-20 income in the return. We find that indication was made in form number 3CD but disallowance was not made in the computation of total income. In response , it was stated that that the issue is covered in favour of the assessee by the decision of the honourable jurisdictional High Court and such payments are allowable if same are paid on or before the due date prescribed of filing of the return of income. Assessee also objected that in form number 3CD only information was provided about payment of provident fund and other Funds and therefore that clause cannot be an item of prima facie adjustment. We find that though there is an inconsistency in the details submitted in form number 3 CD by the assessee of the due date as prescribed in respective provident fund law but now assessee is claiming that such due date for payment should be the due date of filing of the return of income, which is also supported by the decision of the honourable jurisdictional High Court, we find that such adjustment cannot be made by the central processing unit. We reverse the orders of the lower authorities and direct the AO to delete the disallowance of late deposit of employees contribution of provident fund as same has been deposited before the due date of filing of return of income. - Decided in favour of assessee.
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2022 (7) TMI 474
Exemption u/s 54F - Long term capital asset or not - period of holding - AO observed that assessee has sold residential flat after seven months from its acquisition, therefore, it is a short term capital gain - assessee was asked to explain why the above sale should not be treated as short term capital gain and exemption claimed u/s. 54F - Assessee expalined that he was allotted flat based on the joint development agreement entered with the developer - HELD THAT:- The fact remains that assessee has promised and allotted the flat in the new proposed building in lieu of the right on the land which was subject matter of the development. Assessee surrendered the right on the land based on the allotment of the flat, may not be a specific flat but having a legal promise that assessee will get a flat of 3BHK measuring 1000 Sq.ft. and accordingly, builder has allotted Flat No. 201. Therefore, as held in the case of Pr.CIT v. Vembu Vaidyanathan [ 2019 (1) TMI 1361 - BOMBAY HIGH COURT] it was held that for computing capital gain tax the date of allotment would be the date on which purchase of residential unit can be stated to have acquired property. We are of considered view that assessee has transferred the property with the promise of allotment of flat. Therefore, the date of acquisition should be the date of allotment of flat, in this case the date of entering into the joint development agreement. Therefore, the claim made by the assessee is proper and justified and accordingly, we direct the Assessing Officer to allow claim made by the assessee u/s. 54F of the Act and accordingly, ground raised by the assessee is allowed.
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2022 (7) TMI 473
Disallowance u/s 36(1)(iii) - loans are for capital purposes - Denial of natural justice - Admission of additional evidence - As per AR AO did not appreciate that the assessee had total interest free fund which exceeded the amount of loan granted and the disallowance made by the AO u/s 36(1)(iii) - HELD THAT:- We note that the AO has disallowed u/s 36(1)(iii) of the Act which according to the assessee was made without appreciating the relevant facts which could not be provided to the AO, since assessee didn t get proper opportunity before AO. Thereafter the assessee had to file additional evidence before the Ld. CIT(A)/explaining its claim. After going through the aforesaid facts we are of the opinion that the assessee did not get proper opportunity before the AO. Since we have found in the present case that no reasonable opportunity the assessee got before the AO, we relying on the aforesaid decision of in the case of Tin Box Company ( 2001 (2) TMI 13 - SUPREME COURT] set aside the impugned order of the Ld. CIT(A) and remand the issue back to the file of the AO and direct the AO to frame the assessment de--novo on the same after hearing the assessee in accordance to law. Appeal of the assessee is allowed for statistical purposes.
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2022 (7) TMI 472
Revision u/s 263 - Error in computing capital WIP - assessee despite following the Project Completion Method for accounting of Revenue and having debited interest to the profit and loss account, however the same was not included in the capital work in progress as at the end of the year - AO failed to verify whether the assessee had followed the Percentage Completion Method for recognizing revenue as prescribed by the guidance note issued by the Institute of Chartered Accountants of India(ICAI) for accounting income from Real Estate business - HELD THAT:- Assessee had explained all these facts to the Ld.PCIT also pointing out firstly to him that the assessee had all along been consistently following this method of recognizing Revenue and it had also been demonstrated to him from the Guidance Note of the ICAI(Revised in 2012) on accounting for Real estate transactions, that the project completion method was also recommended in the said Guidance Note in specific circumstances ,which the assessee had demonstrated existed in its case justifying the adoption of even as per the guidance note of the ICAI. This issue too had been duly examined during assessment proceedings and it had duly demonstrated to the PCIT also that the project completion method of revenue recognition followed by the assessee was in compliance with the accounting guidelines issued by the ICAI for Real Estate revised in 2012 in this regard. PCIT has not pointed out any infirmity in the above explanation, but simply dismissed it by stating that the assessee has not followed the Guidelines issued by the ICAI and the AO has not examined the issue, both observations we find are factually incorrect. Therefore vis a vis the issue of accounting for income by the assessee whether in accordance with the Guidelines of the ICAI, we find that there is no error in the order of the AO who had accepted the method followed by the assessee, i.e Project Completion, on being demonstrated that it was in accordance with the Guidelines issued by the ICAI, which fact has not been controverted by the Ld.PCIT when demonstrated to him also during revisionary proceedings. Also the uncontroverted fact that the assessee has been consistently following this method of accounting also renders the acceptance of the same by the AO to be correct and in accordance with law. Appeal of assessee allowed.
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2022 (7) TMI 451
Disallowance u/s 14A - CIT-A restricted the addition - when no exempt income is earned or disallowance u/s 14A upto the the exempt income only - Scope of legislative history of section 14A - what is the effect of the insertion of the explanation to section 14A vide Finance Act of 2022 and whether the same shall operate prospectively or with retrospective effect ? - HELD THAT:- The first and foremost condition for allowance of an expenditure is of fulfilment of the requirements of that provision i.e. unless otherwise provided, it must be incurred wholly and exclusively for business as per the provisions of section 37 or else it must be incurred for earning of taxable income under the head Income from other sources. The intent, purpose and consequences thereof of the insertion of section 14A vide Finance Act of 2001 with retrospective effect came into consideration of the hon ble Supreme court in the case of CIT vs M/s Walfort Share Stock Brokers Pvt. Ltd. [ 2010 (7) TMI 15 - SUPREME COURT ] as stated Section 14A clarifies that expenses incurred can be allowed only to the extent they are relatable to the earning of taxable income.The basic principle of taxation is to tax the net income, i.e., gross income minus the expenditure.On the same analogy the exemption is also in respect of net income.The expenses towards non-taxable income must be excluded.If any of the expenses incurred for earning of taxable income are relatable to exempt income also or common expenses have been used for taxable as well as exempt income, the expenses relatable to exempt income have to be apportioned and disallowed. For the purpose of calculation of disallowance under this rule, the value of investments not only income from which does not but also shall not part of the total income are to be considered. Similarly in Rule 8(2) (iii) the words does not and shall not have been used in respect of exempt income for calculating the disallowance @0.5 % of the value of investments. In our view, the words does not and shall not have their own significance. The words does not refer to the income which has already been received and the words shall not refers to the income which may be received. Only the expenditure relatable to earning of taxable income has to be allowed. If the expenditure has not been incurred for the purpose of earning of taxable income, that cannot be allowed irrespective of the fact that any exempt income has been earned or not by incurring such expenditure. However, in a situation where there is a hotchpotch of the expenditure attributable to both earning of taxable and exempt income, the theory of apportionment applies and the expenditure relatable to earning of exempt income has to be disallowed irrespective of the fact that such an expenditure is otherwise allowable under the respective head. However lately, despite the aforesaid legal position and CBDT Circular No.5 of 2014, the different Hon'ble High Courts of the country ruled that no disallowance is attracted u/s 14A, in case, the assessee has not earned any income not forming part of the total income and that the disallowance u/s 14A cannot exceed the total tax exempt income earned by the assesse during the year. However, in our view, the above interpretation cannot be widened/extended to hold that disallowance of expenditure relatable to exempt income cannot be made if no exempt income is earned or that the disallowance u/s 14A cannot exceed the exempt income received irrespective of the fact that the expenditure claimed is not relatable to earning of chargeable income of the assessee under the relevant provisions of the Act. That, in our view, would be against the respective provisions governing the allowance of deduction out of income chargeable under different heads as provided under the Income Tax Act. Explanation will be applicable retrospectively or prospectively? - As from various decisions of the Hon ble Supreme Court it has been settled that in determining as to whether an amendment is to take effect prospectively or with retrospective effect, the date from which the amendment is made operative does not conclusively decide the question. The Court has to examine the scheme of the statute prior to the amendment and subsequent to the amendment to determine whether an amendment is clarificatory or substantive. Further that an amendment which is clarificatory is regarded as being retrospective in nature and would date back to the original statutory provision which it seeks to amend. A clarificatory amendment is an expression of intent which the Legislature has always intended to hold the field. A clarificatory amendment may be introduced in certain cases to set at rest divergent views expressed in decided cases on the true effect of a statutory provision. Where the Legislature clarifies its intent, it is regarded as being declaratory of the law as it always stood and is therefore, construed to be retrospective. Coming to the facts of the present case assessee has made suo moto disallowance by not following any systematic or specific method of calculation but only on estimation on the basis of disallowance made in assessment orders in earlier assessment years. Since the assessee could not show to the AO as on the basis of what methodology the suomo to disallowance was made by the assessee, therefore, the AO proceeded to compute the disallowance by applying Rule 8D. A perusal of the assessment order reveals that the same is a detailed and speaking order recording the reasons on the basis of which the AO was not satisfied with the suo moto disallowance made by the assessee. In appeal before the CIT(A), the assessee took the plea that he had made strategic investment in group companies for business purposes. However, the ld. CIT(A) relied upon the decision of the Hon ble Supreme Court in the case of Maxopp Investment Ltd. [ 2018 (3) TMI 805 - SUPREME COURT ] and rightly held that dominant purpose theory was not applicable for the purpose of apportionment of expenditure relatable to exempt income. CIT(A) accepted the contention of the assessee that the disallowance u/s 14A cannot exceed the exempt income earned during the year relying upon the decision of the Delhi High Court in the case of PCIT vs. Moderate Leasing and Capital Services Pvt. Ltd. [ 2018 (1) TMI 1401 - DELHI HIGH COURT ] In view of our discussion made above and in view of the fact that we have held that the explanation to section 14A inserted by Finance Act 2022 being clarificatory in nature has retrospective effect, the impugned order of the CIT(A) is not sustainable in the eyes of law and the same is accordingly set aside. The order of the Assessing Officer is hereby restored. The appeal of the Revenue stands allowed.
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Customs
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2022 (7) TMI 471
Classification of imported goods - dried pomegranate seeds/anardana - to be be classified under Heading 0813 of the Tariff entries issued under the Customs Tariff Act, 1975 or under Heading 1209 as claimed by the importers? - HELD THAT:- Chapter Note 3 of Chapter 12 states that for the purpose of Heading 12.09, the seeds specified therein, which include seeds of fruit trees, are to be regarded as seeds of a kind use of sowing . Chapter Note 3, therefore, creates a fiction when it stipulates that for the purpose of Heading 12.09, seeds of fruit trees would be considered seeds of a kind used for sowing . The Note, however, expressly excludes the goods specified in clauses (a) to (d), even when they are for the purpose of sowing. Clause (b) excludes spices and other products of Chapter 9 from the purview of Heading 12.09. Further, the Explanatory Notes to sub-heading 1209.99, also explicitly exclude fruits of Chapter 8, which Chapter subject to the exclusions and the principles of interpretation that apply to resolve conflict of classification of entries, applies to edible fruits and not inedible fruits . The word seed in common parlance and in commercial sense means the grains or ripened ovules of plants used for sowing. The normal function of a seed is to germinate and produce a new plant. Broadly, a seed includes a propagative structure such as a spore, or a small dry fruit. Some fruit and vegetable seeds are edible and are used by human beings as food or even as condiments. However, as explained above, as per the Chapter Note 3 seeds of forest trees, seeds of fruit trees are to be regarded as seeds of a kind used for sowing . In the context of the present case, once the finding of fact recorded by the CESTAT is accepted that anardana is a dried product of local daru or wild pomegranate, which grows in mid hill conditions and which fruit in its fresh form is different from the pomegranate included in clause 7 to Heading 08.10, as this wild pomegranate is not consumed as a fresh fruit, the contention of the Revenue must fail. GRI 3, which in the absence of the Heading, Section or Chapter Notes, prescribes the order of priority as - (a) specific description, (b) essential character, and (c) the Heading that occurs last in numerical order, and even GRI 4 the heading appropriate for the goods to which they are most akin , supports our conclusion and finding - sub-heading 1209.99.00 in the Import Policy correlates to sub-heading 1209.99 to Chapter 12 of the HSN. The contention of the Revenue that the Import Policy is in the nature of delegated legislation albeit correct, would not make any difference in the context of the present case as the policy condition in the Export/Import Policy specifically includes pomegranate seeds as anardana under sub-heading 1209.99.00, whereas the Schedule to the Customs Tariff Act, 1975 merely reproduces the Heading and the sub-heading of the HSN, without specifically including or excluding pomegranate seeds under the sub-heading 1209.99. As a postscript, it is also worth mentioning that pomegranate seeds are one of the items notified and recognised as a spice under the schedule of the Spices Board Act, 1986. Section 2(n) of this Act states that a spice means any of the items specified in the schedule. Furthermore, the data available on the export of anardana from India paints a very different picture and contradicts the contention of the Revenue. Petition dismissed.
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2022 (7) TMI 470
Revocation of Customs Broker's License - collection of bribes - availability of remedy of appeal under Section 139 A r/w Regulation 18 of the Customs Brokers Licensing Regulations, or not - HELD THAT:- The petitioner deserves an opportunity to approach the Customs Excise and Service Tax Appellate Tribunal with his grievances. Since the cancellation of the license of the petitioner causes serious prejudice to the petitioner in as much as he is unable to carry on with his business, it is opined that till the stay application to be filed by the petitioner before the Tribunal is considered, the petitioner is entitled to an order staying the operation of Ext.P6. The petitioner is relegated to the alternative remedy of appeal before the Customs Excise and Service Tax Appellate Tribunal - application disposed off.
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2022 (7) TMI 469
Levy of penalty on Customs Broker - non-compliance of the formalities under Regulation 17 by which respondent Commissioner of Customs was required to issue a notice in writing to the Customs Broker within a period of ninety days from the date of the alleged offence - alleged violation of Regulation 10(o) of Customs Brokers Licensing Regulation, 2018 - violation of basic principles of natural justice - HELD THAT:- Hon ble Supreme Court in the case of UMA NATH PANDEY VERSUS STATE OF UP. [ 2009 (3) TMI 526 - SUPREME COURT] where it was held that Natural justice is essence of fair adjudication and to be ranked as fundamental. Purpose of following principle of natural justice is to prevent miscarriage of justice. Notice and hearing required as per principle of natural justice. The impugned order of imposing of penalty being Annexure P4 to the writ petition is not sustainable in law and the same is accordingly set aside and the matter is remanded back to the respondent Customs Authority to pass a fresh order after giving an opportunity of hearing to the petitioner or its authorized representative - Petition allowed by way of remand.
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2022 (7) TMI 468
Rectification of mistake - error apparent on the face of record - technical nature of the request involved - monetary limit of amount involved in the appeal - HELD THAT:- Keeping in view the technical nature of the request involved in the impugned application and that the subject matter is to be considered by the bench only, the presence of respondent-assessee is held to be not required, the application is to be decided. The monetary limits mentioned in Circular dated 22.08.2019 bearing F.No. 390/Misc./116/2017-JC issued by Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs (Judicial Cell) with respect to the present Tribunal/High Courts/ Supreme Court (respective monetary limit) is mentioned in the table in the said Circular - from perusal is abundantly clear that the instruction dated 22.08.2019 with reference to the monetary limits are not applicable to the Customs matters. Dismissing the impugned customs appeal as withdrawn based upon that Circular on the ground of monetary limit issue is therefore an error apparent on the record of the said final order. Instruction issued by CBIC vide F. No. 390/Misc./163/2010-JC dated 17.12.2015 have also been brought to the notice vide which the monetary limit for filing an appeal before CESTAT in a Customs matter is Rs.10.00 Lakhs. The present appeal relates to refund of an amount of Rs.10,95,224/-which has been ordered by the Adjudicating Authority to be credited to the Consumer Welfare Fund under Section 27 of the Customs Act 1962. The amount involved is more than the monetary limit fixed by Department of Revenue in a customs matter for filing an appeal before CESTAT. In view thereof dismissal of a customs appeal holding monetary limit for such appeal to be fixed as Rs.50,00,000/- before CESTAT is held to be an error apparent on the face of impugned final order. Hence, the rectification in the impugned final order dated 30.12.2021 is hereby allowed. Application allowed.
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2022 (7) TMI 467
Fraudulent availment of Duty Drawback - evasion of payment of export duty - switching of the samples sent / taken to the Central Leather Research Institute (CLRI) for getting favourable certification for the goods as Finished Leather - allegation of fraudulent export of Semi-finished Leather in the guise of Finished Leather - HELD THAT:- The issue in the case on hand is already decided by this Tribunal in M/s. Karpaga Leathers and six others vs. Commissioner of Customs, Chennai in Final Order Nos. 40268-40274/2022 dated 30.06.2022 [ 2022 (7) TMI 104 - CESTAT CHENNAI] where it was held that Revenue has not satisfactorily and effectively shook the first report of the CLRI dated 07.10.2016 and hence, it has to be held that the norms and conditions laid down under the Public Notice No. 21/2009-14 dated 01.12.2009 are satisfied, as opined by the expert. The impugned order is set aside and so also the various demands confirmed therein and the appeal is allowed.
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2022 (7) TMI 466
Valuation of imported goods - application of valuation rules where the importer itself has accepted the enhanced value - Commissioner (appeals) set aside the demand - rejection of declared value - enhancement of value of goods - redetermination of values of assessed goods - HELD THAT:- It is seen from a perusal of section 17(4) of the Customs Act that the proper officer can re-assess the duty leviable, if it is found on verification, examination or testing of the goods or otherwise that the self-assessment was not done correctly. Sub-section (5) of section 17 provides that where any re-assessment done under sub-section (4) is contrary to the self-assessment done by the importer, the proper officer shall pass a speaking order on the re-assessment, except in a case where the importer confirms his acceptance of the said re-assessment in writing. In the present case, the proper officer doubted the truth or accuracy of the value declared by the importers for the reason that contemporaneous data had a significantly higher value. It was open to the importers to require the proper officer to intimate the grounds in writing for doubting the truth or accuracy of the value declared by them and seek a reasonable opportunity of being heard, but they did not do so - It needs to be noted that section 124 of the Customs Act provides for issuance of a show cause notice and personal hearing, and section 17(5) of the Customs Act requires a speaking order to be passed on the Bills of Entry, except in a case where the importers/exporters confirm the acceptance in writing. It is non-consideration of the factual position emerging from the statements made by the respondent that led the Commissioner (Appeals) to believe that the declared value could be rejected only on the basis of reasonable and cogent evidence, which burden the Revenue failed to discharge as it could not prove that the invoice did not represent the true transaction value in the international market. Once the importers had accepted the enhanced value, it was really not necessary for the assessing authority to undertake the exercise of determining the value of the declared goods under the provisions of rules 4 to 9 of the Valuation Rules. This is for the reason that it is only when the value of the imported goods cannot be determined under rule 3(1) for the reason that the declared value has been rejected under sub rule 2, that the value of the imported goods is required to be determined by proceeding sequentially through rule 4 to 9 - the importers had accepted the enhanced value and there was, therefore, no necessity for the assessing officer to determine the value in the manner provided for in rules 4 to 9 of the Valuation Rules sequentially. The general observations made the Commissioner (Appeals) in the impugned order that the value declared in the Bills of Entry were being enhanced uniformly by the Department for a considerable period of time was uncalled for. The Commissioner (Appeals) completely failed to advert to the crucial aspect that the importers had themselves accepted the enhanced value. The Commissioner (Appeals) in fact, proceeded to examine the matter as if the assessing officer had enhanced the declared value on the basis of other factors and not on the acceptance by the importers. This casual observation is not based on the factual position that emerges from the records of the case. Appeal allowed.
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2022 (7) TMI 465
Detention of goods - Antiquity or not - appellant is a manufacturer of handicraft of stone etc. - non-application of mind - non-speaking order - violation of principles of natural justice - HELD THAT:- It is apparent, without resorting to the process of retest as directed by this Tribunal from a reputed Gems and Jewellery Laboratory, the Court below has passed the impugned order without application of mind. The adjudication order is non-speaking, arbitrary and against the directions of this Tribunal. Accordingly, the impugned order is set aside and the appeal is allowed. The Department is directed to return the goods to the appellant or allow export of goods forthwith within a period of 45 days from the date of receipt of copy of this order. Appeal allowed.
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Insolvency & Bankruptcy
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2022 (7) TMI 464
Approval of Resolution Plan - Section 30(6) of the I B Code, 2016 - HELD THAT:- It is seen that the plan submitted by the 1st Respondent is in compliance with the technical and commercial requirement of the RFRP and is also incompliance with the Code as well as the Regulations. The Resolution Applicant enclosed the compliance certificate in Form-H of the Schedule and complied the procedure as per law. This Tribunal is of the view that the commercial wisdom of the Committee of Creditors cannot be interfered with by this Tribunal in absence of any illegality or infirmity or violation of any statutory provisions of law. This Tribunal is of the view that the plan is in accordance with law and do not find any legal infirmity or illegality in the Resolution Plan, which was rightly approved by the Adjudicating Authority. The Hon ble Supreme Court time and again held that the commercial wisdom of the CoC cannot be interfered with by the NCLT and NCLAT. - reliance can be placed in the case of VALLAL RCK VERSUS M/S SIVA INDUSTRIES AND HOLDINGS LIMITED AND OTHERS [ 2022 (6) TMI 173 - SUPREME COURT ] where it was held that we do take this opportunity to offer a note of caution for NCLT and NCLAT, functioning as the Adjudicatory Authority and Appellate Authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. This Tribunal comes to an irresistible and inescapable conclusion that the Company Appeals are devoid of merits - appeal dismissed.
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2022 (7) TMI 463
Production of records/documents - Whether the Liquidator is mandated under the Code to share a copy of the valuation report with the Applicant being an ex-director, shareholder, guarantor of the corporate debtor and member of stakeholders' consultation committee? - HELD THAT:- The Member of Stakeholders' Consultation Committee(SCC) shall have access to all relevant records and information as may be required to provide advice to Liquidator on matters relating to the sale, fixing of reserve price etc. For advising on matters of sale and fixing the reserve price of assets of the corporate debtor, the critical record is their valuation reports. It is not easy to contemplate how without any access to valuation reports, the SCC Member can effectively advise the Liquidator on matters of sale as envisaged under Section 31-A(1). Denying the member of the SCC access to the valuation reports and other relevant documents will only defeat the very object for which the provisions have been framed. This Bench holds that to enable a Member of Stakeholders Consultation Committee to meet the mandate under Regulations 31-A(1) and as laid down in 31-A(5), the copy of the valuation report needs to be shared with the applicant i.e. Member of Stakeholders Consultation Committee, as the same would be crucial in determining the reserve price of the asset of the corporate debtor. Regarding confidentiality of the document, the Liquidator can take an undertaking from the applicant to maintain the same as per his powers under Regulation 7(2)(h) of Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, read with paragraph 21 of First Schedule thereto. This could be in the form of a non-disclosure agreement in which Liquidator could be indemnified in case information was not kept strictly confidential. Application allowed.
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2022 (7) TMI 462
Seeking direction for updation of the revenue records and for carrying out the demarcation of the subject property of the corporate debtor - Section 60(5) of the IBC, 2016 - HELD THAT:- Considering the fact that the plot which was identified through the physical inspection of the plot is much smaller than the size of the land as reflected in the records of the corporate debtor, it is essential to ascertain the exact holding over which the corporate debtor has ownership rights for the purposes of subsequent sale of the liquidation assets. As laid down under section 35 36, it is the duty of the liquidator to take all such measures to protect and preserve the assets of the corporate debtor. For this purpose, a proper demarcation of the properties and updation of revenue records are required. The respondents have therefore, directed to update the revenue records and carry out the demarcation of the subject property of the corporate debtor located at Village Jugiana, Ludhiana in accordance with law. Application allowed.
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2022 (7) TMI 461
Seeking Liquidation of Corporate Debtor - no Interim Resolution Professional was proposed by the operational creditor - Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In view of the satisfaction of the conditions provided under Section 33 of the Code, the Corporate Debtor i.e. Calzini Fashions Limited is directed to be liquidated in the manner as laid down in Chapter III of the Code. Application allowed.
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2022 (7) TMI 460
Liquidation order - COC has rejected the resolution plans submitted by all the Prospective Resolution Applicants - Section 33 r.w. Section 34 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It is noted that to resolve the Corporate Debtor, sufficient efforts were made by the applicant as well as the CoC. Three resolution plans were received from the Prospective Resolution Applicants but the sole member of CoC has rejected all the resolution plans submitted by the Prospective Resolution Applicants in its 9th meeting dated 18.02.2022 (through e-voting dated 20.02.2022). The CoC in that very meeting also resolved to liquidate the Corporate Debtor by 100% vote. It is also resolved that the applicant herein be appointed as a Liquidator. A copy of the written consent of the liquidator is also available on record wherein the applicant has stated that no Disciplinary Proceeding is filed or pending against the Applicant. The CoC also passed the resolution that the liquidator may first explore selling the Corporate Debtor as a going concern under Regulation 39C CIRP Regulations read with regulation 32 (e ) of the Liquidation Regulations and also passed a resolution under regulation 39B of CIRP Regulations read with regulation 2A of Liquidation Regulations to contribute estimate liquidation cost of Rs. 11,00,000/- for 6 (Six) months. There is no option but to pass an order of the liquidation in view of Section 33 (2) of the IB Code as the sole member of CoC has passed a resolution to liquidate the Corporate Debtor. The liquidation of the Corporate Debtor is ordered - application allowed.
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2022 (7) TMI 459
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The Corporate Debtor has paid the full amount agreed between the parties which was acknowledged by the Operational Creditor in its Whatsapp message dated 9th February, 2021. There are no due or outstanding to the Corporate Debtor and the denial of the Operational Creditor at this stage after receipt of the amount is just to extract more money from the Corporate Debtor and that is the reason why the Operational Creditor did not sign the terms of settlement sent to it by the Corporate Debtor. If the operational creditor had acknowledged all other whatsapp msg, and did not deny having received them, there was no question of disowning the one in which it admits all the amount received, particularly when all the whatsapp msgs were sent from the same mobile no. This conduct of the operational creditor puts a big question mark on the fair conduct of the operational creditor. This petition cannot survive any longer and is, therefore, dismissed.
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Service Tax
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2022 (7) TMI 458
Recovery of erroneous refund of the tax paid - petitioner requested the respondents to sanction interest at 6% on the amount deposited by the petitioner during the investigation prior to issue of the show cause notice - works contract - HELD THAT:- Admittedly, only for the period after 1.6.2007 the petitioner was liable to pay service tax. A part of the demand proposing the show cause notice would also have been dropped - The petitioner was liable to pay service tax for the period between 1.6.2007 and thereafter 31.10.2008 under the category of works contract . The demand that was proposed and was confined only to Rs.67,97,827/-. The petitioner has not been paid interest separately on the amount that was deposited pending investigation. To that extent, the petitioner is entitled in interest at the rate of 6% on Rs.57,03,608/- only - The amount of tax which was paid by the petitioner for the subsequent period after 1.6.2007 could not have been refunded. However, curiously it appears to have also has been ordered to be refunded back. This would require a proper examination which fact is not forthcoming either from the petitioner or respondent. The case remanded back to the second respondent to re-examine the issue and pay/adjust interest payable to the petitioner firm and out of the amount paid. If there was an erroneous refund of the tax paid for the period after 31.10.2008, the respondents are directed to take appropriate steps to recover the aforesaid amount from the petitioner - petition allowed by way of remand.
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2022 (7) TMI 457
Valuation - non-inclusion of certain expenses incurred by the service recipient - Insurance Auxiliary Services - Illegal recovery of service tax from the insurance agent - non-inclusion of certain expenses such as business promotion expenses, pre recruitment training expenses, refreshable training expenses sells and other training expenses. Whether the appellants are required to pay service tax on the amount representing the service tax paid by them and deducted by them from the commission payable to their life insurance agents? - HELD THAT:- A plain reading of the provisions, of Section 73A (2) and (3), which have been invoked by the Revenue, it is clear that any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. A correct reading of the provisions indicates that the amount representing service Tax would necessarily mean the service Tax not paid. There is no provision to say that service Tax which has already paid should not be recovered from anyone. Such an understanding is contrary to the principles of indirect taxation - If the person liable to pay Tax, having paid the Tax liable, has an understanding/agreement with his Customers to recover such Tax from them, the provisions of the Section cannot be invoked. Whether the appellants are liable to pay service tax on various expenses incurred in training, business promotion expenses, pre-recruitment etc.? - HELD THAT:- A perusal of provisions in section 67 of FA, indicates that the consideration for the purposes of levy of service tax include any amount that is payable for the taxable services provided or to be provided and any reimbursable expenditure are cost incurred by this service provider and charged - In the instant case it is not the case of the Revenue that the expenses in question were incurred by the service provider i.e. the insurance agents and charged to the appellants. It is the appellants that have incurred the expenditure. though, it can be argue, that the expenses on pre- recruitment training/ re-furbisher training should have been born by the agents themselves in order to obtain a license from the Regulatory Authority, the explanation to Section 67 as above does not provide for inclusion of any expenditure that could have been borne by the service providers - the expenses incurred by the appellants are not goes required to be included in terms of the explanation under Section 67. Therefore, the demands confirmed on the various expenses incurred by the appellants are not sustainable. Accordingly, they need to be set aside. Appeal allowed - decided in favor of appellant.
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Central Excise
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2022 (7) TMI 456
Permission for withdrawal of petition - Maintainability of petition - availability of alternative remedy of appeal - submitted that the petitioners, without challenging the order in original before the CESTAT directly approached this Court and not approached the appropriate appellate authority provided under the Act - Clandestine Removal - wrong availment and utilization of CENVAT credit - HELD THAT:- This Court finds petitioners instead of approaching CESTAT, directly approached this Court, without any valid reason, which is not proper. Anyhow, the petitioners, now sought permission to withdraw the Writ Petitions. In view of the same, the the Writ Petitions are dismissed as withdrawn.
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2022 (7) TMI 455
CENVAT Credit - duty paying invoices - credit availed on the strength of Xerox copies of the purchase invoices - HELD THAT:- The credit was denied only on the basis that appellant failed to produce original copy of invoices. However, there is no dispute as regards the purchase of goods and use thereof in the manufacture of final product. The goods is entered in the purchase accounts and therefore, purchase of goods, receipt and use thereof in the manufacture of final products is not disputed. Merely because the original copy of invoice is not available, it cannot alter the important criteria of availing the credit when it is satisfies other criteria. It is settled that availment of credit on the strength of photo copies of the invoices is just a procedural lapse and cannot be made the basis to disallow the credit. For this reason, in the absence of any evidence that appellant had not received the goods, credit cannot be denied. The reasons for denial of credit is not sustainable - credit allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (7) TMI 454
Extension of time limit for completion of assessment - Power of the Commissioner to allow further time of six months to the Assessing Authority to complete the audit assessment must be exercised before the Assessing Authorities time to conclude the proceedings expire - Assessing Authority could pass the assessment order after the period of six months in expectation of the Commissioner extending the time or not - grant of post-facto extension, ratifying the assessment order passed beyond the period of six months - HELD THAT:- Even where a statute uses varied expression such as deferment or extension , the purpose is only to grant further time to the Assessing Authority to complete the assessment. Therefore, there is no purpose in drawing a distinction in the power of extension by referring to the specific expressions used in different statutes provisioning extending the time. The ratio of the judgment is that, upon the lapse of period provided for the AO to make the assessment, the right of the department to assess gets extinguished. This extinguishment also gives rise to a valuable right to the assessee. Once the right to make assessment extinguishes there is no question of extension of time when the assessment has become time barred. There are similar provisions under the Income Tax Act,1961 i.e., Section 139(2) where this Court in COMMISSIONER OF INCOME-TAX VERSUS AJANTA ELECTRICALS [ 1995 (5) TMI 1 - SUPREME COURT] has taken a view that the power of extension can be granted by an Income Tax officer even after the expiry of the prescribed period. Considering from the perspective of administrative law, the time limitations are restrains placed by the legislature to regulate exercise of administrative power. They are intended to enforce discipline in governance and could therefore be compelling guidelines or even mandatory prescriptions. The Court must therefore, examine the provisions in the context of balance between need for executive flexibility and the quest against arbitrariness. It is the duty of the Court to synthesize these competing claims keeping in mind the public interest of good governance. This Court has traditionally drawn a distinction between statutes prescribing no time limit while performing public duties and statutes providing a time limit. Even with the statutes providing for the time limit, there is a distinction between statutes providing for consequence for not acting with the time limit and statutes not providing for any such consequences. Examination of these factors become necessary for appreciating the procedural ultra vires in the executive action. For the present, we need not say anything more. In the case of STATE OF PUNJAB AND OTHERS VERSUS M/S SHREYANS INDUS LTD. ETC [ 2016 (3) TMI 331 - SUPREME COURT] , it was held that the Commissioner should have exercised the power of extension before the original period of limitation expired on 31.03.2013. - These matters must be placed before a three Judge bench for a consideration of the principle in Shreyans Industries and also on the applicability of the said judgment to the proceedings arising under the Act.
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2022 (7) TMI 453
Levy of tax on turnover - purchase of cotton thread, cotton and leather from unregistered dealers - Whether in view of the facts and circumstances of the case the order passed under Section 22 which requires long drawn argument, the imposition of tax under section 22 of the Act is justified? HELD THAT:- There was no explanation for the turn over of purchase of leather from unregistered dealers that remained from being taxed. The provisions of Section 3(AAAA) apply at their own force to each case where purchase is made from an unregistered dealer. Once the assessee disclosed the same in its books of accounts that were examined during the course of assessment and which therefore, became part of the assessment record, the mistake is purely on account of an oversight. To that extent the reasoning given by the revenue authorities and the Tribunal cannot be faulted. Similar is the case with cotton thread. It is not the case of the assessee that it had disclosed manufacture of cotton thread in its books of accounts. In fact, the assessee set out a case that it had wrongly shown cotton thread in its trading account by way of purchase from other dealers. In absence of any invoice etc. to establish the purchase made by the assessee, and in face of his own disclosure that it had purchased the same, again the authorities or Tribunal have not erred in treating the same to have been purchased from unregistered dealer. There was also no debate or doubt as to that. However, that process of reasoning may never apply to the additions made on account of purchase of cotton. It is so because in the course of proceedings under Section 22, the assessee furnished a specific explanation that though, that cotton had been purchased by him from unregistered dealer, it was tax paid inasmuch as the unregistered dealer had purchased the same from a registered dealer M/s Sanjay Kumar of Agra. Once that explanation came to be furnished and the same was not found to be patently false or bogus, the issue became debatable. Unless evidence were led, the assessing officer could not have brushed aside the explanation furnished by the assessee. The question of law raised by the assessee is answered accordingly. The revision succeeds in part.
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2022 (7) TMI 452
Levy of penalty imposed under Section 10A read with Section 10(b) of the Central Sales Tax Act, 1956 - absence of burden discharged by the revenue to establish false representation on part of the assessee - HELD THAT:- While all false declarations are wrong, all wrong declarations are not false. Penalty under Section 10A read with Section 10(b) of the Act is imposable only upon issuance of a false declaration and not on a mere wrong declaration. The burden to establish issuance of false declaration would always remain on the revenue. It is so because in the context of penalty proceedings, the charge has to be proven by the revenue. Therefore, the merit of the defence set up by the assessee would not be decisive in a case such as this where the revenue has failed to lead any evidence in support of the charge levelled by it that the assessee had made a false declaration. The allegation that the commodities electrical goods, Restolene paste and Chemicals are not industrial stores is not found to have been proven. The issue is not to be decided on a common sense perspective of the matter. Once the charge had been levelled, it became the burden of the revenue to prove it. If some evidence had been led whether documentary or oral, the onus may have shifted on the assessee to lead evidence in rebuttal. That was not done - the merit of the explanation furnished by the assessee cannot be relied by the revenue to sustain the penalty. Revision allowed.
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