Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 22, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
Wealth tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Repetition of proceedings - The Respondents in the instant case being not aggrieved by the First Appellate Order dated 16-01-2021, did not challenge the same or availed remedies available under the law but accepted the same and allowed the same to attain finality; thus now they cannot be allowed to turn around and re-agitate a matter afresh which has already come to an end by due process of law. - HC
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Exemption from GST - residential dwelling or not - PG/Hostel Rent paid by inhabitants - PG/Hostel Rent paid by inhabitants do not qualify for GST exemption, as the services provided by applicant are not akin to renting of residential dwelling for use as residence. - AAR
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Scope of supply - charging of battery - activity of supply of electrical energy - The charging of electric battery is an activity amounting to supply service, i.e., ‘Battery Charging Service’ for motors. - The ‘supply of electrical energy’ and ‘service charges’ together are to be treated as ‘supply of service’. - Liable to GST @18% - AAR
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Scope of advance ruling application - place of services - services provided by the applicant to the entities located outside India - the testing activities related to HAG items, meaning thereby that the R&D service is performed on the goods provided by HAG and hence as far as this portion of the service is concerned, it would fall within the ambit of sub-clause 3 of section 13 of IGST Act. - Benefit of Zero rated supply is available - AAR
Income Tax
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Reopening of assessment u/s 147 - reason to suspect v/s reason to believe - The reasons disclosed and placed on record do not allude to the material that was available to the AO which persuaded him to form a belief that income in the concerned AY, pertaining to SGCPL, which was otherwise chargeable to tax, had escaped assessment. - The reasons did not advert to the material that was available to him and which persuaded him to form a belief that income chargeable to tax had escaped assessment. - HC
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Penalty u/s 271FA - non-compliance with the provisions of Section 285BA(1)(b) - non filing of a return in time - The respondents had specifically considered the contention raised by the petitioner and had held that the reasons stated by the petitioner do not constitute a reasonable cause to excuse their delay of 525 days in submitting the returns. It is also clear that though the provision permits the imposition of Rs.500/- per day as penalty only Rs.100/- per day has been inflicted. - Petition dismissed - HC
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TDS u/s 194A - It is abundantly clear that the interest paid or accrued on the Term Deposit Accounts under Saving Bank Account of JKSRRDA was the money belonging to the Central Government and, therefore, exempted from deduction of income tax at source u/s 194A. - Thus raising a demand on account of failure of the assessee/Bank to deduct tax at source u/s 194A on the interest income accrued on the Term Deposit Accounts of the JKSRRDA was legally and factually flawed - HC
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Reassessment u/s 147 - Applicability of Advance Rulings in the own case of assessee or Advance Rulings in case of any other assessee - In view of the clear mandate of Section 245-S of the Act that a ruling would apply and be binding only on the Applicant and the Revenue in relation to the transaction for which it so sought, it is clearly evident that the Assessing Officer has ignored this clear mandate. The ruling in Cyril E. Pereira (supra) cannot as a matter of plain intendment and meaning of Section 245-S of the Act displace the binding character of the ruling rendered between Petitioner and the Revenue. - HC
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Revenue recognition - method of accounting by way of 'project completion method' - Tribunal had rightly considered that the method of accounting followed by the assessee was consistent and the addition made by the assessing officer was not in accordance with the same and hence was not correct and committed no error in giving direction to delete the same. - HC
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Disallowance of claim of commission payment - Liability to deduct TDS for making payment to Non-Residents - withholding tax - where payment of commission has been made by the assessee to non-resident agents for rendering services of procuring sales order etc. it was not FTS but business profit and in absence of PE of such agents in India, such commission payment was not taxable in India. - AT
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TP Adjustment - Interest on interest outstanding/interest receivable - The interest on a loan is a compensation received towards the utilisation of funds given by the assessee to its AE and the interest element on the said loan if not paid improves the liquidity position of the AEs and become part and parcel of the said loan transaction. Therefore, no infirmity in the action of the TPO in treating the interest receivable as a loan outstanding and charging interest on the same accordingly. - AT
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Computation of Long-term Capital Gains - non considering the INDEX COST of assets purchased u/s. 48 - The benefit of indexation while computing long term capital gains had been statutorily provided to the assessee. - AO directed to grant the benefit of indexation to the assessee while computing long term capital gains after verifying the veracity of the workings thereon. - AT
Customs
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Benefit of exemption - foreign going Vessel - Import of ship spares in large quantity onboard the vessel - It is an Ocean-Going Vessel registered with the Director General of Shipping. Since, the Notification allows spares for repairs of ocean-going vessels by a ship repair unit registered with the Director General of Shipping, Government of India, and the question of denying this benefit does not arise. - AT
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Classification of imported goods - earphones with microphones - the earphone will qualify as an accessory which can be used with cellular mobile phone as well as other electronic devices. When used with the cellular mobile phone, it will be an accessory to mobile phone but will not be its part - The benefit of the exemption notification cannot be denied to earphones- AT
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Classification of imported goods - Samsung Galaxy Tab (GT-P1000) - Importer have accepted the classification of the impugned goods to be CTH 84713090 as ordered by the original authority - The appeal of the department on the issue of classification succeeds. - AT
Corporate Law
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Workmen's claim for interest on wages - Company under liquidation - without a valid contractual provision or statutory basis supporting the payment of interest, and considering the nature of the workmen's claim, it is not justifiable to equate their situation with that of the secured creditors for the purpose of interest payment. Interest payment for workmen would only arise if there is a surplus, which triggers the application of Rule 179 and not otherwise. - HC
IBC
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Recovery of outstanding electricity dues - Secured Creditor - Section 78 enacts, that when a company whose property is subject to charge, fails to register it, the charge holder (or the person entitled to the charge over the company’s assets) can seek its registration. Section 3 (31) of the IBC defines “security interest” in the widest terms. In this court’s opinion, the liquidator cannot urge this aspect at this stage, because of the concurrent findings of the NCLT and the NCLAT that PVVNL is a secured creditor. - SC
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Seeking dismissal of the application filed under Section 7 of the IBC - barred by limitation or not - The date of declaration of the loan account as NPA is 31.05.2011. - Long litigation history including proposal for rescheduling of loan etc. - Further communications between the parties, respondent No. 2 agreed for settlement of its dues under OTS vide letter dated 22.04.2016. It was thereafter that application under Section 7 of IBC was filed before NCLT in the year 2018, to be precise on 29.10.2018, which ultimately led to the order dated 20.09.2019. Therefore, it cannot be said that the application under Section 7 of IBC is barred by limitation. - HC
Service Tax
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Rejection of refund claim - amount paid under protest - tax has been included in the gross amount collected as insurance premium or not - The computation of premium is a complicated exercise involving several aspects and factors as well estimation of probability; it is, therefore, not possible to conclusively conclude that inclusion of tax liability would have altered the premium payable for the service. A normal commercial transaction cannot be equated with insurance service and the extent to which the premium represents consideration for insurance cover. - AT
Central Excise
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Denial of rebate claim - non-compliance with the conditions for exporting the goods within 6 months of its clearance from the factory/warehouse - If the respondents have taken an inordinately long period of time in deciding the application for extension of time, the benefit of the same tilts more towards the petitioner as the notification is a beneficial notification and the benefit of which should go in favour of the Assessee. - HC
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Exemption to Agro Waste Fired Boilers - parts manufactured by each unit constitute a full boiler or not - Merely because the Trade Notice uses the words CKD/SKD condition, it does not mean that the entire boiler has to be made under one roof and then knocked down and transported to the site of the customers. The difficulty represented by the trade and the intention of issuing the Trade notice has to be understood. - AT
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Association of brand name with manufacturer - In the present case the appellants claim that it was only a house mark for identification. But their advertisements and marketing strategies employed clearly go to prove that they created a connection between the product and the manufacturer to attract the customers - Therefore, it’s clear that the articles of jewellery manufactured and sold by these appellants was branded jewellery. - AT
Case Laws:
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GST
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2023 (7) TMI 877
Appealable order or not - refusal on the part of respondent no. 7 to accept and admit appeals sought to be filed by the petitioners - HELD THAT:- Having perused the provisions under Section 107 of the CGST Act, it is opined that there is substance in the submissions as urged on behalf of the petitioners. The petitioners certainly have a legitimate right to file an appeal being aggrieved by intimations dated 17th/18th May 2022 issued in Form DRC- 05 as noted above. Merely because electronic portal does not make a provision for filing of an appeal against an intimation issued in Form DRC-05, the petitioners cannot be faulted and for such technical reason, it cannot be countenanced that a statutory right of appeal available to the petitioners is rendered otiose. In the above circumstances, till an appropriate provision is made for acceptance of such appeal electronically, the filing of such appeal is required to be permitted by the manual method. Petition disposed off.
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2023 (7) TMI 876
Repetition of proceedings - Attempt to initiate fresh adjudication proceeding in respect of the self- same cause of action which has already attained finality by First Appellate Order - two show cause notices were issued for the same period for the self-same cause of action (except March, 2020) issued by two different authorities - delay in filing returns on which interest is demanded. HELD THAT:- Section 107(16) of the JGST Act provides that every 1st appellate order passed thereunder shall be final unless subjected to Revision under Section 108, appeal to Tribunal under Section 113 or appeal to High Court under Section 117 or appeal to Supreme Court under Section 118 of the JGST Act. In the instant case, since the 1st appellate order is not subjected to Section 108, Section 113, Section 117, Section 118; thus, by virtue of sub-Section (16) of Section 107, it has attained finality. The Hon ble Apex Court in the case of CCE Vs Prince Gutkha Ltd. [ 2015 (7) TMI 964 - SUPREME COURT] has held that adjudicating authority dropping earlier demand accepting explanation of Assessee, issuance of second show cause notice on same cause of action, not permissible. In the case of COMMR. OF C. EX., VADODARA VERSUS GUJARAT STATE FERTILIZERS CHEM. LTD. [ 2008 (7) TMI 61 - SUPREME COURT ] it is held by the Hon ble Apex Court that order of the Tribunal has attained finality due to non-filing of appeal by the department. Hence, appeal on the same issue is not maintainable which has already attained finality. The Respondents in the instant case being not aggrieved by the First Appellate Order dated 16-01-2021, did not challenge the same or availed remedies available under the law but accepted the same and allowed the same to attain finality; thus now they cannot be allowed to turn around and re-agitate a matter afresh which has already come to an end by due process of law. Having regard to the discussions made, the Revenue cannot re-agitate and issue fresh show cause notices again for the same cause of action covering same period against which the Order passed by the first Appellate Authority has been accepted by the Respondents and same has attained finality. The actions of the Respondent No.2 and the Respondent No.3 is therefore bad in law and is without jurisdiction and is further hit by the principles of res judicata and is clearly not permissible under the law. As stated herein above, after passing of the 1st appellate order, only course available with the Respondents were to challenge the first Appellate Order dated 16-01-2021 before the Appellate Tribunal under Section 112 of the JGST Act, if at all aggrieved, and therefore, the impugned Show Cause Notices are wholly without jurisdiction, without authority of law and also barred by principles of res-judicata. Demand of interest with respect of March, 2020 - HELD THAT:- The demand of interest of Rs.6,63,025/- in the impugned first Show Cause Notice dated 16-09-2022 (Annexure-1) is also erroneous and is contrary to State GST Notification No.451 dated 29-07-2017 as amended by Notification No.31/2020-State Tax dated 25-06-2020 and corresponding Central GST Notification No.13/2017-Central Tax dated 28-06-2017 as amended by Notification No.31/2020-CT dated 03-04-2020. As per Notification No.31/2020-State Tax dated 25-06-2020 and Notification No.31/2020-CT dated 03-04-2020 as a COVID-19 relaxation Measures, the rate of interest for the month of February, 2020 to April, 2020 was reduced to Nil for first 15 days of delay and 9% thereafter in place of 18%, for registered persons having annual turnover above Rs.5.00 Cr. Since the annual turnover of the Petitioner is above Rs.5.00 Cr.; hence, they are entitled to the benefit of said notification. Considering the extension of limitation for filing of GSTR-3B returns and reduction in the rate of interest, amount of Interest demand should have been Rs.12,791.44/- only for the month of March, 2020 as against demand of interest of Rs.6,63,026/- in the impugned Show Cause Notice dated 16-09-2022 for the month of March,2020. Thus; the petitioner is liable to pay interest of Rs.12,791.44/- only for the month of March, 2020 as against demand of interest of Rs.6,63,026/-.Thus, the petitioner is directed to pay the same amount within a period of two weeks, if not paid, from the date of receipt/production of copy of this Order. Both the impugned show-cause notices, are hereby, quashed and set-aside - Application allowed.
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2023 (7) TMI 875
Availment of excess Input Tax Credit (ITC) - contravention of the provisions of Section 16 (2) (c) of the CGST Act - time period prescribed under Section 107 (4) of the CSGT Act to challenge the impugned orders by way of a statutory appeal has lapsed - HELD THAT:- There is wilful negligence on the part of the petitioner because it has failed to submit the ASMT 10 form on time, avail the benefit of getting the alleged error rectified under Section 39 (9) of the CGST Act and has not challenged the impugned orders in appeal. Without taking recourse to the above statutory remedies, the petitioner has assailed the impugned orders in the writ petition, that too after a year. Although there is no time period prescribed in the Constitution of India to file a writ petition, it is trite that a writ petition is to be filed within a reasonable time. What the petitioner has failed to do directly through a statutory remedy cannot be permitted to be done indirectly through a writ petition, that too at its own sweet will and pleasure. This Court is not impressed with the excuse put forth by the petitioner that because its statutory remedy is time-barred, this Court may exercise its discretionary powers and reexamine the impugned orders. A Constitutional Court is not an open Forum to be approached at the whims and caprice of a litigant. This Court s extraordinary power is to be exercised sparingly and in exceptional cases. There are no circumstances in the present case to entertain the writ petition under Article 226 of the Constitution of India. Petition dismissed.
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2023 (7) TMI 874
Maintainability of petition - availability of alternative remedy of appeal - non-constitution of the Tribunal - time limitation - HELD THAT:- The petitioner essentially is desirous of availing statutory remedy of appeal against the impugned order before the Appellate Tribunal (Tribunal) under Section 112 of the Bihar Goods and Services Tax Act - However, due to non-constitution of the Tribunal, the petitioner is deprived of his statutory remedy under Sub-Section (8) and Sub-Section (9) of Section 112 of the B.G.S.T. Act. The petitioner is also prevented from availing the benefit of stay of recovery of balance amount of tax in terms of Section 112 (8) and (9) of the B.G.S.T Act upon deposit of the amounts as contemplated under Sub-section (8) of Section 112 - the respondent State authorities have acknowledged the fact of non-constitution of the Tribunal and come out with a notification bearing Order No. 09/2019-State Tax, S. O. 399, dated 11.12.2019 for removal of difficulties, in exercise of powers under Section 172 of the B.G.S.T Act, which provides that period of limitation for the purpose of preferring an appeal before the Tribunal under Section 112 shall start only after the date on which the President, or the State President, as the case may be, of the Tribunal after its constitution under Section 109 of the B.G.S.T Act, enters office. The writ petition stands disposed of.
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2023 (7) TMI 873
Change in the classification of goods (to avail concessional rate of duty) - flavored milk drinks/dairy products - to be classified under Chapter-22 or under Chapter-4 - HELD THAT:- A perusal of the impugned order would show that prior to coming into force of the GST Act, under the earlier regime the product was classified under HSN 22029930 in order to avail the concessional rate of central excise duty. After the introduction of the GST, the petitioner has deliberately changed the classification of flavored milk to a head under HSN 042/0403 in order to avail a low rate of GST ie; from 12% to 5%. However, there is absolutely no change either in the ingredients or in the manufacturing process. Further, the authority below has analyzed the export invoices of the petitioner which would clearly show that the petitioner was adopting the HSN 22029930 for Badam Milk. The further analyzes of the export details between January, 2021 and October, 2021, it is seen that all the export products are classified under HSN 22029930. Therefore, the respondents have considered each and every arguments put forward by the petitioner and the respondents have also analyzed the documents submitted by them. If aggrieved, the remedy is only by filing an appeal, since the petitioner has not been able to establish that there has been grave error in the exercise of jurisdiction or that there has been violation of principles of natural justice warranting the petitioner to approach this Court directly. The Writ Petition is disposed of with liberty to the petitioner to file an appeal before the appropriate authority under Section 107 of the Act.
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2023 (7) TMI 872
Principles of natural justice - personal opportunity of hearing not given - cryptic non-speaking order - wrongly carried forward credit - HELD THAT:- Perusal of the relevant record would show that for the month ending June, 2017, the entry under the head excess input tax credit at column 11 is shown as '0.00'. This fact has been captured in the impugned order. The contention of the petitioner that she had a credit limit appears to be incorrect. Since the entire writ petition rests on this single issue and as the same has not been proved by the petitioner, the petitioner is not entitled to any relief - Petition dismissed.
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2023 (7) TMI 871
Classification of goods - rate of GST - Chikkies covered under sugar confectionery - Scope of Sugar Confectioneries - Sesame Chikkies - Amaranth Chikkies - Crushed Peanut Chikkies - Spirulina Chikkies - Dry Fruit Chikkies - Chocolate Peanut Chikkies - classifiable under chapter heading 1704 or under chapter heading 1806 90 20 - benefit of N/N. 1/2017-Central Tax (Rate) dated 18.06.2017. HELD THAT:- It is observed on examination of the questions that the important and common ingredient in all of these products is jaggery, which is an unrefined natural sugar that is produced without adding any chemicals. Jaggery, like sugar, is made from sugarcane without separating the molasses. Thus jaggery broadly can be termed as a form of sugar - Sugar preparations which are marketed in a solid or semi-solid form generally suitable for immediate or direct consumption without further processing are collectively referred to as confectioneries. Chikkis, which are jiggery based preparations and are meant for direct consumption as snacks, are squarely covered under term Sugar Confectioneries. Classification of goods under Sugar Confectionery - HELD THAT:- Chapter 17 of the Customs Tariff Act 1962 covers Sugars and Sugar Confectionery and chapter heading 1704 covers Sugar Confectionery (including white Chocolate) not containing cocoa. Thus all the sugar confectionery that do not contain cocoa are covered under heading 1704. In the instant case it is observed that the impugned products except Chocolate Peanut Chikkies do not contain cocoa and thus the products Sesame Chikkies, Amaranth Chikkies, Crushed Peanut Chickies, Spirulina Chikkies and Dry Fruit Chickies are squarely covered under Sugar Confectionery and thus fall under heading 1704. It is an admitted fact that the product Chocolate Peanut Chickies contain cocoa powder and thus the said product is not covered under Chapter 17. Cocoa and Cocoa Preparations are covered under Chapter 18; Chapter heading 1806 covers Chocolate and other food preparations containing cocoa and chapter heading 1806 90 20 covers Sugar Confectionery containing Cocoa. Thus the product Chocolate Peanut Chikkies that contains cocoa powder admittedly is covered under the chapter heading 1806 90 20. GST rates applicable on the impugned products - HELD THAT:- The products i.e. various types of chikkies that are covered under chapter heading 1704 are exigible to GST @5%, in terms of entry number 92 to Schedule-I to the Notification No. 1/2017-Central Tax (Rate) dated 18.06.2017, as amended by the Notification 41/2017-Central Tax (Rate) dated 14.11.2017. Rate of GST applicable to the product Chocolate Peanut Chickies - HELD THAT:- The impugned product being a Sugar Confectionery containing Cocoa is covered under chapter heading 1806 and is exigible to GST @ 18%, in terms of entry number 12C of the Schedule - III to the Notification No. 1/2017-Central Tax (Rate) dated 18.06.2017, as amended by the Notification 41/2017-Central Tax (Rate) dated 14.11.2017. The Dry Fruit Chikkies are classifiable under chapter heading 1704.
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2023 (7) TMI 870
Exemption from GST - residential dwelling or not - PG/Hostel Rent paid by inhabitants - charges collected towards allied additional services provided by the LLP - bundled service along with the service of providing of Hostel/Paying guest or not - GST on reverse charge will be applicable on the rental to be paid to the landowners or not - entry No. 12 of Notification No. 9/2017 dated 28th September 2017. Whether PG/Hostel Rent paid by inhabitants qualify for GST exemption, since they are used as residential dwelling? - HELD THAT:- The term residential dwelling is neither defined in the Notification nor in the CGST Act 2017/rules made there under. However the Education guide on Taxation of services, issued by the CBIC under erstwhile Service Tax Law, at para 4.13.1 while answering the question What is a residential dwelling ? directed to interpret the term residential dwelling in terms of the normal trade parlance, as per which it is a residential accommodation , but does not include hotel, motel, inn, guest house, camp-site, lodge, house boat, or like places meant for temporary stay. Therefore it could be inferred from the above that residential dwelling is a residential accommodation meant for permanent stay and does not include guest house, lodge or like places. In the instant case, the applicant in his own admission claims to be providing PG/hostel services which inter alia refer to paying guest accommodation/hostel services and are akin to guest house and lodging services and therefore can t be termed as residential dwelling . Further, it is also an admitted fact that the accommodation being provided by the applicant, out of the immovable property taken on rent and claimed as residential dwelling, does not have individual kitchen facility to each of the inhabitant and also cooking of food by inhabitants is not allowed, which is an essential characteristic for any permanent stay. On this count as well, the impugned accommodation being provided does not qualify to be a residential dwelling and thus the question of using the same as residence does not arise - the services being provided by the applicant do not qualify for exemption under SI No. 12 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended. Whether the charges collected, towards allied additional services provided by the LLP would be considered as a bundled service along with the service of providing of Hostel / Paying guest? - HELD THAT:- Natural bundle has the characteristics where one of the services is the main service and the other services combined with such service are incidental or ancillary services which helps in better enjoyment of the main service. There are several other factors to determine if various services are naturally bundled or not- like if there is a single price for all the combined services or the combined services are advertised as a single package or the combined services cannot be separated. Important point to consider is that the different elements are integral to one overall package/service i.e. if one or more service is removed then the nature of the package would be affected. The applicant has not furnished any information as to whether these facilities/services are integral part of main supply of hostel/paying guest accommodation or not. Nevertheless it is evident from the nature of the additional services that they are optional and all inhabitants may not opt for the said services. An inhabitant without a vehicle does not require vehicle parking facility; some of the inhabitants may not opt for food i.e. breakfast etc., washing machine facility, television etc. Thus these are the optional facilities / separate services and hence can t be naturally bundled services as an inhabitant can still stay at the hostel without utilizing these facilities - these facilities do not affect the main supply i.e. the main supply would not be affected even if one or more of these services are not provided and thus these facilities/services are not naturally bundled with the main supply of hostel/paying guest accommodation and are separate services which need to be taxed separately. Whether GST on reverse charge will be applicable on the rental to be paid to the landowners? - HELD THAT:- The applicant has to obtain GST registration and discharge the GST liability. Thus the applicant becomes a registered person and the RCM notification, as amended, is applicable to the applicant and hence they have to discharge the GST liability @ 18% under RCM - GST on reverse charge will be applicable on the rental to be paid to the landowners by the applicant as the services of the applicant are leviable to GST and thus the applicant has to obtain GST registration.
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2023 (7) TMI 869
Classification of supply - Scope of supply - supply of goods or supply of service - charging of battery - activity of supply of electrical energy - service charges (as supply of service) - two different components or not - applicability of N/N. 2/2017-Central Tax (Rate), dated 28-06-2017 and N/N. 11/2017-Central Tax (Rate), dated 28-06-2017 - Input tax credit of GST paid. Whether their activity of electric vehicle charging amounts to supply of goods or services? - HELD THAT:- The activity of electric vehicle charging involves charging of a battery i.e, conversion of electric energy to chemical energy in the premises of the applicant s Public Charging Stations (PCS). Electricity which is a moveable property and classified as goods, is not supplied as such to the consumer, rather it is converted into chemical energy. Recipient or the consumer does not receive electricity as such as in the case with any other supply of goods or moveable property. Consumer receives only chemical energy stored in the battery. It is a case of putting to use electrical energy at the PCS for its conversion into chemical energy. The applicant also measures the Energy Charges in the number of units of energy consumed for undertaking the said activity of charging of battery and not the amount of electricity transmitted to the consumer for his further application or usage. Thus the activity of charging of electric vehicle does not amount to supply of electricity or supply of any moveable property, but it is a supply of service. In the instant case, it is admitted that the Public Charging Stations (PCS) proposed by the applicant do not have licence as required under the Act, 2003 and the consumer lacks any premises for transmission through a service line or otherwise. The consumer is also not supplied with electricity, rather gets his electric vehicle battery charged using the electricity. Thus even in terms of the Electricity Act, 2003 the activity does not amount to supply of electricity - the owner of the Electric Vehicle is being allowed to use the infrastructure/facilities that are provided by the charging station and therefore the said activity amounts to supply of service, for which the applicant admittedly collects Electric Vehicle Charging Fee as consideration. Thus the impugned activity amounts to supply of service in terms of Section 7(l)(a) read with Section 2(102) of the CGST Act 2017. The activity does not involve further distribution or transmission of electricity. Therefore, during the activity of charging of battery for use in electric vehicle, the charging station does not perform any of the activities namely transmission, distribution or trading of electricity, which require licence under the provisions of the Electricity Act 2003 and hence the charging of batteries of electric vehicles through charging station does not require licence under the provisions of the Electricity Act 2003 - the charging stations do not require a licence for charging the battery of an EV and thus the said stations are not involved in transmission, distribution or trading of electricity. Therefore, even on this count also the impugned activity amounts to supply of service. As the activity of charging battery of electrical vehicle is considered as supply of service, the applicability of Notifications 2/2017-Central Tax (Rate) and 12/2017-Central Tax (Rate) both dated 28.06.2017 does not arise to the instant case. Classification of the impugned activity of the applicant i.e. charging battery of Electrical Vehicle - HELD THAT:- It is observed from the Explanatory Notes to the Scheme of Classification of Services, which is adopted for the purposes of GST, that SAC 9987 covers Maintenance, repair and installation (except construction) services; SAC 99871 covers Maintenance and repair services of fabricated metal products, machinery and equipment and SAC 998714 covers Maintenance and repair of transport machinery and equipment, which includes electrical system repair and battery charging services for motor cars. The Electrical Vehicle contains a motor to rotate the wheels that functions out of the energy sourced through the battery and thus the said vehicle qualifies to be a motor car. Thus charging the batteries of such electric vehicles amounts to charging of the batteries of motor cars and thus the impugned activity squarely gets covered under SAC 998714. Further Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, prescribes GST rate of 18% (CGST-9% and KGST-9%) vide entry number 25(ii) for the impugned activity/service. Whether the output tax can be set off against the input paid on inputs and input services, as provided under Rule 42 and 43 of the GST Rules? - HELD THAT:- It is observed that the question is not specific and as such the applicant can avail input tax credit and utilize the same in terms of Sections 16 17 of the CGST Act 2017 read with Rules 42 and 43 of the CGST Rules 2017.
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2023 (7) TMI 868
Scope of advance ruling application - place of services - services provided by the applicant to the entities located outside India is covered under Section 13(2) of the Integrated Goods and Services Tax Act, 2017 or not - zero rated supply or not - liable to Central Goods and Service Tax and State Goods and Service Tax or Integrated Goods and Services Tax? - HELD THAT:- Ideally, AAR cannot admit an application seeking a ruling on a question pertaining to place of supply, more so since it does not find a mention under section 97(2) of the CGST Act, 2017. We are of the considered view that being a creature of the Act, we cannot go beyond the diktats of what is spelt out in the Act. However, having said so it is also mindful of the fact that in the first round when the application was made before the Authority, the same was entertained and a ruling was given. In-fact we are also aware of the fact that no appeal was preferred against the ruling dated 9.7.2021 challenging the jurisdiction of the AAR to rule on the question of place of supply. The merits of the matter to be decided in the backdrop of the judgement of the Hon'ble High Court of Kerala in the case of M/s. Sutherland Mortgage Services Inc. [WP(C) No. 32634/2019(D) dated 3.2.2020. [ 2020 (3) TMI 186 - KERALA HIGH COURT] . The applicant develops a prototype. Some of the materials/goods that go into the making of the prototype are supplied by HAG [the recipient]. The prototype is not supplied to the recipient as it gets consumed in the process. After conducting the R D, testing and engineering activities for developing new products process, the applicant communicates the result to HAG. It is on this activity that the applicant seeks a ruling from the GAAR . The supply of services would therefore fall under section 13(2), it is already concluded that it would not fall within sub-clauses 4 to 13. However the testing activities related to HAG items, meaning thereby that the R D service is performed on the goods provided by HAG and hence as far as this portion of the service is concerned, it would fall within the ambit of sub-clause 3 of section 13 of IGST Act. The applicant is on record stating that they are a part of HAG group. Supply of services by a subsidiary/sister concern etc of a foreign company, which is incorporated in India under the Companies Act, 2013 to establishments of the said foreign company located outside India is not barred by section 2(6) of the IGST Act, supra from being considered as export of services since they are not to be treated as supply between merely establishments of distinct persons under explanation I of section 8 of IGST Act, 2017. The service rendered by the applicant would fall under 'export of service', more so in view of the fact that all the five conditions as enumerated under section 2(6) of the IGST Act, 2017, are met viz,- (i) The applicant [being supplier of service] is located in India; (ii) The recipient of service [HAG] is located outside India; (iii) the place of supply is the location of the recipient of service; (iv) The applicant on record has stated in the application that the payment of the supply is received in foreign exchange; (v) The supplier of service and recipient of service are not merely establishment of a distinct person in accordance with explanation 1 of section 8. The services provided by the applicant is eligible to be treated as a 'zero rated supply' under Section 16 of the IGST Act, 2017 in respect of the services mentioned in (B) and (C) under Appendix-I as per para 28. In respect of the service listed in (A) under Appendix-1 of para 28, the subject services are liable to CGST and SGST.
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Income Tax
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2023 (7) TMI 867
Reopening of assessment u/s 147 - reason to suspect v/s reason to believe - Allegation that companies were paper companies which acted as conduits to facilitate loan transactions of the kind that SGCPL claimed to have entered into - HELD THAT:- SGCPL had indicated to the AO that the return already filed should be treated as a return filed in response to the notice issued u/s 148 of the Act. Furthermore, the AO did, in a sense, pay ostensible obeisance to the provisions of Section 147 of the Act (as obtaining at the relevant point in time) by recording that SGCPL had failed to disclose, truly and fully, all material facts. That said, the AO grievously erred in referring to sub-clause (i) of clause (c) appended to Explanation 2 to Section 147 of the Act, which had been removed from the statute with effect from 01.04.1989. Section 292B of the Act can have no application in the instant case, as a perusal of the reasons placed on record seems to indicate that the AO did attempt to tie in the said provision with his assertion that the respondent/assessee had failed to disclose, truly and fully, all material facts concerning the AY in issue. A mistake, which can be corrected u/s 292B of the Act, should be such that if excised it does not change the tenor and scope of the documents/proceedings referred to therein i.e., the return of income, assessment, notice, summons or other proceedings, taken, furnished or made or issued or taken or purported to have been furnished or made or issued or taken against the assessee under the provisions of the Act. The reasons disclosed and placed on record do not allude to the material that was available to the AO which persuaded him to form a belief that income in the concerned AY, pertaining to SGCPL, which was otherwise chargeable to tax, had escaped assessment. The reasons did not advert to the material that was available to him and which persuaded him to form a belief that income chargeable to tax had escaped assessment. That this was a jurisdictional prerequisite is a well-established principle, as reason to suspect is qualitatively different from reason to believe. The statutory [prerequisite] condition was not met by the AO before entering the realm of reassessment/assessment proceedings. [S ee Chuggamal Rajpal v S.P. Chaliha and Ors. [ 1971 (1) TMI 9 - SUPREME COURT] - Decided in favour of assessee.
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2023 (7) TMI 866
TP Adjustment - comparable selection - HELD THAT:- Tribunal was right in excluding ATPL, I-Gate and Infosys on the ground that an extraordinary financial event had occurred, rendering them unfit comparables to determine the ALP. Likewise, quite clearly, the services offered by TCS International [not TCS E-Serve Ltd.] could not be used as a comparable, since the respondent/assessee was, admittedly, in the business of ITES/BPO/FSS. For each of these services that the respondent/assessee offered, it purchased, it appears, proprietary software and did not develop, maintain and update its own software for the use of its customers. The issue at hand, in our view, turned on findings of fact. Revenue's submission that no reasons were provided by the Tribunal is not, in our view, an accurate reading of the impugned order. We find upon perusal of the appeal, the appellant/revenue has raised no ground, that would have us conclude that the findings returned by the Tribunal, as discussed above, are perverse.
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2023 (7) TMI 865
Reopening of assessment u/s 147 - Reasons to believe - purported failure on the part of assessee to produce evidence/material concerning the remaining purchases to the records of JMD being seized by the DGCEI - HELD THAT:- CIT(A) has merely observed that because some part of the record could be produced, the respondent/assessee should have been able to produce the entire record. There, perhaps, may have been some weight in this observation, if only a specific allegation had been made by the AO while triggering reassessment, that because the respondent/assessee failed to disclose, fully and truly, all material facts necessary for carrying out the assessment, income otherwise chargeable to tax had escaped assessment. Furthermore, in our opinion, the AO could have called the bluff of the respondent/assessee [if it was construed to be one] by addressing an appropriate communication to the DGCEI. Reasons recorded by the AO should not only have made such an assertion but should have also indicated the material found in the search operation carried out on the DSC Group of Companies, which gave reasons to believe that income chargeable to tax had escaped assessment. The arguments advanced on behalf of the appellant/revenue, that notwithstanding the absence of a specific allegation that the respondent/assessee had failed to disclose, fully and truly, all material facts, the reopening of the assessment was sustainable because it was a result of search action, is flawed. Thus, the argument that the search action spoke for itself fails to recognize that the AO had to apply his mind to the material available on record, which at the relevant point in time, would have impelled him to form a belief that because of the failure on the part of the respondent/assessee to disclose, fully and truly, all material facts necessary for assessment, income otherwise chargeable to tax had escaped assessment. No such exercise was carried out by the AO at the relevant point in time. It is only after reassessment had been triggered, that information was sought by the AO concerning the purchase made by the respondent/assessee from JMD. We, thus, tend to agree that the jurisdictional ingredients for reopening the assessment provided in the first proviso to Section 147 of the Act were absent - Decided in favour of assessee.
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2023 (7) TMI 864
Penalty u/s 271FA - non-compliance with the provisions of Section 285BA(1)(b) - non filing of a return, despite the petitioner having furnished explanation and shown sufficient and reasonable cause - reasonable cause to excuse their delay of 525 days in submitting the returns - HELD THAT:- There is no requirement for any element of mens rea in the light of the specific language of the provisions. It is further stated that the contention raised by the petitioner that he was prevented from submitting the return in time has been specifically considered at paragraph 2 of Exhibit P2 and it was held that the reason stated by the Sub Registrar cannot be treated as sufficient reason for the inordinate delay in filing the returns. It is further contended that no appeal lies to the Tribunal from an order under Section 271FA. The contentions raised by the petitioner that the issue of reasonable cause under Section 273B of the Act has not been considered by the respondents cannot be accepted. The respondents had specifically considered the contention raised by the petitioner and had held that the reasons stated by the petitioner do not constitute a reasonable cause to excuse their delay of 525 days in submitting the returns. It is also clear that though the provision permits the imposition of Rs.500/- per day as penalty only Rs.100/- per day has been inflicted.
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2023 (7) TMI 863
TDS u/s 194A - interest income accrued on the Term Deposit Accounts of the JKSRRDA - failure of the assessee to deduct tax at source u/s 194A on the interest paid/accrued on the Term Deposit Accounts of the JKSRRD, a society registered under J K Societies Registration Act, Svt. 1998 - HELD THAT:- The JKSRRDA being a body wholly financed by the Government was covered by S.O 3489 dated 27.10.1970 and, therefore, no separate notification in the official Gazette was required to be issued by the Central Government to include JKSRRDA specifically within the ambit of exemption provided under Section 194A (3)(iii)(f) of the Act. Once the two Forums below have returned concurrent findings of fact that the funds released for implementation of PMGSY by JKSRRDA and deposited in the account known as Programme Fund/Account were the funds/money belonging to the Central Government, there should be no dispute that, in terms of Section 196 of the Act, no deduction of tax is to be made by any person from any sum payable to the Government. It is, thus, abundantly clear that the interest paid or accrued on the Term Deposit Accounts under Saving Bank Account of JKSRRDA was the money belonging to the Central Government and, therefore, exempted from deduction of income tax at source u/s 194A. Thus raising a demand on account of failure of the assessee/Bank to deduct tax at source u/s 194A on the interest income accrued on the Term Deposit Accounts of the JKSRRDA was legally and factually flawed as JKSRRDA is a society registered under the Act of 1998 is a body wholly financed by the Central Government for implementation of PMGSY and, therefore, exempt from TDS in terms of Notification No.3489 dated 22.10.1970 issued by the Central Government under Section 194A(3)(iii)(f) - Decided in favour of assessee.
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2023 (7) TMI 862
Reassessment u/s 147 - Applicability of Advance Rulings in the own case of assessee or Advance Rulings in case of any other assessee - Whether in view of the binding nature of the ruling pronounced under Section 245-R by AAR, which is binding on applicant and revenue in respect of applicant and the said transactions, can the AO, relying on ruling in the case of another Applicant where AAR has taken a different view, form a reason to believe that income chargeable to tax has escaped assessment? - HELD THAT:- AO has manifestly exceeded his jurisdiction while proposing to re-open Petitioner s assessment relying on ruling of AAR in the case of Cyril E. Pereira [ 1999 (5) TMI 582 - AUTHORITY FOR ADVANCE RULINGS ] The ruling in Cyril E. Pereira (supra) while considering the provisions of Section 245-S of the Act cannot bind Petitioner nor can it displace the binding effect of ruling in Petitioner s case. There was no dispute before the Court that the transaction in respect of which Petitioner sought a ruling and in respect of which AAR had issued ruling to Petitioner is of the same nature as that for the Assessment Years in question. In view of the clear mandate of Section 245-S of the Act that a ruling would apply and be binding only on the Applicant and the Revenue in relation to the transaction for which it so sought, it is clearly evident that the Assessing Officer has ignored this clear mandate. The ruling in Cyril E. Pereira (supra) cannot as a matter of plain intendment and meaning of Section 245-S of the Act displace the binding character of the ruling rendered between Petitioner and the Revenue. Section 245-S of the Act states that advance pronouncement binds the authority under Section 245-R. It was binding on the Applicant who had sought in respect of the transactions in relation to which the ruling had been sought and on the Commissioner and the Income Tax Authority subordinate to him in respect of Applicant and the said transaction. Sub-section 2 of Section 245-S of the Act constitutes that the ruling shall be binding unless there is change in law or facts on the basis of which Advance Ruling has been pronounced. There was no change in law or facts that has taken place before us or mentioned in the reasons to believe. The subsequent ruling in Cyril E. Pereira (supra) cannot be stated to be covered under sub-section (2) of section 245-S of the Act. It cannot be considered as a ruling that changes the law. For the reasons mentioned above, the impugned notices have to be quashed and set aside. Merely because the AAR in the case of another Applicant has taken a different view, cannot be sufficient basis on which Respondent No. 1 could ever have any reason to believe that income chargeable to tax has escaped assessment. It can also be stated that Respondent No. 1 has not personally formed the belief that income liable to tax has escaped assessment and has abdicated her jurisdiction. The re-opening therefore is invalid. Respondent No. 2 has plainly ignored the relevant provisions of law. We cannot hold that the Assessing Officer had any tangible material to come to the conclusion that there was an escapement of income. Hence, the power to re-open the assessment could not have been exercised. Decided in favour of assessee.
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2023 (7) TMI 861
Revenue recognition - Excess of receipts over expenditure and the interest accrued were not chargeable to tax - method of accounting by way of 'project completion method' - HELD THAT:- On perusal of the entire record, it is explicit that in the instant case, no observation had been recorded by the assessing officer that the project completion method as followed by the assessee would result in deferment of the payment of taxes which are to be assessed annually under the Act. Hence in our opinion, the assessee could follow either project completion method or percentage completion method and the CIT (A) and the Tribunal had rightly considered that the method of accounting followed by the assessee was consistent and the addition made by the assessing officer was not in accordance with the same and hence was not correct and committed no error in giving direction to delete the same. Therefore, the findings recorded by the authorities below on this point do not warrant any interference and are affirmed. Nature of expenses - Udyog Sahayak Expenses - revenue or capital expenditure - one of the contributories (PSIDC) of the Udyog Sahayak Expenses had admitted that some of the expenses were of capital in nature - HELD THAT:- The Udyog Sahayak is admittedly a body constituted by PSIDC, the respondent assessee and some other corporations to facilitate the promotion of industries. It is not in dispute that the contributions made to these funds are utilized for purchase of capital items, renovation, furnishing etc. of office bearers. As such, the expenses incurred on this account cannot be treated as business expenditure and are revenue expenses and, therefore, the findings by the authorities below on this point also do not deserve to be disturbed.
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2023 (7) TMI 860
Deduction u/s. 80P - Assessee is in the business of providing credit facilities to its members - HELD THAT:- It is pertinent to note that the assessee has earned interest income from deposits held with Nationalized Banks and thus, the contention of the assessee that the assessee is eligible for deduction u/s 80P(2)(a)(i) appears to be incorrect in light of the decision of State Bank of India [ 2016 (7) TMI 516 - GUJARAT HIGH COURT] - As relates to the pro-rata expenses for earning interest income the contention of the Ld. A.R. appears to be genuine and in light of the decision of Dhanlaxmi Credit Co-op. Society Ltd. [ 2017 (1) TMI 1601 - ITAT AHMEDABAD] it will be appropriate to remand back this issue thereby directing the Assessing Officer to verify the assessee s claim of pro-rata expenses by examining the record which has to be shown for verification by the assessee - Appeal of the assessee is partly allowed for statistical purpose.
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2023 (7) TMI 859
Exemption u/s 80P - Adjustment u/s 143(1)(a)(ii) - return of income was not filed within the due date prescribed u/s 139(1) - HELD THAT:- Amendment has been introduced in section 143(1)(a)(v) of the Act to provide that the claim of deduction under section 80P of the Act can be denied to the assessee, in case the assessee does not file its return of income within the time prescribed under section 139(1) of the Act with effect from 01-04-2021 and does not apply to the impugned assessment year i.e. assessment year 2019-20 relevant to financial year 2018-19. Accordingly, in our considered view, denial of claim under section 80P of the Act would not come within the purview of prima facie adjustment under section 143(1)(a)(v) of the Act, for the simple reason that the section was not in force during the period under consideration i.e. assessment year 2019-20. Whether the case of the assessee would fall within the purview of prima facie adjustment under section 143(1)(a)(ii) (an incorrect claim, if such incorrect claim is apparent from any information in the return)? - The Explanation to the said section 143(1)(a)(ii) specifically provides for cases/instances when the claim made by the assessee could be said to be incorrect . Therefore, in our considered view, the case of the assessee would also not fall within the purview of prima facie adjustment under section 143(1)(a)(ii) (an incorrect claim, if such incorrect claim is apparent from any information in the return). Denial of deduction u/s 80-P of the Act cannot come within the purview of a prima-facie adjustment u/s 143(1) of the Act, especially in light of absence of an enabling provision during the impugned assessment year, which came to be introduced only during the succeeding assessment year. Claim of deduction u/s 80P of the Act cannot be denied to the assessee only on the basis that the assessee did not file return of income its return of income within due date u/s 139(1) of the Act, by way of prima facie adjustment u/s 143(1) of the Act - Decided in favour of assessee.
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2023 (7) TMI 858
Appellate authorities power considering additional grounds - additional claim u/s 36(1)(viii) should have been made by way of filing of revised return of income and not during the course of assessment proceedings - HELD THAT:- In the case of Pruthvi Brokers Shareholders [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] held that an assessee is entitled to raise before appellate authorities additional grounds in terms of additional claims not made in return filed by it. Again in the case of Sesa Goa Ltd [ 2020 (3) TMI 793 - BOMBAY HIGH COURT] held that where assessee inadvertently omitted to make claim for deduction under section 10B in respect of two 100 per cent Export Oriented Undertakings, however, all necessary facts for claiming deduction under section 10B were already on record, Commissioner (Appeals) in exercise of his plenary/co-terminus powers, as well as Tribunal, ought to have entertained claim. In the case of B. G. Shirke Construction Technology (P.) Ltd [ 2017 (3) TMI 879 - BOMBAY HIGH COURT] has held that an assessee is entitled to make a claim before Tribunal which was not raised before Assessing Officer at time of filing return of income or by filing a revised return of income. Accordingly, in light of the above judicial precedents on the subject and the facts of assessee s case, we are of the considered view that the assessee is eligible for this additional claim under section 36(1)(viii) of the Act. Decided in favour of assessee.
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2023 (7) TMI 857
Levy of interest u/s 234C - intimation issued u/s 143(1) - HELD THAT:- As the tax payable by the assessee on the long-term capital gains earned from the sale of shares on 01/03/2017, i.e. at the rate of 20%, was duly paid by the assessee on the next due date of advance tax, which in the facts and circumstances of the present case was 15/03/2017. Thus, we are of the considered view that in terms of the 1st proviso to section 234C(1), interest u/s 234C of the Act was wrongly levied vide intimation issued u/s 143(1). We direct the AO to delete the interest levied u/s 234C - Ground raised in assessee s appeal is allowed.
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2023 (7) TMI 856
Deduction u/s 80P - Claim denied as assessee having nominal members - HELD THAT:- Their lordships subsequent landmark decision in Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] has settled the law that such a reason of an assessee having nominal members as well would hardly disentitle it for the impugned sec. 80P(2)(a)(i) deduction. Faced with the situation, we accept the assessee s instant identical sole substantive ground - Decided in favour of assessee.
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2023 (7) TMI 855
Disallowance u/s 14A r.w.r. 8D - Investment in shares - HELD THAT:- As investment to the extent in the books of the assessee is nothing but the shares transferred to the assessee pursuant to the aforesaid scheme of amalgamation with Essel Business Process Ltd. The Revenue has not brought any material to controvert the aforesaid facts as emanating from the material placed on record. Therefore, we are of the considered view that such investment cannot be considered for computation of disallowance u/s 14A r.w.r. 8D(2)(ii), since no interest-bearing funds were utilised for the acquisition of the aforesaid investment. Balance investment Hon'ble Supreme Court in South Indian Bank Ltd. [ 2021 (9) TMI 566 - SUPREME COURT] held that disallowance under section 14A would not be warranted where interest-free own funds exceed the investment in tax-free securities and in such a case the investment would be presumed to be made out of assessee's own funds. Therefore, we find no merit in disallowance made by the AO and upheld by the learned CIT(A) under section 14A read with Rule 8D(2) - Decided in favour of assessee.
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2023 (7) TMI 854
Penalty u/s 271(1)(c) - concealment of income while passing the assessment order - defective notice u/s 274 - non specification of clear charge - HELD THAT:- In CIT and Another vs. Manjunath Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] held notice u/s 274 read with section 271(1)(c) of the Act should specifically state the grounds mentioned in section 271(1)(c) of the Act, i.e., whether it is for concealment of income or for furnishing of inaccurate particulars of income. Sending printed form, where all the grounds mentioned would not satisfy the requirement of law. The assessee should know the grounds which he has to meet Otherwise, the principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. Penalty proceedings are distinct from assessment proceedings, though it emanates from the assessment proceedings; still it is separate and independent proceedings all together. When the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act the penalty notice has been issued, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. Decided in favour of assessee.
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2023 (7) TMI 853
Deduction u/s 80IE - Gross total income of an assessee which includes any profits and gains derived by an undertaking on the eligible business prescribed - HELD THAT:- The recent supreme court judgment in the case of Reliance Energy [ 2021 (4) TMI 1237 - SUPREME COURT ] has held that the scope of sub-sec(5) of 80IA is limited to determination of quantum deduction under sub sec.(1) of sec. 80IA by treating eligible business as the only source of income and sub-section (5) cannot be pressed into service for reading a limitation of deduction under sub-sec. (1) only to business income Further as it can be seen from the Ld. CIT(A) order and the regular assessment passed u/s. 143(3) AO followed the Hon ble Supreme Court judgment in the case of Reliance Energy Ltd. and granted deduction under 80IE on the Gross Total Income of the Assessee. Decided against revenue.
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2023 (7) TMI 852
Reopening of assessment u/s 147 - validity of granting approval u/s. 151 - mandation of independent application of mind before granting approval - HELD THAT:- PCIT only mentioned approved in column no 14 - PCIT has not recorded proper satisfaction and granted approval without application of mind in a mechanical manner which is not satisfying the mandatory requirement of provision of sec 151 - Therefore we are in agreement with the conclusion drawn by the ld. CIT(A) that the superior authorities have merely given their approval in a mechanical manner without independent application of mind, therefore, respectfully following the decision of N C Cables [ 2017 (1) TMI 1036 - DELHI HIGH COURT] we hold that the reassessment proceedings are bad in law. Decided against revenue.
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2023 (7) TMI 851
Admission of additional evidences by CIT(A) - application u/r 46A for admittance of additional evidence on the ground that the assessee was prevented by sufficient cause from producing the details / evidences / documents which were important for assessment before AO - HELD THAT:- The actual fact is that the assessee had filed Form 15CA for each of the transactions that was made outside the country. Veracity of evidence may not have direct linkage with the circumstance enumerated in Rule 46A(1)(a) to (d) yet the same evidence has lot of legal impact in deciding the issue involved in the appeal. Admittedly the Ld. CIT(A) has complied with the mandate of allowing reasonable opportunity to the Ld. AO as envisaged under sub-rule (3) of Rule 46A. Disallowance of claim of commission payment - Liability to deduct TDS for making payment to Non-Residents - withholding tax on commission payments made to two residents of Australia - HELD THAT:- AO completely disregarded the explanation of the assessee submitted to him vide reply emphasising therein that the recipient of commission were resident of Australia; had no PE in India; assisted the assessee in procuring service agreement with M/s. Tech Mahindra; received commission in foreign currency in Australia in lieu of services provided by them in Australia; income accrued to them outside India and cannot be deemed to have been accrued in India. Hence, their income is not liable for income tax in India. Therefore, no liability to deduct TDS arises thereto. It has been held in the following decisions that where payment of commission has been made by the assessee to non-resident agents for rendering services of procuring sales order etc. it was not FTS but business profit and in absence of PE of such agents in India, such commission payment was not taxable in India. Once we hold that the impugned payment by the assessee is not FTS the assertions made in the grounds of the Revenue do not have legs to stand. Moreover, these grounds do not arise out of the order of the Ld. CIT(A). We, therefore, reject them. Decided in favour of assessee.
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2023 (7) TMI 850
Income taxable in India - Fees for included services ( FIS ) under Article 12(4)(b) of the India-US DTAA - make available clause satisfied - HELD THAT:- In Gera Development (P.) Ltd. [ 2016 (8) TMI 1009 - ITAT PUNE] on issue of payments made by the assessee, an Indian company, engaged in the business of property development to US company for architectural design and drawings of different building and facilities in respect of its commercial project IQ Business Park held that mere passing of project specific architectural drawings and design with measurement did not amount to make available technical knowledge, know-how or process and that the assessee has not transferred any technical expertise, skill or knowledge along with the drawing and designs of the particular building to the assessee. We are of the view that the consideration received by the assessee for services rendered to the AOP does not fall within the purview of FIS under Article 12(4)(b) of the India-USA DTAA as the same does not satisfy the make available clause envisaged therein. Accordingly, we allow the ground of appeal raised by the assessee in both the AYs.
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2023 (7) TMI 849
Deduction u/s 80P - Adjustment u/s 143(1) - deduction denied as return was filed beyond the due date u/s 139(1) - HELD THAT:- The provisions of section 80AC(ii) amendment, which made it clear that any deduction that is claimed under para c of Chapter VI A would be admissible, only if the return of income in that case is filed within the prescribed due date. No claim under any of the provisions of para c of Chapter VIA would be admissible in the case of belated return. CIT(A) dismissed the appeal of the assessee relying on the decision of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd [ 2021 (4) TMI 1169 - MADRAS HIGH COURT] Similar issue was adjudicated by the Tribunal in the case of Unagatla Large Sized Co-operative Credit Society Ltd., Chagallu Mandal [ 2023 (3) TMI 1386 - ITAT VISAKHAPATNAM] against the assessee, relying on the decision in the case of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd [ 2021 (4) TMI 1169 - MADRAS HIGH COURT] - Decided against assessee.
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2023 (7) TMI 848
TP adjustment - transaction support services - intragroup services paid to AE - whether there was actual rendition of services or not? - HELD THAT:- The Hon'ble Tribunal (A Y 2015-16 and 2016-17) [ 2020 (2) TMI 156 - ITAT DELHI] and [ 2022 (1) TMI 1386 - ITAT DELHI] deleted the entire adjustment made by the Ld. TPO on account of intra group services by giving detailed reasons and finding that documentary evidences clearly show the rendition of services by the AE to the appellant company. Moreover, the TPO himself has accepted the fees received by the assessee from rendering these services. We fail to understand why the payments have been subjected to different treatments. No merit in the TP adjustment. Disallowance of depreciation on goodwill - HELD THAT:- As decided in assessee own case this issue is by now well settled by the decision of Smifs Securities Ltd [ 2012 (8) TMI 713 - SUPREME COURT] wherein held that good will acquired on amalgamation [being the difference between cost of assets and consideration paid} is a capital right and thus eligible for depreciation u/s 32. Disallowance of bad debts written off - HELD THAT:- As decided in assessee own case assessee has successfully discharged its onus and has fulfilled the conditions laid down U/S 36 of the Act. We, therefore, do not find any reason why the write off of bad debts should not be allowed. Appeal decided in favour of the assessee.
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2023 (7) TMI 847
Revision u/s 263 by CIT(A) - accrual of income - service charges receivable from the State Government were not accounted for in its returned income - HELD THAT:- Admittedly, it is a settled position of law that as per the real income theory, it is the real income alone which is liable to be brought to tax in the hands of the assessee and no taxes can be levied on a hypothetical income, but we are unable to persuade ourselves to subscribe to the contention of the Ld. AR that the said theory would apply to the facts involved in the present case before us. We, say so, with all the conviction for the reason that there is no denying of the fact as had been reported by the assessee's CA in his audit report that income in the form of service charges had accrued to the assessee bank during the year under consideration for the services which were rendered by it to various co-operative societies for purchase of paddy. Now when the aforesaid income had accrued to the assessee in definite terms, therefore, there was no justification for it to have kept the recognizing of the same in abeyance. One can well understand that in case if the loss in question was inextricably interlinked or interwoven with the event leading to generation of the income that had accrued in the hands of the assessee bank, i.e. service charges on procurement of paddy by the assessee on behalf of various co-operative societies and the liability for the same had arisen during the year under consideration, then, the same had to be considered in light of the real income theory as had been propounded by the various Courts, but we are afraid that the facts involved in the present case do not fall within the scope and gamut of any such situation. Once it is established that the commissions were receivable to the bank, then, we are unable to fathom any basis for the assessee bank to claim that the said income was not liable to be brought to tax in its hands during the year in which the same had accrued. We, thus, considering the facts involved in the case before us are unable to persuade ourselves to subscribe to the view taken by the CIT(A), who had dislodged the well-reasoned order of the AO and thus, set-aside his order and uphold the addition that was made by the A.O while framing the assessment vide his order passed u/s.143(3) r.w.s.263. Appeal filed by the revenue is allowed.
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2023 (7) TMI 846
TP Adjustment - Interest on receivable - TPO treated the receivable as a separate international transaction and stated that interest needs to be charged on the same - TPO on perusal of all the details furnished noticed that the assessee has not charged interest on the receivables though the same has been outstanding for more than 90 days - HELD THAT:- It is a settled position now that interest on delayed receivables is a separate international transaction and has to be benchmarked accordingly. AO in the present case has applied a rate of 5.5% benchmarking the transaction against the rate at which the assessee is charging interest on the loan transactions with the AE. With regard to the submission of allowing credit period of 90 days, we notice that the TPO has excluded the receivables outstanding of a period of less than 90 days while arriving at the adjustment towards interest on delayed receivables which would mean that the TPO has allowed the credit period of 90 days. While calculating the interest for receivable outstanding for more than 90 days, the TPO has taken the entire period of outstanding without allowing any credit period. We, therefore, see merit in the submission of the Ld.AR that there should be uniformity in the stand taken by the TPO and accordingly credit period of 90 days should be applied while arriving at the interest on delayed receives on outstanding for more than 90 days. Accordingly, we direct the TPO / AO to revise the interest working after taking into consideration the credit period of 90 days as has been allowed in the case of invoices outstanding for less than 90 days. Interest on interest outstanding/interest receivable - TPO noticed that the assessee has given loans to its AE and has been charging interest @5.5% - HELD THAT:- Assessee did not provide any details before the lower authorities to substantiate the said submissions. Further we notice that the assessee has also not shared any evidence or efforts made towards recovery of the interest amount. We, therefore, see merit in the argument of DR that the assessee has not properly substantiated the reasons for delay in interest receivables which has resulted in improving the liquidity position of the AE and that the assessee needs to be compensated accordingly. AR during the course of hearing argued that there is no provision to charge interest on interest since as per the loan agreement there are only interest terms agreed with the AEs. In our considered view, this contention cannot be accepted since in a transfer pricing transaction what needs to be looked into is that in an uncontrolled similar transaction whether the third party would charge such interest or not. The interest on a loan is a compensation received towards the utilisation of funds given by the assessee to its AE and the interest element on the said loan if not paid improves the liquidity position of the AEs and become part and parcel of the said loan transaction. Therefore, no infirmity in the action of the TPO in treating the interest receivable as a loan outstanding and charging interest on the same accordingly. We confirm the TP adjustment made and dismiss the ground raised by the assessee. Addition while computing the total income as any other addition u/s 28 to 44DA - HELD THAT:- As in the final assessment order, it is noticed that the AO had retained the disallowance without any detailed discussion on the directions of the DRP. We, in this regard direct the AO to verify the submissions of the assessee in this regard and allow the claim in accordance with law. Prior period expenses - HELD THAT:- We notice that the assessee has submitted additional evidences before the DRP and the DRP after perusing the details submitted, has given a clear direction to the AO to verify and allow the expenditure in accordance with law. However, the AO in the final assessment order did not consider the said directions of the DRP. We, therefore, remit the issue back to the AO with a direction to consider the evidences submitted and allow the claim of the assessee in accordance with law after giving a reasonable opportunity of being heard to the assessee.
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2023 (7) TMI 845
Income accrued in India - assessee held 90% shares of a company based in UAE namely M/s. Rubamin FZC (RFZC) - Taxing entire profit of RFZC, UAE as profit belonging to the assessee - HELD THAT:- As decided in favour of assessee as in own case [ 2021 (10) TMI 506 - ITAT AHMEDABAD] wherein held that profit attributable to RFZC with respect to the transactions carried out by it with the company based in China namely Trafigura Beheer BV belongs to DRC companies. Likewise, the profit attributable to RFZC with respect to the transactions carried out by it with the assessee company has already been subject to transfer pricing provisions. Therefore, no inference can be drawn that the profit of the assessee company got diverted. Hence the ground of appeal of the assessee is allowed.
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2023 (7) TMI 844
TP Adjustment - ALP adjustment on account of payment for freight without considering demurrage and brokerage charges thereon - HELD THAT:- We find for the purpose of benchmarking the international transactions, actual quantity i.e. the subject matter of shipment should be considered together with the exchange rate prevailing on the date of shipment. The purpose of transfer pricing regulation in Chapter X of the Act is only to ensure that on the date of relevant international transaction, whether the said transaction had been carried out by the assessee with the AE at arm s length. The quantity to be shipped as mentioned in the agreement and exchange rate prevailing on the date of agreement is only a promise or a contract entered into between assessee and other parties. That promise gets fructified / materialized only when actual shipment is made. Hence, the benchmarking of the said international transaction should be done on the date of actual shipment of the goods by applying the exchange rate of conversion of USD into Indian rupees prevailing on the date of the said transaction and not on the date of agreement. Thus the interpretation of provisions of Chapter X of the Act in this manner alone would be just and fair and serve the intended purpose of the said Chapter. When this is done, there will be no scope of any ALP adjustment in respect of freight charges paid by the assessee as is evident from the aforesaid table. Hence, we direct the Ld. AO / TPO to delete the ALP adjustment. Computation of Long-term Capital Gains - non considering the INDEX COST of assets purchased u/s. 48 - HELD THAT:- As in the case of CIT vs. Pruthvi Brokers Shareholders Pvt. Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT ] had categorically held that any valid claim of assessee could be made for the first time either by way of filing a revised computation or before the appellate authorities. We find that the benefit of indexation while computing long term capital gains had been statutorily provided to the assessee. Hence, we direct the Ld.AO to grant the benefit of indexation to the assessee while computing long term capital gains after verifying the veracity of the workings thereon. Accordingly, the ground No.6 raised by the assessee is allowed for statistical purposes.
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2023 (7) TMI 843
Disallowance u/s 14A - AO has disallowed an amount since the assessee has made investment and has claimed as interest - Appellant has contested that the AO has not established that the investment were made out of loan funds and had sufficient own capital to make investment - HELD THAT:- As noted that assessee had sufficient owned fund, as at the start and end of relevant previous year, for making investment for earning exempt income. Assessee, during the year under consideration, received dividend income only to the extent of Rs. 60,134 and CIT(A), NFAC restricted disallowance to the extent of dividend income as earned by the assessee. CIT(A), NFAC has relied on number of decisions for the proposition that no disallowed u/s 14A can be made if the own fund of assessee are more than the investment made to earn exempt income. Disallowance u/s 14A cannot be more than the exempt income earned by assessee. We feel that ld. CIT(A), NFAC has correctly restricted disallowance to the extent of exempt income earned by assessee. Ground of appeal taken by department is dismissed. Bogus LTCG - information as received that racket of generating bogus entries in LTCG in penny stocks had been unearthed - HELD THAT:- In the present case, the entire addition has been made by the AO on the basis of report of investigation wing and report of certain persons. No opportunity of cross verification was provided to the assessee. Under such circumstances, no addition can be made to the income of assessee, specifically when entire basis of addition is investigation report, which was never confronted to assessee, and statement of persons, who were neither examined by the AO nor opportunity of cross examination provided to assessee. Taking into consideration various documentary evidences produced by the assessee in support of his claim and further relying upon various decisions of this Tribunal as well as the decision of Pooja Agarwal [ 2017 (9) TMI 1104 - RAJASTHAN HIGH COURT] as well as in case of PCIT vs. Pramod Jain Others [ 2018 (7) TMI 2161 - RAJASTHAN HIGH COURT] we allow the claim of exemption under section 10(38) of the Act and accordingly delete the addition made by the AO. Hence, the order of ld. CIT (A) is upheld. Commission paid for the accommodation entries - HELD THAT:- When we have given a finding that the transaction of purchase and sale of shares and consequential Long Term Capital Gain cannot be treated as bogus then the addition made by the AO on account of notional commission paid treating the same as undisclosed expenditure u/s 69C will not be sustainable being consequential. Appeal of the Department is dismissed.
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Customs
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2023 (7) TMI 842
Violation of principles of natural justice - non-consideration of documents and statements - EPCG scheme - contention of the Appellant that the demand of interest should be limited to the amounts debited in cash and not in respect of the amounts to be debited from EPCG licences - HELD THAT:- The Tribunal has not examined various facts of the Appellant. The Tribunal was required to examine the facts and documents so as to form an opinion as to whether in the facts of the Appellant s case, the decision of Valecha Engineering Ltd. [ 2009 (8) TMI 451 - HIGH COURT OF BOMBAY] was at all attracted. The Tribunal in passing the impugned order has merely reproduced the Order-in- Original and various paragraphs of Valecha Engineering, without examining its applicability to the facts of the Appellant and assigning any reasons thereof. The Tribunal has reproduced the submissions of the Appellant with respect to levy of interest to the effect that the Appellant had contended that levy of interest is against the doctrine of promissory estoppel and further that the interest in alternative can be only in respect of the duty required to be paid by them in cash and not on the component of duty allowed to be debited by them from the EPCG licences. The Tribunal ought to have examined the effect of the communication received from DGFT dated 27th October 2014, on the issue of imposing interest. The Tribunal has also not recorded any finding on the submissions made by the Appellant that interest if at all ought to have been levied only on cash demand confirmed amounting to Rs.10.94 crores and not on the duty paid under EPCG licences - the Tribunal ought to have accorded reasons after examining the facts of the Appellant before deciding the issue of interest. On the issue of interest under Sections 28AA and 28AB of the Customs Act, the appeal is allowed - Tribunal directed to pass a speaking order after examining the facts of the Appellant and after giving opportunity of hearing to both the parties and by speaking order.
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2023 (7) TMI 841
Confiscation - penalty - Attempt to smuggle (export) red sanders - Restricted/prohibited goods or not - HELD THAT:- The Ld. adjudicating authority has ordered the confiscation of 6.78 MTS of red sanders valued at Rs.33,90,000/-- under Section 113(d) of the Customs Act, 1962 which were attempted to be exported out of India in contravention of the provisions of the Customs Act, 1962 read with the Foreign Trade (Development Regulation) Act, 1992. That there is no dispute that Mr. Ramesh, Treasurer of M/s. Artisan s Welfare Society has rendered the goods under export liable for confiscation by his various acts of omission and commission. In any case, the exporter is not challenging the confiscation of the impugned goods. As such he is liable for penal action under Section 114(i) of the Customs Act, 1962. However, regarding penal action under Section 114 AA of the Customs Act, 1962 investigation could not prove that the exporter knowingly or intentionally have made any false declaration statement or produced documents. All along he has been pleading that he is ignorant and is not aware that these goods are prohibited for export. The penalty imposed is disproportionate and excessive as the confiscated goods were valued at Rs.33,90,000/-- only. In order to meet the ends of justice in this case, we feel it appropriate that the penalty imposed is reduced to Rs.5,00,000/-- under Section 114(i) of the Customs Act - Appeal allowed in part.
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2023 (7) TMI 840
Benefit of exemption - foreign going Vessel - Import of ship spares in large quantity onboard the vessel after filing reshipment application instead of Bill of Entry without paying any customs duty - foreign going status only for the duty-free supply of fuel and lubricants - levy of duty on goods other than fuel and lubricants - HELD THAT:- It is seen from the definition the Ocean Going Vessels includes scientific research vessel. And it is an admitted fact that FORV Sagar Sampada is a Scientific Research Vessel and hence, the question of not treating the appellant as an Ocean-Going Vessel does not arise. It is an Ocean-Going Vessel registered with the Director General of Shipping. Since, the Notification allows spares for repairs of ocean-going vessels by a ship repair unit registered with the Director General of Shipping, Government of India, and the question of denying this benefit does not arise. It is also seen from the records that F. No. 354/39/2010-TRU dated 10.05.2010, the letter categorically mentions that vessel Sagar Sampada is an Ocean-Going Vessel which is eligible for import duty exemption in respect of spares, parts and other specific items for repair of the vessel under Notification No.21/2002-Cus. dated 1.3.2002. The impugned order is set aside and the appeal is allowed.
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2023 (7) TMI 839
Classification of imported goods - CX 275s and CX180. Model CX 275s earphones have microphones - CX180 earphones - classified under customs tariff heading 8518 30 00 or not - N/N. 57/2017-Cus dated 30.06.2017 as amended by N/N. 22/2018-Cus dated 02.02.2018 (S. No. 18) - HELD THAT:- It is undisputed that earphones CX 275s have two speakers for the ears and an inbuilt microphone. It is also not in dispute that CX 275s can be used with the cell phone. There is nothing on record to show that it cannot be used with any other device. It is common knowledge that earphones with microphone can be used with laptop, i-pad, desktop, i-pod, mobile phone etc., and they perform the same function of providing audio output through the speakers and receiving audio input through the microphone from device they are attached to. The utility of the earphones is limited by the compatibility of the jack with the port on the device. So long as the jack is compatible, the same earphone can be used with tablet, cell phone, gaming devices etc. Therefore, earphone utility of the earphone is not confined to cellular mobile phone. The earphones are neither a part of nor are they essential to use a mobile phone. They only add additional utility. Therefore, the earphone will qualify as an accessory which can be used with cellular mobile phone as well as other electronic devices. When used with the cellular mobile phone, it will be an accessory to mobile phone but will not be its part - What is evident from the entry no. 18 is that only such microphones, wired headsets and receivers as are parts of cellular mobile phones get excluded from the exemption notification and all other goods falling under CTH 8518 are exempted. Earphones CX 275s imported by the appellant, while being earphones, are clearly not parts of any mobile phone. In Dilip Kumar and Company [ 2018 (7) TMI 1826 - SUPREME COURT] , the Supreme Court did not completely rule out the possibility of liberal interpretation of an exemption notification but affirmed its previous decisions in COLLECTOR OF CENTRAL EXCISE VERSUS PARLE EXPORTS (P) LTD. [ 1988 (11) TMI 108 - SUPREME COURT ] and CCE VERSUS M/S HARI CHAND SHRI GOPAL [ 2010 (11) TMI 13 - SUPREME COURT ] that strict and liberal interpretations of the notification should be applied at different stages. To see if the subject is covered by the notification or not, strict interpretation should be applied and once this ambiguity or doubt is resolved, the Court may construe the notification by giving full play bestowing wider and liberal construction. In this case, clearly, all goods falling under CTH 8518 are exempted by S. No. 18 of the notification excluding some parts of the cellular mobile phones including headsets . Clearly, S. No. 18 does not exclude all earphones but only headsets which are parts of cellular mobile phones. The earphones in dispute CX 275s are not parts of any mobile phone but are accessories which can be used with a variety of electronic gadgets including cellular mobile phones. Even for this reason, the benefit of the exemption notification cannot be denied to earphones CX 275s imported by the appellant. The demand of duty in the impugned orders cannot, therefore, be sustained and need to be set aside. Consequently, the penalty imposed in one of the order dated June 1, 2020 also need to be set aside - appeal allowed.
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2023 (7) TMI 838
Classification of imported goods - Samsung Galaxy Tab (GT-P1000) - to be classified under CTH 84713090 or under CTH 85171290? - HELD THAT:- Taking note of the submissions made by the Ld. Counsel that they have accepted the classification of the impugned goods to be CTH 84713090 as ordered by the original authority, it is held that the appeal of the department on the issue of classification succeeds. The impugned order passed by the Commissioner (Appeals) is set aside. The appeal filed by the Department is allowed.
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2023 (7) TMI 837
Exemption on imported Life Rafts under N/N. 21/2002-Cus dated 01.03.2002 - allegation of the Revenue is that the documents enclosed with the Bill of Entry have not indicated the Life Rafts as inflatable that the goods lose their identity once out-of-charge of Customs is granted and that there are different kinds of Life Rafts such as Tubular Life Rafts, Polyester Life Rafts, etc., and all the Life Rafts are not inflatable. HELD THAT:- The imported goods are inflatable Life Rafts only and so, eligible for the benefit of the Notification No. 21/2002-Cus dated 01.03.2002. For committing an inadvertent mistake by the clearing agent in classifying the imported goods under CTH 8907 9000 instead of CTH 8907 1000 denial of exemption benefit of the notification is not justified. Other than alleging as to wrong classification apparently declared by the appellant itself, the respondent has not adduced any evidence, to suggest that what was imported by the appellant was not inflatable Raft. The impugned order dated 30.04.2013 is set aside - appeal allowed.
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2023 (7) TMI 836
Amount of Redemption fine and penalty - Valuation of imported old and used worn clothing articles- enhancement of value - classifiable under Tariff Item No.63090000 of the First Schedule of the Act -s restricted item for import as per Para 2.17 of Foreign Trade Policy 2009-2014 - HELD THAT:- This issue came up before this Tribunal in the case of VENUS TRADERS, RAINBOW INTERNATIONAL, AL-YASEEN ENTERPRISES, GLOBE INTERNATIONAL, KRISHNA EXPORT CORPORATION, PRECISION IMPEX, BMC SPINNERS PVT. LTD., SHIVAM TRADERS, LEELA WOOLEN MILLS, M.U. TEXTILES VERSUS COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI [ 2018 (11) TMI 625 - CESTAT MUMBAI] , wherein this Tribunal has observed The failure of the original authority to comply with the direction in remand to disclose the margin of profit that prompted the fine and penalty, the matter would normally have to be remitted back by another remand order. However, the paucity of evidence and the negligible scope for ascertainment at this stage deters us from doing so. Thus, the redemption fine and penalty imposed on the respondents by the adjudicating authority is sufficient to meet the end of justice. Therefore, the redemption fine and penalty confirmed by the adjudicating authority are upheld - there are no infirmity in the impugned order and the same are upheld - appeal of Revenue dismissed.
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Corporate Laws
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2023 (7) TMI 835
Debar on petitioner by the National Financial Reporting Authority(NFRA) - It was held by Kerala High Court that Exts.P6 and P7 in these writ petitions can be kept in abeyance till 03.07.2023 so that the Tribunal can pass appropriate orders, in accordance with law. HELD THAT:- There are no reason to interfere with the impugned judgment and hence, the special leave petitions are dismissed.
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2023 (7) TMI 834
Disbursal of payments towards the admitted claims of workmen - Consortium s second charge on certain assets belonging to the company in liquidation - pari passu rank of the second charge - second charge ranks at par with their first charge or not - levy of costs - workmen's claim for interest on wages. Whether the entirety of dues owed to the secured creditors must be computed as a single unit against the dues owed to the workmen for calculating the pro rata shares? HELD THAT:- The priority between two sets of secured creditors has been elucidated in the judgment in ICICI BANK LTD. VERSUS SIDCO LEATHERS LTD. [ 2006 (4) TMI 264 - SUPREME COURT ] wherein the Supreme Court addressed the relationship between various types of secured creditors and determined their respective rights and priorities - Supreme Court has held that the absence of explicit provisions in Section 529 of the Act regarding priority rights over mortgaged assets does not exclude the application of Section 48 of the TP Act in cases of company liquidation. The Court has reasoned that if inter se priority rights of secured creditors were disregarded, it would result in their exclusion from dividend distribution and unjustly treat them as unsecured creditors. This would also unjustly deprive the secured creditor of their rights over the security, which surely is not the legislature's intent. In view of the discussion and holding in ICICI Bank Ltd., it becomes evident that the first and second charge holders cannot be treated equally. Upholding the objection of the second charge holder would upset the priority of the first charge holder, which would go against the provisions of Section 48 of the TP Act. Imposition of costs - HELD THAT:- During the proceedings, a mutual agreement was reached among the secured creditors, including Dena Bank, to implement the payments outlined in OLR No. 165/2018. This understanding is evidenced by the Minutes of Meeting dated 24th August, 2018, which were signed by Mr. Rahul Pratap, Chief Manager of Dena Bank. However, the Applicant-Bank has chosen to backtrack on this commitment. The delay in releasing the dues to the workmen can thus be attributed solely to the actions of the Applicant-Bank/Consortium - The Court even directed a meeting between all stakeholders to facilitate an amicable resolution regarding the payment of dues. Subsequent meetings were held between the OL and the parties involved, but these discussions did not bring about a definitive resolution to the issues at hand. Consequently, the Applicant-Bank has purposefully caused delays by attempting to undermine the overriding priority granted by law to the first charge holders, namely the workmen and their admitted claims - the present application is dismissed with a cost of Rs. 10 lakhs on the Consortium, to be deposited in terms of the directions issued later in the judgment. Workmen's claim for interest on wages - HELD THAT:- The contractual provisions outlined in the facility documents of the secured creditors serve as the basis for their entitlement of interest. On the other hand, the workmen do not present any comparable contractual stipulation or statutory basis for the payment of interest on their overdue salaries or other remuneration. Their claim for interest is grounded in equity, which cannot serve as a sufficient foundation for the Court to approve such a claim. Unless debts explicitly carry interest as per the terms of a contract, interest cannot be awarded, except in specific situations outlined under the relevant rules. Therefore, without a valid contractual provision or statutory basis supporting the payment of interest, and considering the nature of the workmen's claim, it is not justifiable to equate their situation with that of the secured creditors for the purpose of interest payment. Interest payment for workmen would only arise if there is a surplus, which triggers the application of Rule 179 and not otherwise. It is also noteworthy that the entitlement to interest from the date of the winding-up order, as per Rule 179, for subsequent interest is not in dispute. The OL has confirmed that once the admitted claims have been settled, any surplus funds will be utilized to declare dividends in accordance with Rule 179. These dividends will be distributed to all relevant parties, including the workmen - the claim for payment of interest to the workmen at a rate of 12 percent lacks merit and is rejected. Application dismissed.
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2023 (7) TMI 833
Condonation of delay of 290 days in filing appeal - HELD THAT:- A mere running on the eye over, the ingredients of Section 61(1) and Section 61(2) of the Insolvency and Bankruptcy Code, 2016, unerringly, points out that, in any event, an Appeal, cannot be preferred by an Affected/ Aggrieved Party, beyond 30+15=45 days (the outer limit period). There is no power enjoined upon the Appellate Tribunal, to Condone the Delay, of 15 days, of course, after the expiry of 30 days, from the date of passing of the Impugned Order, by an Adjudicating Authority/National Company Law Tribunal, Kochi Bench. Admittedly, in the instant case, the Impugned Order came to be passed by the Adjudicating Authority/ Tribunal, on 29/01/2021 and the Appeal, was filed by the Petitioner/ Appellant, on 15/12/2021, with a Delay, of 290 days, which is an unacceptable one. In reality, the said delay of 290 days, is not to be condoned, by virtue of the decision of the Supreme Court in the matter of V NAGARAJAN VERSUS SKS ISPAT AND POWER LTD. ORS. [ 2021 (10) TMI 941 - SUPREME COURT] . Appeal dismissed.
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2023 (7) TMI 832
Seeking expeditious disposal of complaint - Accounting and auditing irregularities in the functioning of the MHRIL - one-time (or in instalments) Membership Fees (MF) and recurring Annual Subscription Fee (ASF) - MHRIL raises substantial revenues through the ASF but does not report it as a separate Operating Segment, as required by Ind AS 108 - promised obligation of providing the assured one week's vacation to the members, on the ground of non-availability of rooms, even though the rooms for the same duration could be booked through other channels as non-members, not met up. Implementation of Ind AS 108: Operating Segments - HELD THAT:- The Ind AS 108 places an onerous responsibility on the Company to not only determine the operating segments, and their reportability or otherwise after applying the prescribed aggregation measures, but also to make necessary disclosures, including the profit and loss and revenues and expenses for the reportable segments. It follows that the determination of Operating Segments cannot be an arbitrary process depending on the whims and fancies of the Company but has to follow a process because once an Operating Segment has been determined it is obligatory to report it, subject to it meeting the reportability threshold. It is in this light that we proceed to examine the position obtaining in the MHRIL. MHRL has stated that it follows a mixed- use business model wherein both Members and FITs have access to its facilities. MHRIL has referred to its membership rules stating that the members specifically agree to such mixed-business model. We have perused the said rules. Rule 13.4 states that certain Club Mahindra Notified Resorts (CMNR) may have some rooms (FIT rooms) earmarked exclusively for FITs and Member agrees to the same. It further says that the FIT rooms will generally not have the same amenities and facilities as the rooms provided to the members such as kitchenette, sofa cum bed etc.; that FIT rooms may be made available by MHRIL to Members opting for it depending on availability; that the Member agrees not to make any claim whatsoever against MHRIL on the ground that such rooms do not have similar amenities and facilities as the rooms provided to members. It is quite clear from this that the room types and the associated amenities and facilities provided to the Members and the FITs are different and are distinguishable from each other, as are their payment obligations. Recognition of revenue from contracts - HELD THAT:- Presentation of a true and fair view requires faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework. The application of Ind ASs, with additional disclosure, when necessary, is presumed to result in financial statements that present a true and fair view. Regulation 4 (2) of SEBI LODR requires that a listed entity shall implement the prescribed accounting standards in letter and spirit in the presentation of financial statements taking into consideration the interest of all stakeholders and shall also ensure that the annual audit is conducted by an independent, competent and qualified auditor. The preceding discussion shows that there are many lingering questions in respect of the accounting policies and practices followed by MHRIL, especially as they relate to Ind AS 108 and Ind AS 115, resulting in representation by its Members to various forums (including NFRA) and filing of court cases. MHRIL will be well advised to address these questions in a convincing manner and adhere to the accounting standards in true spirit. Conclusion - The current accounting policies and practices of MHRIL need review in application of the Ind AS 108- Segment Reporting. The internal controls, disclosures and policies with respect to Ind AS 115- Recognition of Revenue from Contracts also require review. To recapitulate, MHRIL's Consolidated Financial Statements do not provide disaggregated segment reporting for the one distinct category at the customer type level i.e Members - Following directions given to the MHRIL and its auditor: 1. MHRIL shall, going forward, thoroughly and proactively review its accounting policies and practices in respect of segment reporting, as they relate to application of Ind AS 108; and also Ind AS 115, keeping in mind our above findings relating to deficiencies in accounting disclosures. Following such a review, MHRIL shall take necessary measures to address the deficiencies pointed out in the foregoing paragraphs and effect changes in the disclosures in its financial statements in the letter and spirit of the disclosure as required under the Companies Act and the SEBI LODR. MHRIL shall complete this process by 30th June 2023. 2. MHRIL's review and the changes brought in its accounting practices and reporting should be properly documented, especially with respect to the CODM's exercise of monitoring and control, both at the aggregated and dis-aggregated, granular level, and such documentation shall be verified by MHRIL's statutory auditor who shall complete this process by 31st July 2023. 3. MHRIL and its statutory auditor shall report separately to NFRA the results of their review and the changes effected in the MHRIL's accounting policies and practices. Based on its own review of the reports of MHRIL and its statutory auditor, NFRA will take further course of action as provided under the existing provisions of the CA-2013 and the NFRA Rules.
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2023 (7) TMI 818
Debar on petitioner by the National Financial Reporting Authority(NFRA) - grievance of the petitioners is that, since the stay petition is pending before the Tribunal, the respondents ought not have been issued Exts.P6 and P7 - HELD THAT:- It is clear that the case is stand posted on 03.07.2023. If that is the case, Exts.P6 and P7 in these writ petitions can be kept in abeyance till 03.07.2023 so that the Tribunal can pass appropriate orders, in accordance with law. It is made clear that the matter not considered on merit and since the appeal and the petitions are posted on 03.07.2023, following directions are passed: i) Exts.P6 and P7 in these writ petitions are kept in abeyance till 03.07.2023. ii) The petitioners are free to approach the National Company Law Appellate Tribunal (NCLAT) in the meanwhile for appropriate orders.
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Insolvency & Bankruptcy
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2023 (7) TMI 831
Recovery of outstanding electricity dues - Secured Creditor - attachment of properties - waterfall mechanism - classification of property in order of priority of dues prescribed under Section 53 of the IBC - HELD THAT:- The creation of a charge need not necessarily be based on an express provision of the 2003 Act or plenary legislation, but could be created by properly framed regulations authorized under the parent statute. In these circumstances, the argument of PVVNL that by virtue of Clause 4.3(f)(iv) of the Supply Code, read with the stipulations in the agreement between the parties, a charge was created on the assets of the corporate debtor, is merited. A careful reading of the impugned order of the NCLT also reveals that this position was accepted. This is evident from the order of the NCLAT which clarified that PVVNL also came under the definition of secured operational creditor as per law. This finding was not disturbed, but rather affirmed by the impugned order. In these circumstances, the conclusion that PVVNL is a secured creditor cannot be disputed. Rainbow Papers [ 2022 (9) TMI 317 - SUPREME COURT] did not notice the waterfall mechanism under Section 53 the provision had not been adverted to or extracted in the judgment. Furthermore, Rainbow Papers was in the context of a resolution process and not during liquidation. Section 53, as held earlier, enacts the waterfall mechanism providing for the hierarchy or priority of claims of various classes of creditors. The careful design of Section 53 locates amounts payable to secured creditors and workmen at the second place, after the costs and expenses of the liquidator payable during the liquidation proceedings. However, the dues payable to the government are placed much below those of secured creditors and even unsecured and operational creditors. This design was either not brought to the notice of the court in Rainbow Papers or was missed altogether. In any event, the judgment has not taken note of the provisions of the IBC which treat the dues payable to secured creditors at a higher footing than dues payable to Central or State Government. The Gujarat Value Added Tax Act, 2003 no doubt creates a charge in respect of amounts due and payable or arrears. It would be possible to hold [in the absence of a specific enumeration of government dues as in the present case, in Section 53(1)(e)] that the State is to be treated as a secured creditor . However, the separate and distinct treatment of amounts payable to secured creditor on the one hand, and dues payable to the government on the other clearly signifies Parliament s intention to treat the latter differently - and in the present case, having lower priority. As noticed earlier, this intention is also evident from a reading of the preamble to the Act itself. Similarly, in DUNCANS INDUSTRIES LTD. VERSUS A.J. AGROCHEM [ 2019 (10) TMI 301 - SUPREME COURT ], Section 16G of the Tea Act, 1953 which required prior consent of the Central Government (for initiation of winding up proceedings) was held to be overridden by the IBC. In a similar manner, it is held that Section 238 of the IBC overrides the provisions of the Electricity Act, 2003 despite the latter containing two specific provisions which open with non-obstante clauses (i.e., Section 173 and 174). It is held that the reliance on Rainbow Papers is of no avail to the appellant. In this court s view, that judgment has to be confined to the facts of that case alone. Section 78 enacts, that when a company whose property is subject to charge, fails to register it, the charge holder (or the person entitled to the charge over the company s assets) can seek its registration. Section 3 (31) of the IBC defines security interest in the widest terms. In this court s opinion, the liquidator cannot urge this aspect at this stage, because of the concurrent findings of the NCLT and the NCLAT that PVVNL is a secured creditor. The record further shows that after the NCLT passed its order, the appellant preferred its claim on 10.04.2018. Based on that application, the liquidator had filed an application before the NCLT for modification of its order dated 21.08.2018, and contended that PVVNL also came under the definition of secured operational creditor in realization of its dues in the liquidation proceedings as per law. The application sought amendment of the list of stakeholders. The application was allowed. In view of these factual developments, this Court does not consider it appropriate to rule on the submissions of the liquidator vis-a-vis the fact of non-registration of charges under Section 77 of the Companies Act, 2013. At the same time, the liquidator is directed to decide the claim exercised by PVVNL in the manner required by law. It shall complete the process within 10 weeks from the date of pronouncement of this decision, after providing such opportunity to the appellant, as is necessary under law - Appeal dismissed.
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2023 (7) TMI 830
Seeking dismissal of the application filed under Section 7 of the IBC - barred by limitation or not - review of the order directing liquidation as well as the order initiating Corporate Insolvency Resolution Process - It was contended that the application filed by respondent No. 2 under Section 7 of IBC was clearly barred by limitation and therefore, all proceedings and orders passed on the basis of such application were non est in the eye of law. HELD THAT:- NCLT had passed the initial order dated 20.09.2019 after hearing both the financial creditor as well as the corporate debtor. Petitioner had filed reply to the application filed under Section 7 of IBC but did not raise any issue of limitation. What was urged before the NCLT was that it was because of the methodology adopted by the financial creditor that the corporate debtor ran into liquidity crunch which resulted in default in payment of outstanding dues. Be that as it may, if the petitioner was aggrieved by the order dated 20.09.2019, he had his remedy of filing appeal under Section 61 of the IBC. However, under sub-section (2) of Section 61, such appeal is required to be filed within thirty (30) days before NCLAT. As per the proviso, NCLAT has the discretion to allow an appeal to be filed after the expiry of the said period of thirty days if it is satisfied that there was sufficient cause for not filing the appeal but such period shall not exceed fifteen days. Thus, overall there is limitation of 45 days in filing appeal under Section 61. Petitioner did not file any such appeal. Long thereafter he filed an interlocutory application under Section 60(5)(c) of IBC for rejecting the application filed under Section 7 of IBC as being barred by limitation which we have seen above has been dismissed by NCLT vide the impugned order dated 30.03.2021. NCLT shall have jurisdiction to entertain or dispose of any application or proceeding by or against the corporate debtor or corporate person; any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and any question of priorities or any question of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under IBC. It is under this provision that the related interlocutory application was filed by the petitioner. According to us, it has been rightly dismissed by the NCLT. In Glaxo Smith Kline Consumer Health Care Limited [ 2020 (5) TMI 149 - SUPREME COURT ], Supreme Court has held that ordinarily High Court should not entertain a petition under Article 226of the Constitution of India after exhaustion of the limitation period provided by the statute for availing the remedy thereunder. Extension of limitation in proceedings under IBC - HELD THAT:- Adverting to Section 18 of the Limitation Act, 1963, Supreme Court in Chandra Prakash Jain [ 2021 (10) TMI 144 - SUPREME COURT ] held that the said provision is applicable to applications filed under Section 7 of IBC. In case the application under Section 7 of IBC is filed beyond the period of limitation of three years from the date of default and the financial creditor furnishes the required information relating to acknowledgement of debt in writing by the corporate debtor before the adjudicating authority, with such acknowledgement having taken place within the initial period of three years from the date of default, a fresh period of limitation commences and the application can be entertained if filed within this extended period. In the instant case, the date of declaration of the loan account as NPA. It is 31.05.2011. Demand notice was issued by respondent No. 2 to the corporate debtor under Section 13(2) of the SARFAESI Act on 22.06.2011, followed by possession notice dated 15.09.2021. While proceeding under the SARFAESI Act was going on, a proposal for rescheduling of the loan account was mooted by the parties on 19.03.2012. Corporate debtor had also executed balance confirmations on 04.07.2013. Thereafter, corporate debtor had submitted proposal by way of e-mail communications dated 22.12.2015 and 23.12.2015 showing its readiness and willingness to settle outstanding dues at Rs. 16.00 crores. A meeting was held thereafter between the corporate debtor and the financial creditor on 08.01.2016 - Following further communications between the parties, respondent No. 2 agreed for settlement of its dues under OTS vide letter dated 22.04.2016. It was thereafter that application under Section 7 of IBC was filed before NCLT in the year 2018, to be precise on 29.10.2018, which ultimately led to the order dated 20.09.2019. Therefore, it cannot be said that the application under Section 7 of IBC is barred by limitation. The present writ petition is thoroughly misconceived and is liable to be dismissed - Petition dismissed.
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FEMA
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2023 (7) TMI 829
Acquittal of the charge u/s 56 of FERA - trial Court held that there was no other evidence against the respondent except his statements [Ex.CW2/A and Ex.CW2/B] and no material was available on record to connect the appellant with the commission of the alleged crime and the prosecution had miserably failed to prove the case against him - HELD THAT:- As prosecution could not place on record any orders/notice asking the respondent to appear and make the statements. This fact alone proves that the statements made by the respondent were not voluntarily. Apart from that, the learned trial Court has correctly recorded that there is no evidence against the respondent/accused except his own statements Ex.CW2/A and Ex.CW2/B. Even the prosecution could not lead any evidence to connect the respondent with the alleged chits Ex.C2 to Ex.C14 and the findings recorded by the learned trial Court are liable to be upheld. Apart from that, even the complaint was premature as the same was launched on the strength of the orders Ex.CW2/C and the appeal preferred by the respondent against the said order was stated to be pending before the Appellate Tribunal. Thus, it is apparent that the very basis i.e the order Ex.CW2/C had not even attained finality and the complaint was preferred in a tearing hurry without any valid explanation. Thus instant appeal is wholly misconceived, bereft of merits and without any substance; thus, it must fail. No case for interference has been made out.
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Service Tax
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2023 (7) TMI 828
Levy of Service Tax - liability to discharge service tax on the entire amount collected from the customers - appellant submitted that though they are liable to pay service tax on the entire amount collected from the customer, the same would be applicable only w.e.f. 01.03.2011 as the said Explanation was added to the Rules only on such date - HELD THAT:- It can be seen that the Explanation in Rule 5, clause (1) of Service Tax (Determination of Value) Rules, 2006 (inserted by N/N. 2/2011-S.T., dated 1-3-2011) has been added only w.e.f. 01.03.2011 which indicates that the service tax has to be paid on the gross amount collected from the person (PCO user) and to whom the telecom services are provided. In the appellant s own case BHARAT SANCHAR NIGAM LTD. VERSUS CCE MADURAI AND VICE-VERSA [ 2018 (3) TMI 1007 - CESTAT CHENNAI] , the very same issue was considered and the Tribunal held that Explanation would take effect only from 01.03.2011 and the demand for the period prior to 01.03.2011 cannot sustain. Applying the ratio of decision in appellant s own case, it is opined that the demand cannot sustain and requires to be set aside - appeal allowed.
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2023 (7) TMI 827
Levy of Service Tax - difference in value indicated between the ST-3 returns and the Balance Sheet - 1% indirect cost allocation from the Joint Venture - interest on alleged delay in payment of Service Tax under reverse charge mechanism - amount disclosed as receivables in the Balance Sheet. HELD THAT:- The activities undertaken by the appellants needed to be listed out in detail to determine whether they were already covered under the scope of service tax levy or whether they were subsequently covered under the new proposed levy in 2007 Budget, which by expanding the coverage in a comprehensive manner brought these activities under the service tax However, since the learned Commissioner as original adjudicating authority had already decided this by concluding that the issue of taxability is a settled issue and for his confirmation of demand mainly relied on the basis of difference between the amounts indicated in the Balance sheet and ST-3 return, we consider it is sufficient to examine the issue in the narrow compass of whether service tax is leviable on such difference in values between two different documents i.e., Balance sheet and ST-3 Returns. This issue has already been decided by the Co-ordinate Bench of this Tribunal in the case of SYNERGY AUDIO VISUAL WORKSHOP P. LTD. VERSUS COMMR. OF ST, BANGALORE [ 2008 (1) TMI 188 - CESTAT BANGALORE] , holding that levy of service tax on the sole basis of balance sheet/income tax returns, etc. is unsustainable in law - The Co-ordinate Bench of this Tribunal in the case of in the case of M/S. MAHINDRA HOLIDAY AND RESORTS INDIA LTD. VERSUS THE COMMISSIONER OF LTU, CHENNAI [ 2018 (10) TMI 35 - CESTAT CHENNAI] had held that balance sheet entries per se cannot be considered as income or expenditure for the purpose of considering it as gross value for levy of service tax. Management or Business Consultant s service - 1% of the total amount received from unincorporated joint venture towards parent company income or affiliate of the operator outside India to support and manage petroleum operations - HELD THAT:- This issue is no more res integra in view of the decision of this Tribunal in the case of appellant themselves in BG EXPLORATION PRODUCTION INDIA LTD VERSUS COMMISSIONER OF SERVICE TAX (AUDIT-I) MUMBAI [ 2020 (10) TMI 579 - CESTAT MUMBAI] , holding that the performance of obligations by a party to the joint venture is intended to serve itself and, thereby, the joint-venture and the fulfillment of obligations to contribute to the capital of the joint venture is beyond the scope of taxation under Finance Act, 1994, as it does not amount to consideration. The contractual arrangements between various parties to joint venture agreement under production sharing contract in the PannaMukta-Tapti joint venture (PMT JV), were examined in great detail in the case of appellants by the co-ordinate Bench of the Tribunal in B.G. EXPLORATION PRODUCTION INDIA LTD. VERSUS COMMISSIONER OF CGST CEX., NAVI MUMBAI [ 2021 (10) TMI 306 - CESTAT MUMBAI] , holding that the performance of a party in the joint venture agreement does not amount to a contractor-contractee or principal-agent relationship between the coventurer and the joint-venture, which is a pre-requisite for a service to be liable to tax under the Finance Act. Penalties - HELD THAT:- As the entire demand raised in the impugned order is based on the records as per ST-3 Returns filed by the appellant and the amounts indicated in the appellant s balance sheet, this could only lead to an irresistible conclusion that no suppression or intention to evade payment of tax could be levelled against the appellant. This being so, it is found that there was reasonable cause for the failure to discharge tax liabilities which have been rectified by the appellant duly paying the service tax along with interest thereon and hence the imposition of penalties is unjustified. The impugned order is modified to the extent of allowing the appeals filed by the appellants and upholding the confirmation of demand arising out of short payment of service tax for an amount of Rs.8,68,65,143/- along with interest thereon for Rs.4,76,07,998/-, which have also been appropriated to the Government exchequer in the impugned order - Appeal allowed in part.
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2023 (7) TMI 826
Rejection of refund claim - amount paid under protest - tax has been included in the gross amount collected as insurance premium or not - HELD THAT:- It is unable to comprehend the finding of the original authority that the claim for refund was premature. It was preferred after payment of the claimed amount and it was certainly later than the final audit objection came to approved by the appropriate internal authority. Not unnaturally, the reviewing authority has not placed much store on that line. The thrust of the grounds is that the respondent has not evinced any factual material to contend that the amount collected did include the taxes; on the contrary, it was pointed out that, prior to the decision of the Tribunal in 2015 upholding the leviability of tax on activity undertaken by the respondent from 2011 onwards, the assessee had not been functioning under the premise that tax was not leviable and, hence, the claim that such is included in the premium is not tenable. The history of the dispute itself offers reliable guide to the view to be taken. The respondent had been providing the impugned service since 1st January 1962 by mandate of Parliament after failure of banks left small depositors stranded and though service tax was introduced as far back as 1994 on insurance service , the nature of its activity left it undisturbed from tax oversight until the issue determined by the Tribunal in re Deposit Insurance and Credit Guarantee Insurance Corporation fastened the tax liability on them in 2015 and, in accordance with circular of Central Board of Excise Customs (CBEC) - in the absence of exemption, tax liability does lie and, in such circumstances, the tax would have to be borne from the premium itself. Furthermore, as set out in the grounds of appeal, they could not have collected any amount higher than the premium specified by the Reserve Bank of India (RBI) as their customers the banks also bound under the supervision of the Reserve Bank of India would not pay up any amount over and above the premium. Consequently, the consideration, and gross value, includes the tax amount and liability was to be computed only on the cum tax value. The computation of premium is a complicated exercise involving several aspects and factors as well estimation of probability; it is, therefore, not possible to conclusively conclude that inclusion of tax liability would have altered the premium payable for the service. A normal commercial transaction cannot be equated with insurance service and the extent to which the premium represents consideration for insurance cover. No evidence has been placed on record by the appellant to demonstrate otherwise. There are no merit in the appeal which is dismissed.
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Central Excise
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2023 (7) TMI 825
Denial of rebate claim - non-compliance with the conditions for exporting the goods within 6 months of its clearance from the factory/warehouse - Rule 18 of the Central Excise Act, 1944 read with the notification No. 19/2004 Central Excise (NT) dated 06.09.2004 - HELD THAT:- The Hon'ble Supreme Court in the case of MANGALORE CHEMICALS FERTILIZERS LTD. VERSUS DEPUTY COMMISSIONER [ 1991 (8) TMI 83 - SUPREME COURT ] has granted full relief to the Assessee and held that 'A public authority cannot be estopped from doing its public duty, but it can be estopped from relying on a technicality'. Hon'ble Supreme Court quoted with approval a passage from Francis Bennion in 'Statutory Interpretation' which read: Modern Courts seek to cut down the technicalities attendant upon a statutory procedure, where these cannot be shown to be necessary to the fulfillment of purpose of the legislation . The Hon'ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS MPV ENGG. INDUSTRIES [ 2003 (3) TMI 107 - SUPREME COURT ] has held that 'Assessee who is eligible for exemption should not be deprived of benefit simply because authorities concerned took their own time in disposing of the application'. Taking into consideration the aforesaid judicial pronouncements and on appreciating the records of the writ petitions what is apparently evident is that the respondents took more than 2 years in deciding the application for extension of time which otherwise under the notification was required to be finalized within 7 days. If the respondents have taken an inordinately long period of time in deciding the application for extension of time, the benefit of the same tilts more towards the petitioner as the notification is a beneficial notification and the benefit of which should go in favour of the Assessee. The impugned order dated 08.02.2022 (Annexure P/1) and also that passed by the Commissioner (Appeals) and the original authority therefore deserves to be and is accordingly set-aside - Petition allowed.
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2023 (7) TMI 824
CENVAT Credit - fake invoices - recovery of CENVAT Credit alongwith interest and penalties - HELD THAT:- The facts which are not in dispute that appellant has taken Cenvat credit on the basis of invoices issued by M/s Agrawal Structure Mills Pvt Ltd for service provided to the appellant and appellant has taken Cenvat credit of service tax paid by M/s Agrawal Structure Mills Pvt Ltd although late. In that circumstances, the appellant has correctly taken the Cenvat credit on the invoices issued by M/s Agrawal Structure Mills Pvt Ltd, therefore, no proceedings is sustainable against the appellant. Appeal allowed.
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2023 (7) TMI 823
Exemption to Agro Waste Fired Boilers - parts manufactured by each unit did not constitute a full boiler - only allegation of the department is that each assessee unit has cleared parts of a boiler and does not constitute a complete boiler for which the exemption is not applicable - extended period of limitation - N/N. 6/2006-CE and subsequent notification 12/2012. HELD THAT:- From the above notification, Sl.No.16 of List 8 refers to Agricultural forestry, Agro-industrial, Industrial, Municipal and Urban waste conversion device producing energy. Again, Sl.No.21 refers to parts consumed within the factory of production of such parts for the manufacture of goods specified at S.Nos. 1 to 20 above . It can be seen from Notification 6/2006 as well as Notfn 12/2012 that these notifications provide the exemption from payment of excise duty on the agricultural, forestry, agro-industrial, industrial municipal and urban waste conversion device producing energy and also for parts if such parts are consumed within the factory. In the present case, a sample purchase order is furnished by the assessee. This document shows that the purchase order is for supply of Agro Waste (Palm fibre) Fired Reciprocating Grate Boiler Agricultural Waste Conversion Device Producing Energy. The said purchase order is issued by M/s.Ruchi Soya Industries Ltd. The prices quoted are for supply of the entire boiler and erection and commission. It is no where mentioned in the purchase order that the payment is to be made for separate parts. It is stated in the purchase order that the equipment supply shall be completed in 8 months to suit commissioning within 9 months from the date of the purchase order along with 10% advance amount. The assessee company (not individual units) is liable to pay liquidated damages for the delay in supply and commissioning. All these go to show that the purchase order is for a complete boiler - On perusal of a sample invoice it is seen that the name and address of the factory is shown as assessee company i.e., M/s.Thermodyne Technologies Pvt. Ltd. The consignee name is shown as M/s.Ruchi Soya Industries Ltd., Unit II. The invoice which is for clearance of parts corresponds to the purchase order. At the coloum of description of the goods, it is mentioned as 1x30 TPH AGRO WASTE (PALM FIBRE FIRED RECIPROCATING GRATE BOILER . The two parts cleared as per this invoice is Economiser Block-I and Economiser Block-II. It is also stated in the invoices that the assessee is availing the exemption as per Notification 12/2012. It needs to be mentioned that the purchase order and invoice above (relating to M/s.Ruchi Soya Industries Ltd.) is referred by the adjudicating authority to consider the issue of cum duty price benefit. The issue of having to clear parts of boiler has been examined by the Board and in order to maintain uniformity in the classification of excisable goods and the levy of duty on boiler designed for agricultural or municipal waste as also conventional fuel it is clarified by the Board that benefit of notification No.205/88-CE dated 25.5.1988 (subsequent notification 6/2006) will be available for such goods even when these goods are cleared in CKD / SKD condition provided that evidence is produced that goods cleared as parts form a complete device and that evidence is also produced for supply of such complete device to the buyer - Para 2 (a) (b) (c) of Trade Notice would show that parts were cleared to the customer site. Merely because the Trade Notice uses the words CKD/SKD condition, it does not mean that the entire boiler has to be made under one roof and then knocked down and transported to the site of the customers. The difficulty represented by the trade and the intention of issuing the Trade notice has to be understood. In the case of COMMISSIONER OF C. EX., PUNE-I VERSUS THERMAX BOBCOCK WILCOX LTD. [ 2005 (1) TMI 145 - CESTAT, MUMBAI ] the issue was the classification of pressure parts of boiler removed in several consignments whether to be regarded as a boiler in complete form and whether classifiable as boiler under 8402.10 or under 8402.90 as parts. The Tribunal held that fact that boiler in unassembled form is removed in several lots on different dates itself does not mean that parts only and not the whole boiler is cleared from factory for the reason that, the assessee has a contract to erect and commission a boiler. It was held that the parts are to be classified as complete machine under 8402.10, by upholding the application of Rule 2(a) of Interpretative Rules. Extended period of limitation - HELD THAT:- The adjudicating authority has taken note of the fact that the earlier decision was in favour of the assessee and also that there was CERA and departmental audit conducted. There is no positive act of suppression of facts established by the department. We therefore hold that the demand set aside on the ground of limitation requires no interference. As already discussed there are no grounds to confirm the demand for the normal period and requires to be set aside. Appeal allowed.
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2023 (7) TMI 822
Association of brand name with manufacturer - whether the brand name indicates a connection in the course of trade between the product and some person using such name or mark with or without any indication of the identity of that person - bar by time limitation under Section 11A of the Central Excise Act, 1944 - levy of personal penalty - HELD THAT:- During the investigations it was observed that an affidavit had been filed with the office of the Registrar of Trade Marks, Chennai under the Trade Marks Act, 1999 where the declaration has been made to the effect that they have adopted Trade mark ABHARAN . Shri Subhas M Kamath Partner of M/s. Abharan Jewellers in his statement dated 16.12.2005 and 13.06.2006 admitted that they have made an application for registration of Logo and Marking ABHARAN before the Registrar of Trade Mark, Chennai. The photographs also show the markings as ABJ on the articles of jewellery. At no given point of time, they have withdrawn these statements. From the above its clear that expensive, premium and branded jewellery are manufactured, marketed and sold by the appellants which are liable for tax at the rate of 2%. From the facts of the present cases as discussed in the impugned order there is no doubt that the name of the manufacturer CKJ and ABJ is written on each article of jewellery as is the requirement of the notification. Whether this name or initials draw any connection between the manufacturer and the product can be clearly established through the various advertisements, hoardings and their elegant and most vibrant expensive showrooms. The statements recorded from the customers it clearly shows that the jewellery is identified with the manufacturer. In the case of KAIL LTD. (FORMERLY KITCHEN APPLIANCES INDIA LTD.) VERSUS STATE OF KERALA REPRESENTED THRGH. JT. COMMR. (LAW) [ 2016 (10) TMI 938 - SUPREME COURT ] the issue was with regard to the tax under Section 5(2) of the KGST Act on sales turnover of home appliances for Rs. 27,27,20,230/- on the ground that the appellant-Company had sold the home appliances under the brand name Sansui . The Assessing Authority - the respondent-State, while scrutinizing the second sale exemption as claimed by the appellant-Company Kail Ltd., found that it is the brand name holder of Sansui and hence the turnover of the items sold under Sansui brand name was treated as first sale under Section 5(2) of the KGST Act. What follows from the above decision is that the brand name is established through the marketing strategy adopted by the companies. So, the definition of brand name to find a connection with the trade is clearly established by the ways and means the products are publicised and marketed to woo the customers and establish their brand in the market. The fact that huge amounts were incurred by all these appellants towards hoardings and various other modes of advertisement stands testimony to their strategy to establish their brand and woo the customers. In the present case the articles of jewellery itself were embossed with the name of the manufacturer and the products were widely advertised to attract the customers in buying their products for the quality and craftsmanship of their products. As held by the Apex court the intention was very clear and specific and the legislature intended to tax only those jewellery manufacturers who had established their brand in the market. Whether it is merely a house mark or trade mark (brand name)? - HELD THAT:- In the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI VERSUS M/S. KALVERT FOODS INDIA PVT. LTD. ORS. [ 2011 (8) TMI 24 - SUPREME COURT ] the issue was whether the Appellant had cleared the goods under question under any brand name. The Tribunal had held that because the brand name Kalvert was not registered in their name therefore it cannot be held that respondents were using brand name . The Tribunal further held that the name on the goods manufactured and cleared by the respondent in the market could at best be termed as House mark and not brand name/trade name. The above observations of the Apex court clearly establish the difference between the house mark and the trade mark. In the present case the appellants claim that it was only a house mark for identification. But their advertisements and marketing strategies employed clearly go to prove that they created a connection between the product and the manufacturer to attract the customers - Therefore, it s clear that the articles of jewellery manufactured and sold by these appellants was branded jewellery. In fact, these appellants had also registered their trademarks with the authorities concerned. In the present case Rule12AA was a specific provision introduced to bring every person who gets the articles of jewellery manufactured on job work basis shall obtain registration, maintain accounts, pay duty leviable on such goods and comply with all the relevant provisions of these rules, as if he is an assessee. The question of Rule 12AA overriding section 2(f) or Section 3 of the central excise act does not arise. Time Limitation - HELD THAT:- In case of PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [ 1995 (3) TMI 100 - SUPREME COURT ] the apex court has held that the extended period of five years under the proviso to section 11A(1) is not applicable just for any omission on the part of the assessee, unless it is a deliberate attempt to escape from payment of duty. Where facts are known to both the parties, the omission by one to do what he might have done and not that he must have done does not constitute suppression of fact. The appellants therefore cannot be said to suppressed the facts as they were under the impression that they were not liable to pay duty - the proviso to section 11A cannot be invoked when there is no evidence of wilful suppression with intent to evade duty is alleged by the revenue. Therefore, the goods cleared by the appellants are branded goods and they are liable to pay duty as per Rule 12AA of the Central Excise Rules. Since no allegation of wilful suppression with intent to evade payment of duty is established from the records, the demand is restricted to normal period. Levy of Personal Penalty - HELD THAT:- The personal penalty on Shri Subhas M Kamath, Partner of M/s. Abharan Jewellers, Udupi; Shri Vinod Hayagriv, Managing Director of M/s. C Krishnaiah Chetty Sons and Shri Pratap Kamath, CEO of M/s. C Krishnaiah Chetty Sons, are also not sustainable and consequently set aside. Matter remanded to the original authorities for re-quantification of the demands for the normal period along with interest. Penalty under 11AC and under Rule 25 is set aside - appeal allowed in part.
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2023 (7) TMI 821
Valuation - amount of subsidy received by the appellant from the State Government under the Rajasthan Investment Promotion Scheme, 2010 is includible in the assessable value of the goods cleared or not - section 4(3)(d) of the Central Excise Act, 1944 - period 2011-12 to 2015-16 - HELD THAT:- The issue, stands settled by an order dated 21.03.2023 of the Tribunal while answering on the reference that had been made on account of difference of opinion between the two Members constituting the Division Bench in M/S HARIT POLYTECH PVT. LTD. VERSUS COMMISSIONER, CENTRAL EXCISE CGST- JAIPUR I, GANPATI PLASTFAB LTD., M/S APEX ALUMINIUM EXTRUSION PVT. LTD., M/S MAHA MAYAY STEELS, M/S. TIRUPATI BALAJI FURNACES PVT. LTD., M/S. TRANS ACNR SOLUTIONS PVT. LTD., M/S. FRYSTAL PET PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS CGST- ALWAR [ 2023 (3) TMI 1120 - CESTAT NEW DELHI ] where it was held that In the promotion policy involved in the present case, the subsidy does not reduce the sales tax that is required to be paid by the assessee as the entire amount of sales tax collected by the assessee from the customer is paid. The subsidy amount, therefore, cannot be included in the transaction value for the purpose of levy of central excise duty under section 4 of the Excise Act. The decision of the Supreme Court in COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II VERSUS M/S. SUPER SYNOTEX (INDIA) LTD. AND OTHERS [ 2014 (3) TMI 42 - SUPREME COURT] was considered in the aforesaid order and it was held that it would not be applicable in the facts of the present case. In view of the aforesaid answer to the reference made by the Division Bench, the order of the Commissioner (Appeals) deserves to be set aside and is set aside - appeal allowed.
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2023 (7) TMI 820
Clandestine removal - excess production as against the annual capacity of production - clearance of excess production without payment of duty - demand of interest and penalty - HELD THAT:- The ld. Commissioner (Appeals) in his impugned order has observed that Since the said assesse were operating under Section 3A, actual quantity of production and removal is immaterial, and the assessee has to discharge duty liability fixed by the competent authority on the basis to the ACP determined as peer ACP rules, 1997. In the instant case, monthly duty liability fixed by the competent authority has not been set aside by the higher authority or y the higher forum, and such fixation of ACP, as well as duty liability, cannot be put into question, and I cannot sit on judgment over such issue settled by the then jurisdictional Commissioner, statutorily competent authority in this regard. It is further noted that nowhere the revenue has come forward with an evidence that how the alleged excess production took place and the show-cause notice has been issued without cogent evidence to bring on record the annual capacity of production was not fixed properly. The allegations in the show-cause notice are not sustainable - there are no merit in the appeal filed by the Revenue and the same is dismissed.
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Wealth tax
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2023 (7) TMI 819
Wealth tax assessment - Computation of taxable wealth - addition on account of Net accretion to the assets on the basis of the additions made under the income tax proceedings - addition of on account of appreciation in the value of assets - HELD THAT:- As most of the details of the transactions were maintained by the assessee on a number of computers, which were seized, and upon the analysis of the seized data, it was found that complete share market transactions were not available therein. Therefore, it was held that complete books of account could not be generated from the seized data as well. Thus, the original income tax assessment was also completed on the basis of the material available in the seized computer data, other records, and information gathered from various sources. It was held that the income of the assessee is represented by accounted and unaccounted investment in shares, jewellery, cash, unexplained money, and other unexplained assets, which in any case represents assets liable for levy of wealth tax. AR apart from making general submissions did not bring any material on record to controvert the aforesaid findings of the learned CIT(A). In view of the peculiar facts of the present case, we find no merits in the submissions of the learned AR. We find that the coordinate bench of the Tribunal in assessee s own case in Smt. Jyoti H. Mehta v/s DCIT, [ 2019 (2) TMI 1198 - ITAT MUMBAI] granted substantial relief to the assessee. Accordingly, giving effect to the directions of the Tribunal, the total taxable income of Rs.299,77,95,160 was reduced to Rs.32,54,186, which has been adopted by the learned CIT(A) for computation of taxable wealth in the present case. Further, since from the very first Wealth Tax assessment order dated 28/03/1995, passed by the WTO under section 16(3) of the Act, the total income of the assessee is considered for computation of gross wealth, we find no merits in the ground raised by the Revenue in its appeal Addition on account of appreciation in the value of shareholding - As evident that the coordinate bench in late Shri Harshad S Mehta v/s DCIT, [ 2019 (2) TMI 1198 - ITAT MUMBAI] observed that despite sufficient opportunity the Revenue failed to adduce the relevant material on the basis of which figures of purchase and sale of shares have been computed. Therefore, in view of the above, we deem it appropriate to restore this issue to the file of the WTO for de novo adjudication in light of the aforesaid decision of the coordinate bench of the Tribunal in assessee s own case. To the extent the shares in respect of which figures of purchase and sale have been found to be unsubstantiated by the Tribunal in the absence of relevant material being available on record, the WTO is directed to delete the addition on account of appreciation in the value of shares. To this extent, the impugned order is set aside. Accordingly, ground no.3, raised in assessee s appeal is allowed for statistical purposes. Addition on account of the value of stock exchange membership card - We find that the coordinate bench of the Tribunal in DCIT v/s Ashwin C. Shah [ 2001 (12) TMI 195 - ITAT BOMBAY] held that the right of membership of the BSE under the stock exchange card is merely a personal privilege granted to a member by the BSE and it cannot amount to property or interest in property to constitute an asset within the meaning of section 2(e) of the Act and thus no tax is payable in respect of such stock exchange card of the BSE. Therefore, addition made on account of the value of the stock exchange membership card is deleted. As a result, ground no.5 raised in assessee s appeal is allowed. Deduction on account of various liabilities incurred in relation to the assets belonging to the assessee - HELD THAT:- As further held that the figure of total income has been taken as the basis of computation of taxable wealth in the case of the assessee for the assessment year 1991-92 and a net wealth determined for the assessment year 1991-92 has, in turn, become the base figure for computing the net wealth for the assessment year 1992-93. Thus, it was held that the assessee cannot claim that the liabilities incurred in relation to assets belonging to the assessee while determining the net wealth have not been considered in the case of the assessee. We deem it appropriate to set aside the impugned order on this issue and restore the issue to the file of the WTO for de novo adjudication as per law after necessary verification. As a result, ground raised in assessee s appeal is allowed for statistical purposes. Levy of interest u/s 17B - This issue by following the decision of its predecessor in earlier rounds of litigation. We find that the interest u/s 17B of the Act is to be charged for the period commencing from the due date of filing the return till the date of filing the return or till the date of assessment, whichever is earlier. Therefore, we deem it appropriate to set aside the impugned order on this issue and direct the AO to levy interest u/s17B of the Act in accordance with the provisions of the Act. As a result, ground raised in assessee s appeal is allowed for statistical purposes. Levy of interest under section 31 - We find that in CIT v/s Chika Overseas Pvt. Ltd. [ 2011 (11) TMI 118 - BOMBAY HIGH COURT] held that where pursuant to remand, the AO passed a fresh assessment order, on failure of the assessee to pay the demand within the prescribed time the interest u/s 220 (2) is to be levied from the date of fresh demand. Since, provisions of section 220(2) are pari materia to section 31 of the Act, we find no infirmity in the aforesaid findings of the learned CIT(A). Accordingly, ground raised in Revenue's appeal is dismissed.
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