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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter July 22, 2024 Case Laws in this Newsletter: GST Income Tax Customs PMLA Service Tax Central Excise CST, VAT & Sales Tax Highlights / Catch Notes GST Petitioner's refund amount error excused due to portal glitch. Respondents ordered to pay interest on delayed refunds. Visit to Get Source Retrospective GST registration cancellation for non-filing returns violates natural justice. Cancellation must cite reasons. Registration cancellation effective from notice date, not retrospective. Visit to Get Source Extraordinary writ jurisdiction can't exclude time for appeal filing. Reagitating decided issues is abuse of process & relitigation. Visit to Get Source Motor vehicles for demo by dealers not eligible for input tax credit. Treated as capital goods, not stock for sale. Visit to Get Source Works supervised by applicant, material/installation cost by recipient. Applicant charges supervision fees only. GST payable on supervision charges. Visit to Get Source Non-edible neem oil falls under HSN 1515 90 20, not fertilizers. Remains neem oil despite chemical modification. No ITC refund allowed. Visit to Get Source Vouchers purchased & sold by applicant qualify as movable goods. No service element. Vouchers' title transfer = supply of goods u/s 7(1)(a). Taxable @ 9% CGST & UPGST. Visit to Get Source Income Tax FERA proceedings dropped, IT additions relying on seized docs untenable. Tribunal rightly denied additions for unrelated years. Visit to Get Source Authorities can't revise Tribunal's order due to merger, judicial discipline & res-judicata principles. Tribunal settled deduction entitlement in assessee's favor. Visit to Get Source Notices u/s 148 by Joint Assessing Officer invalid due to lack of jurisdiction per Sec 151A & Mar 2022 notification. Hexaware case cited. Visit to Get Source No TDS on discounts to franchisees under Sec 194H. Victory for assessee. Visit to Get Source Purchase from AE: RPM is MAM for buy-sell/sales commission model sans value add. Trading filter 30%-40% accepted. ECMAS rejected. Arrow excluded. Working capital adjustment remitted. Visit to Get Source Exemption denied due to auditor's mistake, revised Form 10B filed. Rs. 43,98,666/- exemption u/s 11(1)(a) allowed by ITAT. Visit to Get Source Mauritian fund's investments in India for >5 yrs earned legit long-term capital gains. No proof of fund flow from India. Biz model rationale upheld. Visit to Get Source Agri income exempted. Increased expenses not as other income sans proof. AO can't estimate expenses sans verification. Order based on assumptions quashed. Visit to Get Source Demurrage charges disallowed. Salary reimbursement not taxable. DDT refund rejected, treaties inapplicable. Assessee lost relying on set aside orders. Visit to Get Source Non-resident entity's fees for telecasting rights not taxable in India. Reopening invalid due to non-application of mind by AO & DRP. Visit to Get Source Property partition among kin: no transfer, co-parcener shares devolved from father. Compromise decree upheld. Long-term capital gains applicable. Visit to Get Source Customs Charges included in assessable value only if condition of sale, not post-importation activities per SC rulings. License fee related to manufacturing process, hence excluded. Visit to Get Source PMLA Illegal sand mining suspicion alone can't trigger PMLA attachment. Scheduled offence case & proceeds determination mandatory. Visit to Get Source Service Tax Maintenance charges refundable, not for services. No double taxation. Extended limitation period set aside due to nascent service tax law. Impugned order quashed. Visit to Get Source Central Excise Refund claim upheld. Duty can't be loaded in LME index pricing. Appellant bore duty burden, entitled to excess duty refund. Visit to Get Source Clandestine Sponge Iron manufacture alleged - undervaluation demand based on seized docs - MD penalty & 18,156.96 MT confiscation set aside. Visit to Get Source VAT Penalty u/s 47(6) cancelled. Valid docs, no evasion intent. Tribunal rightly set aside assessment order. Assessee didn't benefit from lower tax rate. Visit to Get Source Articles GST REG-14 shall be applicable to properties in India Ownership and bearing of cost - whether relevant for availing ITC under GST? Assessee entitled to refund of the amount recovered as the appellate tribunal has yet not been constituted Notifications Customs 50/2024 - dated 19-7-2024 - Cus (NT) Seeks to amend Notification No. 24/2023- Customs (N.T.), dated the 1st April, 2023 - The manner of issue of duty credit for goods exported under the RoDTEP Scheme under Foreign Trade Policy, 2023 03/2024 - dated 19-7-2024 - CVD Central Government countervailing duty imposed on the tariff 40112010 and 40118000 for a period of five years (unless revoked, superseded or amended earlier) Income Tax 93/2024 - dated 19-7-2024 - IT Central Government specifies the pension fund, namely, AIMCo India Infrastructure Limited in respect of the eligible investment made by it in India - 93/2024 - Income Tax 92/2024 - dated 18-7-2024 - IT Amendment in Notification No. 106/2023 dated 27th December, 2023 - Extension of exemption u/s 10(23FE) - the pension fund, namely, Ravenna Investments Holding B.V. 91/2024 - dated 18-7-2024 - IT Amendment in Notification No. 95/2023 dated 1st November, 2023 - Extension of exemption u/s 10(23FE) - the pension fund, namely, BPC Penco XVII Corporation 90/2024 - dated 18-7-2024 - IT Amendment in Notification No. 89A dated 13th October, 2023 - Extension of exemption u/s 10(23FE) - the pension fund, namely, the Stichting Pensioen funds 89/2024 - dated 18-7-2024 - IT Amendment in Notification No. 36/2023 dated the 7th June, 2023 - Extension of exemption u/s 10(23FE) - the pension fund, namely, 2743298 Ontario Limited 85/2024 - dated 18-7-2024 - IT Amendment in Notification No. 119/2022 dated 31st October, 2022 - Extension of exemption u/s 10(23FE) - investment made in India - Pension fund, namely, Teacher Retirement System of Texas 84/2024 - dated 18-7-2024 - IT Amendment in Notification No. 115/2022 dated 14th October, 2022 - Extension of exemption u/s 10(23FE) - investment made in India - Sovereign wealth fund Norges Bank On Account Of The Government Pension Fund Global notfied as the specified person 83/2024 - dated 18-7-2024 - IT Amendment in Notification No. 114/2022 dated 13th October, 2022 - - Extension of exemption u/s 10(23FE) - the pension fund, namely, 2589555 Ontario Limited 81/2024 - dated 18-7-2024 - IT Amendment in Notification No. 95/2022 dated 16th August, 2022 - Extension of exemption u/s 10(23FE) - the sovereign wealth fund, namely, INQ Holding LLC in respect of the investment made by it in India 80/2024 - dated 18-7-2024 - IT Amendment in Notification No. 93/2022 dated 5th August, 2022 - Extension of exemption u/s 10(23FE) - the sovereign wealth fund, namely, Qatar Holding LLC. 78/2024 - dated 18-7-2024 - IT Amendment in Notification No. 69/2022 dated 27th June, 2022 - Extension of exemption u/s 10(23FE) - the sovereign wealth fund, namely, Seventy Second Investment Company LLC - 69/2022 73/2024 - dated 18-7-2024 - IT Amendment in Notification No. 84/2021 dated 3rd August, 2021 - Extension of exemption u/s 10(23FE) - the pension fund, namely, , the 2726247 Ontario Inc 72/2024 - dated 18-7-2024 - IT Amendment in Notification No. 67/2021 dated 17th May, 2021 - Extension of exemption u/s 10(23FE) - the pension fund, namely, the Indo-Infra Inc. 71/2024 - dated 18-7-2024 - IT Amendment in Notification No. 66/2021 dated 13th May, 2021 - Extension of exemption u/s 10(23FE) - the pension fund, namely, the OMERS Administration Corporation 69/2024 - dated 18-7-2024 - IT Amendment in Notification No. 64/2021 dated the 13th May, 2021 - Extension of exemption u/s 10(23FE) - the pension fund, namely, the Public Sector Pension Investment Board 67/2024 - dated 18-7-2024 - IT Amendment in Notification No. 62/2021 dated 13th May, 2021 - - Extension of exemption u/s 10(23FE) - the sovereign wealth fund, namely, the CDC Group Plc. 66/2024 - dated 18-7-2024 - IT Amendment in Notification No. 55/2021 dated 5th May, 2021 - Extension of exemption u/s 10(23FE) - the sovereign wealth fund, namely, the Chiswick Investment Pte. Ltd. News CBIC releases National Time Release Study (NTRS) 2024 CBDT awards Taxnet 2.0 Project to M/s Bharti-Airtel Ltd Case Laws: GST 2024 (7) TMI 1066 Refund of Integrated Goods and Services Tax (IGST) paid on goods exported - petitioner had made a mistake of not showing the correct amount of refund in the return Form GSTR-3B for July 2017 and August 2017 - HELD THAT:- If delay was due to technical glitch, there is no evidence as to what was the technical glitch and how long it prevailed. Moreover, once the High Court passed directions on 21st April 2023, the technical glitch mysteriously vanished and petitioner was given the refund as indicated above. The refund was given only after this Court directed respondents to consider petitioner s representation. Therefore, the delay in grant of refund cannot be attributed to petitioner since respondents have admitted that the delay was on account of technical glitch in their portal which processed the refund. An Assessee cannot be deprived of its justifiable money. Inaction on the part of revenue is certainly contrary to the provisions of the Act and on general principles, petitioner ought to be compensated for such deprivation. The respondent nos. 3 and 4 to pay interest @6% p.a. from 1st July 2018 upto 18th September 2023 on Rs. 7,15,962/- and upto 16th October 2023 on Rs. 6,04,118/- - petition disposed off. 2024 (7) TMI 1065 Retrospective cancellation of petitioner s GST registration - Failure to file return timely - impugned reason do not set out any reason - violation of principles of natural justice - HELD THAT:- The impugned order does not set out any reason for cancelling the GST registration except referring to the impugned SCN. The petitioner s GST registration has been cancelled on account of its failure to file returns within time. However, that may not justify the cancellation of the petitioner s GST covering the period for which the petitioner had filed its GST returns. Although, in terms of Section 29 (2) of the CGST Act, the Proper Officer has the power to cancel the GST registration from such date as it may deem fit, however it is obvious that such powers cannot be used arbitrarily. The decision to cancel the registration with retrospective effect must be informed by reason - In the present case, no reasons are found either in the impugned SCN or the impugned order, which support the cancellation of the petitioner s registration from the date it was granted. Since, the learned counsel for the petitioner has not pressed the relief for setting aside the impugned SCN or the impugned order in their entirety, it is considered apposite to dispose of this petition by directing that the cancellation of the petitioners GST registration will be with effect from the date of the impugned SCN and not retrospectively with effect from 02.07.2017 as set out in the impugned order. Petition disposed off. 2024 (7) TMI 1064 Invocation of extraordinary writ jurisdiction - whether the petitioner is entitled for exclusion of time taken in the writ proceedings from the period of limitation for filing appeal? - Abuse of the process of the Court. Exclusion of time taken in the writ proceedings from the period of limitation for filing appeal - HELD THAT:- In M/s. Laxmi Srinivasa R and P Boiled Rice Mill [ 2022 (12) TMI 822 - SUPREME COURT ] the Hon ble Apex Court held as under on the point of entitlement to ask for exclusion of the period in terms of Section 14 of the Limitation Act. The judgment in the case of M/s. Laxmi Srinivasa R and P Boiled Rice Mill is distinguishable and is of no help to the petitioner for the contention raised. The proposition of law as laid down by the Hon ble Apex Court in M/s. Laxmi Srinivasa R and P Boiled Rice Mill that the exclusion of time is different and cannot be equated with condonation of delay and that the period once excluded cannot be counted for the purpose of computing the period for filing appeal, is well settled, but the said principle of law is not attracted to the petitioner s case herein. The petitioner is not entitled for exclusion of time on the ground that he filed writ petition. The same is also not sufficient ground seeking condonation of delay in filing appeal. Abuse of the process of Court - HELD THAT:- In KK. MODI VERSUS KN. MODI [ 1998 (2) TMI 566 - SUPREME COURT ] the Hon ble Apex Court in the context of Order 6 Rule 16 of Code of Civil Procedure, which provides that the Court may at any stage of the proceedings, order to be struck out, or amended any matter in any pleading inter alia which is otherwise an abuse of the process of the Court , while explaining the phrase abuse of the process of the court , cited relitigation as one of the examples as an abuse of the process of the Court. It was observed that it is an abuse of the process of the Court and contrary to justice and public policy for a party to relitigate the same issue which has already been tried and decided earlier against him. The reagitation may or may not be barred as res judicate. But if the same issue is sought to be reagitated, it also amounts to an abuse of the process of the court. M/s. Mastek Engineering Private Limited [ 2024 (3) TMI 893 - ANDHRA PRADESH HIGH COURT ] is also of no help to the petitioner and does not apply to the facts of the present case. There was no previous writ petition filed, like in the present case. There was no finality attached to any previous Order passed in writ proceedings. The cause shown for the delay in filing the appeal beyond the condonable period was found sufficient by the writ Court, consequently, the writ court condoned the delay and directed the appellate authority to decide the appeal on merits. The writ petitioner is not entitled for exclusion of time taken in writ proceedings and the subsequent proceedings from the period of limitation for filing appeal, for the reason that the petitioner s writ petition was entertained and the assessment order against which now the appeal has been filed was already set aside in the writ proceedings - the petitioner cannot seek condonation of delay in filing the appeal - Filing of the appeal by the writ petitioner after writ proceedings and subsequent proceedings against the same order of assessment, just to avoid the compliance of the directions of the writ Court is nothing but abuse of the process of the Court. The writ petition is dismissed. 2024 (7) TMI 1063 Availment of Input Tax Credit - inward supply of motor vehicle which are used for demonstration purpose in the course of business of supply of motor vehicle as input tax credit on capital goods - HELD THAT:- It is noted that the motor vehicles supplied for demo purpose are supplied at a discounted rate. Therefore, are treated as different category of vehicles as compared to those which are supplied for sales to the appellant - when the OEM supply vehicles for demo purpose categorised them differently than other vehicles and require the dealership to capitalised such vehicles for a period as per customary practices of the business. There are no reason not to rely on the accounting treatment of the goods to determine its classification. It is understood position that audited books of accounts show true fair position of the business. Further from the plain reading of section 17 (5) (a) (A) it is clear that ITC on motor vehicles as specified in clause 17(5(a) shall be available when further supplied. Therefore, the appellant is not holding the goods for further supply and therefore the exception in clause (A) of section 17 (5) doesn't apply to the appellant. Thus the ITC on motor vehicles used for demo purpose cannot be allowed as per the provisions of the GST Act. The Applicant is not entitled to avail the Input Tax Credit charged on inward supply of motor vehicles which are used for demonstration purpose in the course of business of supply of motor vehicle as input tax credit on capital goods. As by capitalising the motor car it is treated as asset for use in the business and therefore such motor car cannot be said to be held for further supply. 2024 (7) TMI 1062 Determination of taxable value under GST - inclusion of value of material and cost of execution work for installation of lines, in the value of supply for determination of taxable value under GST where all such cost are born by the recipient of service and the applicant charge only supervision charges - HELD THAT:- In this method, the works contract service supplied in course of electric line installation are neither supplied by nor the consideration for same has been received by applicant. The contract for works contract services is executed between the concerned party and a third-party work contractor. Therefore, the applicant is a stranger to this contract. In a case where the third-party work contractor remains unpaid for the services supplied by him, he can sue only the concerned party not the applicant. There is no obligation to pay on the part of applicant. Hence, the case shall not be covered under section 15 (2) (b) of the CGST Act 2017. UPPTCL is not a supplier of goods and services as per provisions of section 2 (105) of CGST Act, 2017 as the work is being undertaken by the customer itself. There is no relationship between the customer and UPPTCL which can be categorized as that of supplier and recipient except for the services of the supervising the whole work - The work contract services supplied in the course of construction/ dislocation/shifting are neither supplied by nor the consideration for the same has been received by UPPTCL hence there is no supply of works contract services by the UPPTCL. Thus, where the value of materials and cost of execution of work for installation of electric lines are borne by the recipient of service and the applicant charges supervision fees only, the value of materials and cost of installation shall not be included in the value of supply for determination of taxable value under GST and the applicant shall be liable to pay GST only on the supervision charges. GST will be applicable on only supervision charges. 2024 (7) TMI 1061 Classifictaion of goods - non-edible neem oil - HSN code - whether the product under question is classified under Chapter Heading 15 or Chapter 31 or under any other Chapter Heading? - applicability of N/N. 09/2022-Central Tax (Rate) dated 13.07.2022. Classification of goods - HELD THAT:- It is found that neem seed oil is mentioned under Chapter Sub-heading 1515 90 20. Thus, the neem oil is classifiable under HSN code 1515 90 20. However, as per applicant their product in question i.e. non-edible Neem Oil are chemically modified and it should be classified as fertilizer under chapter 31 of HSN codes. As per applicant, naturally produced neem oil by them is having Azadirachtin content of 100-900 ppm, whereas they are supplying to their buyers having Azadirachtin content of around 150 ppm. PPM of Azadirachtinis modified/reduced to 150 PPM by adding mixed solvent, reducer oil, cashew nutshell liquid, etc. As per applicant this reduction in concentration is nothing but chemical modification and hence their product is chemically modified neem oil. Since, the product is neem oil mixed with different solvents resulting to new product which remain neem oil in its essential character. Thus, as per rule 3 (b) of General Rules for the interpretation of the Harmonized System, the product non-edible Neem Oil is classified under HSN code 15159020. The product do not classified as fertilizer under chapter 31 of HSN codes. Applicability of Notification No. 09/2022-Central Tax (Rate) dated 13.07.2022 on the applicant - HELD THAT:- Vide Notification No. 09/2022-Central Tax (Rate) dt. 13.07.2022, under the powers conferred by clause (ii) of the first proviso to sub section (3) of section 54 of the CGST Act 2017, certain goods falling under chapter 15 and 27 have been specified in respect of which no refund of unutilized input tax credit shall be allowed , where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on the output supplies of such specified goods (other than nil rated or fully exempt supplies) - Non-edible Neem Oil manufactured by the applicant having HSN code 1515 is covered by Notification No. 09/2022/Central Tax (Rate) dt. 13.07.2022 and thus the applicant is not entitled to any refund of unutilized input tax credit, which is accumulated on account of rate of tax on inputs being higher than the rate of tax on the output supplies of such specified goods. 2024 (7) TMI 1060 Taxability - vouchers themselves, or the act of supplying them is taxable, and at what stage, for each of the three categories of transactions - rate of tax - value of supply - HELD THAT:- In the present case, the Applicant purchases the vouchers by paying a consideration to the issuer. The vouchers are also sold to the clients of the Applicant for a consideration. The vouchers have both a value and an ownership, which is transferred by the issuer of these vouchers to the Applicant, and then to the ultimate beneficiary who redeems the voucher. No element of service is involved between the issuer of vouchers and the Applicant and also between the Applicant and the purchaser. These vouchers are freely transferrable. Therefore, the vouchers qualify to be considered as movable property and the goods. Whether the vouchers are in the nature of actionable claims. As per the definition provided in section 2 (52) of the CGST Act 2017, goods includes actionable claims ? - HELD THAT:- As per Sl. No. 6 of Schedule III of the CGST Act, actionable claims other than lottery, betting and gambling as being neither a supply of goods nor a supply of services. Therefore, only lottery, betting and gambling shall be treated as actionable claims which are goods under GST. All other actionable claims shall not be treated as either goods or services. In the case of Premier Sales Promotion Pvt. Ltd. [ 2023 (2) TMI 130 - KARNATAKA HIGH COURT ], the Hon'ble High Court in Para 10 Assessee receives orders for supply of e-vouchers wherein the assessee observed that sources e-vouchers for such clients as per the orders received and acts as an intermediary between the assessee and the supplier of e-vouchers However, in the present case, as per the facts stated , the Applicant purchases the vouchers, holds in its stock, and sells it to its clients and not acting as intermediary - purchase of these vouchers are not merely advance payment because the Applicant supplies these at a profit; and its client is also getting credit of more than what it has paid. In the present case, as per the given illustration, the client has paid Rs. 96/- but it gets the benefit of Rs. 100/-. In the instant case the applicant is involved in trading of vouchers for a consideration in the course of furtherance of business. Though profit motive is not a requisite for the term supply, yet it is a fact that the Applicant is selling these vouchers at a profit. Thus, the impugned transaction amounts to supply of goods in terms of Section 7 (1) (a) of the CGST Act 2017 - Schedule II to Section 7 of the CGST Act 2017 stipulates the activities or transactions to be treated as supply of goods or supply of services. Para 1(a) of Schedule II to Section 7 specifies that any transfer of the title in goods is supply of goods. The transaction of sale of vouchers in the instant case involves transfer of the title, and hence they are covered under goods . The vouchers in the present case are taxable as per residual entry no. 453 of Third Schedule of N/N. 01/2017-Central Tax (Rate) dt. 28.06.2017 (and similar notification under UPGST Act) at the rate of 9% CGST and 9% UPGST. Income Tax 2024 (7) TMI 1059 TP Adjustment , Depreciation on computer peripherals , Levying of interest u/s 234B and 234C - ITAT [ 2013 (6) TMI 184 - ITAT DELHI] allowed assessee appeal and HC [ 2024 (4) TMI 1148 - DELHI HIGH COURT] decided ITAT was essentially called upon to render appropriate clarification and directions. That cannot possibly be construed to be the remit of Section 254(2) and On an overall conspectus of the aforesaid, we find no ground to interfere with the dismissal of the miscellaneous application HELD THAT:- Petitioner s counsel sought permission to withdraw this special leave petition with liberty to file a writ petition for seeking the enforcement of the order of the Income Tax Appellate Tribunal [ 2013 (6) TMI 184 - ITAT DELHI] His submission is placed on record. The special leave petition stands dismissed as withdrawn with the aforesaid liberty. 2024 (7) TMI 1058 Revision u/s 263 - Deduction u/s 80IC - principles of merger, judicial discipline and res-judicata - self-assessment made by respondent was rejected and it was re-opened in terms of Section 147 - deduction claimed by respondent was reduced from 100% to 30% - HELD THAT:- Principal Commissioner has power to revise an order if he finds that order passed Assessing Officer is prejudicial to the interest of Revenue. In the case in hand, the AO had not extended deduction @ 100% whereas AO had rejected claim of assessee and reduced deduction from 100% to 30%. The said order merged with the order of Commissioner (A) and order of Commissioner (A) further merged with the order of Tribunal. The common thread running through order of AO, Commissioner (A) and Tribunal was whether assessee is entitled to deduction @ 100% or @ 30% u/s 80IC Tribunal categorically held that assessee is entitled to deduction @ 100%. The Principal Commissioner while exercising its power under Section 263 concluded that assessee was not entitled to deduction @ 100%. The ground to reduce the deduction may be different but it cannot be ignored that Assessing Officer had reduced deduction from 100% to 30%, thus, issue before the authorities was confined to entitlement of deduction. The Appellate Tribunal settled the matter in favour of the assessee. The act of Principal Commissioner amounted to revision of order of Appellate Tribunal. The Principal Commissioner had no jurisdiction to revise order of Appellate Tribunal. Act of Principal Commissioner was contrary principles of merger, judicial discipline and res-judicata. If an authority is permitted to revise an order which had already merged with the order of Higher Authorities, there would be chaos and no end of litigation. Every litigation at one or another stage must be put to rest. 2024 (7) TMI 1057 Validity of Faceless assessment of income escaping assessment - Challenge to notice u/s 148 as non-compliance with Section 151A of the Act - notices issued by JAO instead of FAO - HELD THAT:- JAO would not have jurisdiction to issue the impugned notices more particularly in view of the clear provisions of Section 151A read with notification dated 29 March, 2022 issued by the Central Government. As fairly conceded on behalf of the revenue, the challenge in the proceedings would stand covered by the decision of this Court in Hexaware Technologies Ltd. ( 2024 (5) TMI 302 - BOMBAY HIGH COURT] . The impugned notices would be required to be held to be illegal and invalid as and there is no dispute that the JAO had no jurisdiction to issue the impugned notice. We, accordingly, allow this petition in favour of assessee. 2024 (7) TMI 1056 Income tax proceedings based on show cause notice from the Enforcement Directorate [FERA Proceedings] - Misdeclaration of value of goods exported - Assessee had under-valued the goods - show cause notice was not based upon shipping bills and other export documents whereas it was based upon documents resumed during search - HELD THAT:- Enforcement Directorate has dropped proceedings against the respondent-Assessee and the matter stands settled between the respondent-Assessee and Enforcement Directorate. The foundation of proceedings under 1961 Act stands wiped out, thus, there is no ground to make additions in the returned income of the respondent-Assessee. The Appellate Tribunal has further recorded finding to the effect that documents resumed by Enforcement Directorate related to subsequent assessment years and Income Tax Department cannot make additions in the returned income of a particular year with respect to which documents do not relate. Thus, no factual or legal infirmity in the impugned orders passed by Appellate Tribunal as basis of assessment did not exist after FERA Proceedings were quashed by Special Director in the Enforcement Directorate. 2024 (7) TMI 1055 TDS u/s 194H - Tax liability to be deducted at source and the discounted price by the distributors - HELD THAT:- As decided in Bharti Cellular Limited (now Bharti Airtel Limited) [ 2024 (3) TMI 41 - SUPREME COURT] wherein, the issue which fell for the consideration of the Supreme Court was in relation to the liability to deduct tax at source u/s 194-H on the amount which as per the revenue, is a commission payable to an agent by the assessee under the franchise / distributorship agreement, between the assessee and the franchise / distributor. The assessee also in the present proceeding has contended that neither the amounts were paid as a commission or brokerage to the franchise / distributor nor were the franchise / distributor s their agents. High Court had taken a view that the assessee was liable to deduct tax at source u/s 194(H) whereas, this Court as also the Rajasthan High Court and the Karnataka High Court had held that Section 194(H) of the Act was not attracted in the facts and circumstances of the case. The Supreme Court considering the rival contentions upheld the view taken by this Court. Thus, on a reading of the said decision of the Supreme Court, it is clear that the question of law as raised in the present appeals was squarely dealt by the Supreme Court and answered in favour of the assessee. In this view of the matter, further adjudication of these appeals is not called for, as the question of law would stand answered by the authoritative pronouncement of the Supreme Court, in the assessee s own case in Bharti Airtel Limited (supra). We answering the question in favour of the assessee and against the revenue. 2024 (7) TMI 1054 TP Adjustment - Transaction of purchase of goods from Associated Enterprises ( AE ) - MAM - Comparable selection - HELD THAT:- The primary business of the assessee during the year under consideration is to sell and distribute fiber glass products which are manufactured by its overseas AEs. Assessee adopted both the buy-sell model as well as sales commission model depending on how the customers are acquired and maintained. In the buy-sell model, assessee imports products from its overseas AEs and resells the same to the customers in India and in the sales commission model, assessee s overseas AEs sell the products to the third party customers in India directly and the assessee charges sales commission to the overseas AEs based on a certain percent of the product value of the direct sales made by the overseas AEs. The business profile as mentioned in the TP study report, it can be safely concluded that the assessee is not doing any value addition and the products imported from AEs are sold in the market, therefore, consider the FAR analysis, Resale Price Method (RPM), is to be considered as a Most Appropriate Method (MAM) as adopted by the TPO. During the course of scrutiny assessment proceedings, the TPO showcaused the assessee to explain as to why Transactional Net Margin Method (TNMM), should not be rejected and RPM applied as MAM. Assessee in its reply, strongly rejected the RPM as the MAM contending absence of reliable data with respect to degree of comparability and absence of reliance date relating to gross margins earned by the comparable companies. The objections raised by the assessee were dismissed by the TPO. Comparables selected by the assessee - TPO rejected ECMAS Resins Private Limited (ECMAS) as the said company was engaged in manufacturing and sale of unsaturated polyester resins and trading component of its income is 40.06% only. Before us, the assessee had strongly contended that due to paucity of the comparables available, a trading filter range of 30%-40% should be considered as an appropriate threshold for selecting comparable companies. We are inclined to accept this contention of the assessee for the simple reason that ECMAS is a manufacturer and while carrying out its activities, it is also doing trading activities but which is very less as compared to the manufacturing activity and its trading results is completely dominated by its manufacturing activities. Therefore, rejection of ECMAS is upheld. TPO has included Arrow Technical Textile Private Limited (ATTPL) as a good comparable. The business description of this entity as extracted from its website shows that it is a dynamically upstart company offering world-class Structural Strengthening Materials, Carbon Fibers, Basalt Fibers Products, High Strength Fiberglass, Fiberglass Product Insulation Cloth, High Silica Fibers, Filter Cloth, Non Woven Fabric and many more. Its core purpose is to provide innovative solutions in advanced industrial fiber and fabric to Indian Industry and SAARC Nations with a sustainable ecological environment commitment. This company has a wide range of product mix which primarily deals in textile fiber and carbon fiber and fabrics and this company is offering composite fibers such as High Silica, Carbon Fiber, Basalt Fiber, Aramid, EMI (electromagnetic induction) and ESD (electromagnetic sensitive devices). The principle business activity of the company is trading in textile products. This is entirely different from the products sole by the assessee. The assessee deals in basic glass fiber products like assemble rovings, direct rovings, chopped strands, shopper strand mat. Thus, the products offered by ATTPL are quite different from fiber glass products in terms of its uses and industrial application. Because of the product dissimilarity, we are of the considered view that ATTPL is not a good comparable and direct the TPO to exclude the same from the final list of comparables. TPO has dismissed the claim of working capital adjustments on the ground that the assessee has failed to explain as to how by not treating the working capital adjustment would materially affect the amount of gross profit margin in the open market. We are of the considered view that there is some force in the contention of the TPO but at the same time, improvement in the results, in the comparability study after giving working capital adjustment cannot be ruled out. The assessee is directed to demonstrate how the working capital adjustment would make the difference in the comparability and the TPO is directed to examine the working capital adjustment furnished by the assessee and decide this claim after offering reasonable and adequate opportunity of being heard to the assessee. To sum up, exclusion of ECMAS stands and ATTPL is directed to be excluded. With this, the TPO is directed to re-compute the Arm s Length Price adjustment, if any, after giving effect to the working capital adjustments. Assessee has also claimed for the application of external Comparable Uncontrolled Price (CUP) method as the MAM. We are of the considered view that application of any method as MAM for the determination of ALP margin depends upon the functional profile of the tested party and on the facts of the case in hand, in the light of the functional profile of the assessee RPM is the MAM. With the above directions, appeal of the assessee is partly allowed. 2024 (7) TMI 1053 Denial of exemption u/s 11 - non-claiming of exemption in the original return had happened as a consequence of auditor s mistake in Form No. 10B - HELD THAT:- It is only the second part of same provision of section 11(1)(a) which entitled the assessee to claim exemption which had not been allowed to assessee due to inadvertent mistake by auditors in Form No. 10B. The mistake also stands rectified by assessee by filing revised Form No. 10B. There can hardly be any dispute by revenue that the impugned second part of exemption u/s 11(1)(a) amounting to Rs. 43,98,666/- is a statutory claim of assessee. Thus, the exemption u/s 11(1)(a) is already claimed by assessee in original return, the only mistake which occurred was in mentioning the amount of second part of exemption. In any case, it is also a judicial view that a legal claim of assessee can be allowed by appellate authorities, if not by AO, and the decision of Goetze (India) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] does not come in the way of appellate authorities. Therefore, we are of the considered view that in present case the assessee s claim of exemption of Rs. 43,98,655/- under second part of the section 11(1)(a) has to be considered by AO. Accordingly, we direct the AO to allow the claim of assessee after verifying the revised Form 10B filed by assessee. Assessee appeal allowed. 2024 (7) TMI 1052 Income taxable in India - capital gains as exempt as per Article 13(4) of the India- Mauritius Tax - Denial of Treaty benefits - Appellant transferred shares of Indian Companies and thereby earned long term capital gains on such transfers -assessee company claimed to be holding valid tax residency certificate ( TRC ) and Global Business License-I ( GBL- I License ) issued by the Financial Services Commission, Mauritius HELD THAT:- In the case in hand present assessee company was incorporated in 2006 as an investment fund and held by company formerly known as JP Morgan India Property Mauritius Company I, which was also incorporated in Mauritius. Being investment fund, the appellant company pools capital from investors from countries through series of funds investor vehicles / feeder funds creating a master fund which is used for investment into various entities in India and particularly in regard to companies for which alleged gains has been attributed the companies were joint ventures or real estate. The investment in four companies allegedly giving rise to the capital gains were made in A.Y. 2007-08 to 2011-12. There is no allegation of the AO on the basis of any evidence that any investment flowing from India was received for creating the present appellant company. It is coming up that the investments are held for over five years before they are transferred and as observed earlier, appellant was earlier also making investment and divestments and still holds investment in various other companies. Certainly the assessee was holding the investment in its own name beneficially and legally. It cannot be called as a fly by night operator created merely for tax avoidance purposes. To question the genuineness of the activities of assessee on the basis of the fact that Directors were not residents of Mauritius or absence of operational expenditures and Directors remunerations, when analyzed in the light of aforesaid facts as to how the assessee company had come into existence as a subsidiary company of IPM-I, the assessee company has validly discharged its burden by establishing that the external service provider has been outsourced, the day to day administrative activities of assessee company as per the law of land and payments were being made for those services. It is the wisdom and discretion of company as to how the day to day activities are managed and without establishing that on sham basis administrative activities are being shown, Revenue cannot question genuineness of the business operations of an assessee. AO has attributed conduit status to the assessee alleging that the investment funds and the consideration received from liquidation were immediately transferred to the assessee before investment and the assessee immediately transferred the consideration in the form of share buyback and dividend. When assessee is incorporated as a investment fund, then such model of transaction is obvious. What is material is to see that for how long the investments were held and whether the investments had commercial expediencies. No presumption of conduit status merely on the basis of transfer of the consideration immediately after divestments can be drawn because ultimately the funds under investments were to be returned with whatever gains made. AO himself has reproduced in the order, the resolutions of the assessee company indicating as to why the divestments are being made and how the proceeds of divestments shall be accounted back to the investors. The commercial rationale for the existence of the assessee company in Mauritius is thus not any scheme of tax avoidance but a business model to attract funds from different jurisdictions for investment in India. As emphasized in the case of Azadi Bachao Aandolan [ 2003 (10) TMI 5 - SUPREME COURT] when the whole endeavor of the Government of India is to procure investment in joint venture and infrastructure projects for the benefit of economy then attributing a malice to investment funds like the assessee is not justified. We are of the firm belief that except for suspicion there was no evidence with learned AO to rebut the statutory evidence of presumption of genuineness of business activity of assessee company on basis of TRC held by the assessee and consequently we are inclined to allow these two grounds no. 2 3 in favour of the assessee. 2024 (7) TMI 1051 Unexplained cash sales u/s 69A - Deposits in the bank during the course of demonetization period - CIT(A) deleted addition - HELD THAT:- Assessee, engaged in the business of trading of Imported Electrical Goods, has made cash sales as well as credit sales. It has maintained sales vouchers and filed VAT return within the stipulated time period. The revision of VAT return has not affected the turn over shown in the original VAT return. Before us, revenue has not placed any material on record to demonstrate that the details of cash sales shown by the respondent/assessee are fictitious/bogus. The purchases are entirely through imports. Revenue has also failed to place any material on the record to demonstrate that the VAT returns of the relevant year have not been accepted by the VAT authority and the Custom authority has not accepted the imports/purchases. Hence, following the reasoning given in the case of Ramesh Kochar, addition under section 69A of the Act is uncalled for and the CIT(A) is justified in deleting the same. Appeal of the Revenue stands dismissed. 2024 (7) TMI 1050 Income tax demand / proceedings pertaining to pre-CIRP periods survive after insolvency resolution proceedings - HELD THAT:- The statutory provision of section 156A effective from 1st April, 2022 thus provides that where any tax, interest, penalty, fine or any other sum in respect of which a notice of demand has been issued under section 156, is reduced as a result of an order of an Adjudicating Authority as defined in clause (1) of section 5 of the Insolvency and Bankruptcy Code, 2016, the AO shall modify the demand payable in conformity with such order and shall thereafter serve on the assessee a notice of demand specifying the sum payable, if any, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly. The amended law further provides that where the order referred to in sub-section (1) is modified by the National Company Law Appellate Tribunal or the Supreme Court, as the case may be, the modified notice of demand as referred to in sub-section (1), issued by the Assessing Officer shall be revised accordingly. Accordingly, we direct the assessing officer to take necessary action under section 156A. Since the grounds of appeal No.1 raised by the assessee on the technical grounds are allowed, the alternative grounds concerning merits of the case have not been found to be deserving any separate adjudication. Appeals are allowed. 2024 (7) TMI 1049 Expenditure in connection with the agricultural activity - assessee HUF is holding 8 acres 27 guntas of agricultural land at Purle Village in Shimoga Taluk of Karnataka State where the assessee is cultivating coffee, pepper, areca nut, coconut, banana and coco - whether the CIT(A) is justified in confirming the order of the AO specially when no adverse materials were brought on record and the additions were based on pure estimate, imagination and surmises? HELD THAT:- Agriculture income is exempt u/s 10(1) of the I. Tax Act, 1961 which falls in Chapter III of the Act. Heading of the Chapter III is Incomes which do not form part of total income . Thus the item of Income specified in Section 10(1) of the Act or Chapter III of the Act would not be a part of total Income. There cannot be a charge of Tax u/s 4(1) of the Act on anything other than total income. We could not understand how by increasing the agriculture expenditure reducing the Agriculture Income which are exempted u/s 10(1) of the Act would give rise to Total Income chargeable to tax u/s 4(1) of the Act under head Income from Other Sources . We are of the opinion that the question of increasing or decreasing of any agriculture expenditure may become irrelevant if income of the assessee HUF is considered solely agriculture in nature therefore merely by increasing the Agriculture expenditure reducing the exempted Agriculture income will not resulted in Income from other sources automatically unless the AO brought some material on record to show that the assessee HUF earns any other income also. It is also well settled that the AO cannot step into the shoes of an assessee , or question or even sermons to his beleaguered assessees on the conduct of the business. This is more particularly so, when there is nothing in the enacted laws, that requires an assessee to conform to a particular set of business practices. Merely on the basis of some estimation assumption of the AO, increasing of Agriculture expenditure consequently reducing the Agriculture income will not automatically culminate in Income from Other Sources without any material being brought on record to show that agriculture expenses are not genuine or they are understated. AO has merely acted on the basis of surmises and conjuncture in adopting the estimate of 30% of gross agriculture income as Expenditure in connection of agriculture activities without carrying out further verification. We note that both the authorities have failed to discharge their duties properly as none of the parties have brought any substantial material on record to prove that assessee has incurred expenses over above what has been stated by the assessee HUF. We are not in a position to sustain the order of the CIT(A) as the same appeared to be on assumptions estimations, guess surmises to sustain the addition made by the AO and therefore, we are inclined to set aside the order of the first appellate authority and direct the AO to delete the addition. Appeal of assessee allowed. 2024 (7) TMI 1048 TDS u/s 195 - Disallowance of demurrage charges and reimbursement of salary paid to seconded employees on account of non-deduction of tax at source - HELD THAT:- As perused the orders of the Coordinate Bench in the assessee s own case for earlier assessment years [ 2019 (10) TMI 972 - ITAT MUMBAI ] where identical issue arose and the issue is decided in favour of the assessee. We find that first time the issue arose in the case of the assessee with respect to reimbursement of demurrage charges [ 2019 (10) TMI 972 - ITAT MUMBAI ] While deciding the issue following the decision in the case of CIT vs. Dempo and Co. P. Ltd. [ 2016 (2) TMI 308 - BOMBAY HIGH COURT ] Further, for subsequent years also, the Coordinate Bench has followed this decision. DR could not show us any reason as to why the above decision should not be followed. Accordingly, respectfully following the decision of the Coordinate Bench in the assessee s own case, we confirm the order of the Learned CIT-A in deleting the disallowance of demurrage charges paid by the assessee. Accordingly, ground No.1 of the appeal is dismissed. Disallowance of reimbursement of salary paid to seconded employees on account of non-deduction of tax at source - We find that the issue first arose in the case of the assessee in [ 2019 (10) TMI 972 - ITAT MUMBAI ] for assessment year 2010-11 where the Coordinate Bench has dealt with the issue in paragraphs 15 16 and deleted the addition. The year has relied upon the decision in the case of Burt Hill Design Pvt. Ltd. [ 2017 (3) TMI 1515 - ITAT AHMEDABAD ] CIT-A has followed the decision of the Coordinate Bench in deleting the disallowance. Therefore, we do not find any infirmity in the order of the CIT-A. Accordingly, ground No.2 of the appeal of the Assessing Officer is dismissed, holding that no tax is required to be deducted on reimbursement of salary to seconded employees. Thus, the appeal of the Assessing Officer for assessment year is dismissed. Refund of excess Credit for DDT [Dividend Distribution Tax] paid - HELD THAT:- We find that the issue is squarely covered by the decision in the case of the assessee [ 2023 (4) TMI 988 - ITAT MUMBAI (SB) ] where in it has been held that DTAA does not get triggered at all when a domestic company pays DDT u/s 115-O; where contracting states to a tax treaty intend to extend treaty protection to domestic company paying dividend distribution tax, only then, domestic company can claim benefit of DTAA, if any. Further latest decision of the Hon'ble Supreme Court in Nestle SA [ 2023 (10) TMI 981 - SUPREME COURT ] Claim of the assessee is based on Concentrix Services Netherlands B.V. [ 2021 (4) TMI 1051 - DELHI HIGH COURT ] and Steria (India) Ltd. [ 2016 (8) TMI 166 - DELHI HIGH COURT ] both these decisions are set aside by honourable Supreme court. Decided against assessee. 2024 (7) TMI 1047 Validity of reopening of assessment u/s 147 - validity of approval u/s 151 argued as issued on mechanical manner - assessee is a non- resident corporate entity incorporated in Australia incurred financial transactions in India - based on AIR information available in AIMS module of ITBA, AO noticed that assessee has entered into certain financial transactions and as the activities undertaken by assessee are income generating activities and assessee has not filed any return of income in India, notice issued u/s 148 - As submitted by the assessee that it had entered into an Asian Broadcast Agreement with ESPN granting certain rights for telecasting certain matches played in Australia [ESPN Star Sports is a partnership incorporated in USA and has principal palace of business at Singapore] and that the fee received by the assessee from another non-resident company is not subject to tax in India - AO stated that assessee didn t file any return of income. HELD THAT:- It is a fact on record, in the year under consideration, neither the assessee has made remittances to anyone outside India or in India nor deducted any tax at source. Therefore, there is no question of assessee filing any TDS return. This fact has been accepted subsequently by the Assessing Officer while disposing of the objections of the assessee. Thus, the present case stands on identical footing as the case of Cricket South Africa [ 2023 (10) TMI 1318 - ITAT DELHI] as held only requirement to initiate proceedings u/s. 147 is reason to believe which has been recorded above. This case is beyond four years within six years from the end of the assessment year under consideration. Therefore, approval u/s 151(1) of the Act is solicited. AO has reopened the assessment under Section 147 of the Act with complete non-application of mind. Unfortunately, the higher authorities while granting approval under Section 151 of the Act have approached the issue in a mechanical manner without verifying the facts. Approval has to be granted with caution and proper application of mind to the facts and material on record, to prevent to miscarriage of justice as reopening of assessment involves reopening of an already concluded assessment. Therefore, it should not be used as a trail of harassment to the assessee unless there is concrete evidence that the Assessing Officer indicating escapement of income, powers under Section 147 of the Act should not be exercised. However, this is not the case in the present appeal. Not only the Assessing Officer has acted in a caliber manner while reopening of assessment under Section 147 of the Act but the proving authorities under Section 151 of the Act have failed in discharging the duties cast upon them by the Statue. As could be seen from the observations of learned DRP, they have disposed of the objections of the assessee being completely oblivious of the factual position as the DRP has referred to non- filing of TDS return and related transactions as the reasons for reopening. Thus, in our view, is totally unacceptable. When the Assessing Officer while disposing of the objections of the assessee as admitted errors committed by him, it is surprising that learned DRP has fallen in the same error while referring to non-filing of TDS royalty and TDS transaction as the cause for reopening of assessment - As DRP is constituted by three very senior officers of the department in the rank of Principal CIT/CIT. Therefore, it is expected that when the panel decides the objection raised by the aggrieved assessee, they must decide the issues raised before them by considering both the facts and law. This is so because after directions issued by the DRP, assessee got no further opportunity before the Assessing Officer as the Assessing Officer has to implement the directions of DRP in latter and spirit. However, we have come across several instances where the DRP has failed to discharge its obligation in a proper manner by dealing with the objections of the on merit with valid reasoning. The instant case is a classic example on failure of the DRP to effectively deal with the issue at hands. Thus we hold that reopening of assessment under Section 147 of the Act in the facts of the present appeal is wholly without jurisdiction, hence, invalid. Accordingly, we quash the assessment order. Decided in favour of assessee. 2024 (7) TMI 1046 Capital gain on partition among family members - determining market value of the property - compromise decree resulted in the assessee acquiring the shares of others - AO treating the capital gains arising in respect of the 6/8th share in respect of which the assessee paid sum to the co-sharers as short term capital gains on the premise that the assessee acquired the share of others under the compromise deed - whether there is any transfer of property from the other co-sharers to the assessee in respect of such 6/8th share on the assessee paying Rs. 102.50 lakhs within the meaning of Section 45 / 47(i) of the Act? HELD THAT:- With the passing of the preliminary decree and for that matter, with the passing of any final decree, the partition does not reach its logical conclusion. It is only with the allottees of the shares putting in possession of the respective property, the partition is complete. Till then, the shares themselves are liable to be varied on account of the intervening events, if any. Whatever the directions that the civil court gives and whatever the payment that would be made by the parties to each other or the variances in the size of shares by metes and bounds, till the partition proceedings reach the logical conclusion, are only the process of adjusting the equities. Compromise decree clearly shows that it is not a record of mere payment transaction in respect of 6/8th share of other coparceners, but it deals with other items of property and the obligations of other parties also. More particularly it deals with the other movable and immovable property and also and rights and obligations of other defendants also. It is the record of adjustment of equities and not a document recording the simple payment and acquisition of the rights of the 6/8th shareholders in one item of the property. It is only the compromise decree that gives a quietus to the issue of partition and, therefore, the assessee must be deemed to have acquired the property under such decree on devolution of the same from the father, but not through the other coparceners. Such an event gives rise to the legal fiction that when the assessee alienated the property on 21/01/2016, the assessee did so while in the shoes of the other coparceners, for the purposes of computing the capital gains. Thus, we hold that the assessee is entitled to offer the entire capital gains as long term capital gains, and consequently direct the learned Assessing Officer to treat the entire impugned capital gains as long term capital gains. Decided in favour of assessee. Customs 2024 (7) TMI 1045 Valuation of Customs Duty - inclusion of the supervision charges and license charges for process Know-How in the assessable of goods imported by the appellant - re-determination of Customs duty - HELD THAT:- From the decision in COMMISSIONER OF CUSTOMS, CHENNAI VERSUS M/S. DENSO KIRLOSKAR INDUSTRIES PVT LTD [ 2015 (10) TMI 549 - SUPREME COURT] and COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI VERSUS M/S. HINDALCO INDUSTRIES LTD. [ 2015 (5) TMI 696 - SUPREME COURT] , it is apparent that before such consideration are included in assessable value it has to be established that such charges are a condition of sale Moreover, it has to be established that the charges are not in relation to post importation activities. It s only in such conditions that such charges can be added to the assessable value. There is nothing in the contract which shows that the procurement of licenses for process Know-How or the activity of the supervision of erection and commissioning plant are in any way, condition for the sale of goods to the appellants. The impugned order also does not identify any such conditions of sale. Moreover, the licence fee also relates to the manufacture process which is a post importation activity, just like supervision of Erection and Commissioning. In these circumstances, since the activities are clearly post importation activities and also not a condition for sale, the price paid for the same cannot for part of the assessable value of the goods. The impugned order cannot be sustained - appeal allowed. PMLA 2024 (7) TMI 1044 Money Laundering - Provisional Attachment Order - possession of proceeds of crime - petitions have been filed on the primary ground that the respondents lack jurisdiction to initiate action under the Prevention of Money Laundering Act, 2002 - reasons to believe. Whether, even assuming that the respondents have material to show that there was illegal sand mining and it had generated huge proceeds, they would be entitled to initiate action under PMLA, in the absence of a scheduled offence investigated by any other investigation agency and determination of proceeds of crime? HELD THAT:- The respondents have proceeded on the premise that a scheduled offence has been committed and that it has generated proceeds of crime. Neither in their counter nor in any of the Provisional Attachment Orders, the respondents have spelt out the exact scheduled offence committed by the petitioners. That apart, they have also not spelt out as to whether an FIR has been registered for a scheduled offence said to have been committed by either the petitioners or someone else whose proceeds of crime are held by the petitioners. Above all, the exact proceeds of crime, have not been determined. In the instant case, neither the FIRs relied upon by the respondents nor the reasons given by the respondents for initiating proceedings under PMLA warrant an emergent action. It is noted that though the Provisional Attachment Orders were passed as early as in January 2024, the respondents have not taken any action to inform the concerned jurisdictional Police about the commission of any scheduled offence by the petitioners or any other person through whom the petitioners are dealing with the proceeds of crime. Strangely, the respondents have chosen to write a letter purporting to be communication under Section 66 (2) of the PMLA, on 13.06.2024, to the Director General of Police. In the said letter, the materials that were available to the respondents as early as January 2024 were reiterated. There was no reason as to why the respondents had suddenly discovered the need to send a letter on 13.06.2024, when the matters were heard by this Court on 12.06.2024. An attachment of property would result in serious consequences for the concerned persons and cannot be based on assumptions made by the respondents as observed by the Hon'ble Supreme Court. The FIRs relied upon by the respondents are not even remotely connected to the petitioners. There are no other FIRs as on date to connect the alleged proceeds of crime in the possession of the petitioners in connection to any scheduled offence - There is absolutely no discussion as to what is the proceeds of crime and how they had arrived at that figure. Even if there is proceeds of crime, the respondents cannot assume jurisdiction to attach all other properties on the premise that they were ill-gotten. The Schedule to the Attachment Order suggests that all the money that is lying in the bank accounts were also subject matter of the attachment. The respondents' case is that there are other FIRs and the State of Tamil Nadu is refusing to share those particulars with the respondents. If that is the case, the remedy lies elsewhere. We are also informed that the respondents have filed a petition before the Hon'ble Supreme Court for a direction to the State of Tamil Nadu to share the information - unless an information with regard to any case in the scheduled offence is registered and such an offence has generated proceeds of crime, which is dealt with by the petitioners, no action can be initiated. As stated earlier, the materials collected and the reasons shown in the Provisional Attachment Order, even if accepted to be true only suggests that the respondents have unearthed large scale illegal sand mining and that may have generated illegal money. The Hon'ble Supreme Court in Vijay Madhanlal Choudhary's case [ 2022 (7) TMI 1316 - SUPREME COURT ], has observed that even assuming that the money obtained by the petitioners is ill-gotten, in the absence of any scheduled offence, that has resulted in proceeds of crime, the respondents cannot assume jurisdiction to initiate action under PMLA. However, we would also make it clear that the respondents would have every right to initiate such action to ensure that the scheduled offence is registered and is investigated. Till such time, the properties of the petitioner cannot be subjected to attachment and the respondents otherwise cannot initiate any action under the PMLA. One cannot put the cart before the horse. The impugned actions, which are challenged in the Writ Petitions, are without jurisdiction and they are liable to be quashed and as such, stand quashed - Provisional Attachment Orders impugned in the Writ Petitions are quashed - Petition disposed off. Service Tax 2024 (7) TMI 1043 Maintainability of appeal - appeal was rejected on the ground of limitation - benefit of abatement - Section 60B r/w Section 66E of the Finance Act, 1994 - HELD THAT:- The petitioner has placed on record the discharge summary issued by the Apollo Hospital, Chennai. The said document records that the petitioner was admitted with triple vessel coronary artery disease . It also records that the petitioner was diagnosed as a diabetic 13 years earlier - The facts and circumstances warrant providing the petitioner an opportunity by putting the petitioner on terms. By taking into account the fact that the petitioner had earlier remitted 7.5% towards tax demand, reconsideration is necessary by directing the petitioner to remit an additional 7.5% of the disputed tax demand. The matter is remanded for reconsideration on condition that the petitioner remits an additional 7.5% of the disputed tax demand within 15 days from the date of receipt of a copy of this order - Petition disposed off by way of remand. 2024 (7) TMI 1042 Valuation - inclusion of charges from the Customers under the category of Interest Free Maintenance Security [IFMS] and Annual Maintenance Charges [AMC] - Revenue s contention is that the said collected amount would fall under the category of Management, Maintenance and Repair Services and would be liable to service tax separately - demand of service tax of advance maintenance charges. Inclusion of charges from the Customers under the category of Interest Free Maintenance Security [IFMS] and Annual Maintenance Charges [AMC] - HELD THAT:- The amount is refundable in case of termination of the ownership agreement and if no such termination has taken place till date, the amount would not be refunded. As long as the provisions for refund of the said amount in the agreement itself is there, it has to be considered that the said amount is refundable and was towards security deposits and was not for the purpose of providing any services, so as to levy tax on the same. Demand of service tax of advance maintenance charges - HELD THAT:- Once it is an admitted fact that Paramount Facilities Services Pvt. Ltd. has provided services, no tax would be demanded from the Appellant. This is also a fact on record that the Department had already demanded service tax from Paramount Facilities Services Pvt. Ltd. under SCN dated 10.10.2014 for the same work during the same period and on same basis. It is also submitted that for the period 2010-11 to 2011-12 the Department had already issued another SCN demanding tax on parking charges which has been finally settled in favour of the Appellant on merits as well as on limitation. Extended period of Limitation - HELD THAT:- It is found that demand stands raised and confirmed by invoking longer period of limitation inasmuch as a SCN was issued on 15.10.2014 for the period July, 2010 to June, 2012. Apart from the fact that the Lower Authorities have alleged that the Appellant did not file the returns and pay the Service Tax, there is otherwise no positive evidence adduced by the Revenue so as to justifiably invoke the longer period of limitation. The Service Tax law, during the relevant period, was still at the nascent stage and was not clear. The Board s Circular referred to by the Learned Advocate is to the effect that all peripheral activities provided by the builders would not be taxable under the category of Residential Complex Construction Services . There is also no positive evidence indicating any mala fide on part of the Appellant. Accordingly, the order set aside on limitation and the appeal allowed on the said ground. The impugned order cannot be sustained and is accordingly set aside - Appeal allowed. Central Excise 2024 (7) TMI 1041 Refund claim of excess duty borne - denial on account of unjust enrichment - sale of goods on the basis of LME price index. Revenue sought to deny the refund claim on the ground that during the impugned period, when the appellant paid duty at higher rate, the same was booked in the Books of Accounts as revenue expenditure and later on, after the decision, the ld.Commissioner (Appeals) held that the lower rate of duty is payable, the appellant booked in the Books of Accounts as recoverable from the Department, therefore, they are not entitled to claim the refund. HELD THAT:- The said issue has been examined by this Tribunal in the case of COMMISSIONER OF CUSTOMS VERSUS M/S. U.T. ELECTRONICS PVT. LTD. [ 2019 (12) TMI 1219 - CESTAT NEW DELHI ], wherein this Tribunal has observed ' the mere fact that the amount of differential CVD is shown as recoverable in profit and loss account is, in itself, not sufficient to prove that burden thereof has been passed by the assessee to the buyers. Onus otherwise rests upon the Department to prove the same. There is no such evidence produced by the Department. On the contrary, the assessee has placed on record the C.A. Certificate falsifying the allegations of unjust enrichment. Same cannot be ignored, that too. in absence of any evidence to the contrary.' It is further noted that the appellant is selling the goods on the basis of LME price index. Therefore, the issue is to be examined when the goods are sold by the appellant on the basis of LME Price Index, whether Revenue would hit by unjust enrichment or not ? The said issue is examined by the Hon ble Apex Court in the case of State of Rajasthan Ors. V. Hindustan Copper [ 1997 (11) TMI 516 - SUPREME COURT] , wherein the Hon ble Apex Court has observed that ' It has been stated in the said affidavit that the price of copper has always been fixed by the Mineral Metal Trading Corporation (MMTC) on the basis of the prevailing price fixed by the London Metal Exchange (LME) and this was done not only for the period in question but also for prior and subsequent period and that only such price could be charged and that no part of the duty in respect of rectified spirit captivity consumed in the manufacture of copper could be added to the price of copper which was fixed on the basis of the LME prices.' Admittedly, in this case, the appellant is selling aluminium on the basis of LME Price Index. In that circumstances, the bar of unjust enrichment is not applicable to the facts of this case. As the Revenue has failed to do so, admittedly, the duty element has been borne by the appellant, which has been paid by them to SAILRSP, therefore, they are entitled for refund claim of excess duty paid by them, which was rightly sanctioned by the adjudicating authority vide its Order dated 27.01.2010. The impugned order set aside - appeal allowed. 2024 (7) TMI 1040 Clandestine removal - Job-work - burden of proof - appellant submits that clandestine removal, being a serious charge, is required to be proved beyond doubt on the basis of affirmative evidence and not on the basis of inferences - Penalty imposed on the Director, Shri Milan Kumar Mehra. HELD THAT:- The submission of the appellant is agreed upon that clandestine removal must be proved and supported by sufficient evidence and the burden of proof in this regard is on the Department. Such onus to prove is required to be discharged by production of sufficient tangible and affirmative evidence, which is found to be absent in the instant case. Charge of clandestine removal cannot be made and confirmed against the appellant on the basis of assumptions, based on purported documents whose authenticity is disputed - all the goods mentioned in the challans have been supplied to established units, whose addresses are available. The Department could have conducted verification at the end of the recipients and easily ascertained what type of activities were undertaken by the appellant for them. The appellant has submitted that the above said three SSI units have sent inputs under the job challans for processing and the semi-finished goods were returned to the respective companies under the appellant s job challans and the appellant raised the bills on the said companies for the 'job charges' giving reference of both the challans. The only job work which the appellant undertook for these companies was 'printing' of the boards sent and returned the same. The activities undertaken by the appellant to these companies does not amount to 'manufacture' as defined under Section 2 (f) of the Central Excise Act, 1944. On receipt of the semi-finished goods, the respective units undertook further processing and the final product chargeable to duty emerge only at the premises of the respective units - the Department has not brought in any evidence to counter these submissions made by the appellant. The Department merely alleges that these units were not existing and hence they could not have sent the material for job work. The demands of central excise duty confirmed in the impugned order on the basis of the Annexures D/1 to D/8 to the Notice, is not sustainable and accordingly, we set aside the same. Since, the demand of duty is not sustainable, the question of demanding interest and imposing penalty on the appellant-company does not arise. Penalty imposed on the Director, Shri Milan Kumar Mehra - HELD THAT:- It is observed that the impugned order alleged that he is the mastermind in floating the fictitious units and instrumental in clearing the finished goods clandestinely without payment of duty under the guise of job work. Since the allegation of clandestine removal of the goods without payment of duty has not been established, it is held that no penalty imposable on the Director/Appellant No. 2. Accordingly, the penalty imposed on Appellant No. 2 is set aside. The impugned order is set aside - appeal allowed. 2024 (7) TMI 1039 Clandestine manufacture and clearance of Sponge Iron - undervaluation of Sponge Iron removed during the period from January 2006 to June 2009 - entire demand has been calculated on the basis of the documents seized from the premises - retraction of statements - Section 9D of the Central Excise Act, 1944 - penalty on the Managing Director of the appellant-firm - Confiscation of 18,156.96 MT of Sponge Iron. HELD THAT:- The impugned order has considered the documents seized from the premises of DCPWB as documents maintained by VSPL, on the basis of the statements recorded from the Managing Director on various dates. It is also alleged that some of the entries available in the seized documents tally with the invoices raised by the appellant for their actual transactions. Accordingly, the ld. adjudicating authority concluded that since Smt. Chunia Nandi is one of the Directors of VSPL and also the Proprietor of DCPWB, Shri D. Nandi has kept these documents in the premises of DCPWB and he has control over these documents. The ld. adjudicating authority cited the provisions of Section 36A of the Central Excise Act, 1944 and observed that these documents can be admitted as evidence and duty can be demanded based on the entries available in these documents. A perusal of the provisions of Section 36A reveals that the documents seized from another premises can be admitted as evidence provided the author of the entries made in the documents has been identified. Once the identity of the person in whose handwriting the documents are written is established and his statement is taken admitting that it is his handwriting, then the documents can be admitted as evidence - the requirements as provided under Section 36A are not fulfilled in this case and hence the seized documents cannot be presumed to be documents relating to the appellant company and relied upon to demand Central Excise Duty from the appellant-company. In the case of METAL FITTING (P) LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, DELHI [ 1997 (4) TMI 146 - CEGAT, NEW DELHI] it has been held that entries in private diary and loose papers are not sufficient evidence to establish charge of shortages and the burden is on the Department to prove shortages and clandestine removal. In the case of DULICHAND SILK MILLS (P) LTD. VERSUS COMMISSIONER OF C. EX., HYDERABAD [ 2001 (4) TMI 147 - CEGAT, CHENNAI] , it has been held that to establish the allegation of clandestine removal, the statement of manager of the assessee alone not sufficient. It is observed that no statement has been recorded either from the owner of the premises or from the person who was in possession of the seized documents at the time of seizure. Regarding the admission statement recorded from Shri Nandi, it is observed that he has retracted his statements by writing a letter to the jurisdictional Commissioner and by filing a sworn in affidavit before the Notary Public and contented that on 30.06.2009; his statement was taken late in the night, when he was under custody, under coercion, threat and duress, at Bhubaneswar Headquarters. It is observed that an admission statement taken under such situation alone cannot form the basis for inferring clandestine removal. The ld. adjudicating authority has simply brushed aside the retractions as mere afterthoughts. When the statements recorded are retracted, its evidentiary value comes down. In such circumstances, further corroborative evidences required to substantiate the allegations of clandestine removal. It is observed that other than the entries in the note books and loose sheets and the statements recorded, there is no other corroborative evidence available in this case. The appellant relied on the decision in the case of KRISHNA CO. VERSUS COLLECTOR OF CENTRAL EXCISE, JAIPUR [ 1997 (10) TMI 138 - CEGAT, NEW DELHI] wherein it has been held that demand based on note books without any other evidence of production and clandestine removal is not sustainable. A perusal of Section 9D of the Central Excise Act, 1944 clearly establishes that unless a person who has made the statement is examined as a witness before the adjudicating authority, no reliance can be placed on any statement recorded under section 14 of the Central Excise Act. Any statement recorded under Section 14 of the Central Excise Act could be admitted in evidence only after the process of examination and cross examination is completed under Section 9D - it is observed that the procedure set out under Section 9D is a mandatory procedure and without following this procedure, no reliance can be placed on any statement recorded under Section 14 of the Central Excise Act, 1944. The allegation of clandestine clearance cannot be sustained on the basis of statements alone. There must be some positive evidences like purchase and consumption of unaccounted raw materials, discrepancy between recorded stock and physical stock, seizure of any goods en route, consumption of excess electricity, actual clandestine removal of finished goods without payment of duty, mode of removal, evidence of transporters and buyers of the clandestinely removed goods and flow back of funds pertaining to clandestine removals - the demands confirmed on account of clandestine removal in the impugned order without any of the above mentioned evidences are not sustainable. Since the demands of duty on account of clandestine removal and undervaluation is not sustained and set aside, the question of demanding interest and imposing penalty on the appellant company does not arise. Penalty imposed on Appellant No. 2, the Managing Director, Shri Digambar Nandi - HELD THAT:- The alleged role of Appellant No. 2 in commission of the offence is not established. Accordingly, the penalty imposed on the Appellant No. 2 viz. Shri. Nandi, Managing Director of the appellant-company is set aside. Confiscation of 18,156.96 MT of Sponge Iron - HELD THAT:- The allegation of clandestine removal and undervaluation is not sustained and set aside and hence, the question of confiscation of the goods alleged to have been cleared clandestinely without payment of duty does not arise. Accordingly, the order for confiscation and imposition of redemption fine in the impugned order is set aside. The impugned order is set aside - appeal allowed. CST, VAT & Sales Tax 2024 (7) TMI 1038 Cancellation of penalty u/s 47 (6) of the Kerala Value Added Tax Act - cancellation of additions made in the assessment order pertaining to the respondent assessee for the assessment year 2012-2013, based on the penalty order passed by the Intelligence Officer - HELD THAT:- These OT. Revision Petitions at the instance of the State must necessarily fail. The Appellate Tribunal in the order impugned in these revision petitions clearly finds as a matter of fact that the consignment that was detained was accompanied by valid transport documents such as the invoice and the checkpost declarations in Form 8F. The Tribunal also found that the assessee had immediately after the goods were detained, produced the statutory declarations in Form 16 to demonstrate that the goods that were being transported were for the own use of the assessee. In contrast to this, nothing has been produced before us that would suggest that the assesee was engaged in any trading activity during the assessment year 2012-2013. The finding of the Appellate Tribunal, based on the documents available before it, that there was no intention on the part of the assessee to evade payment of tax is legally sustainable - It is apparent, therefore, that while obtaining the goods from outside the State, the assessee did not get the benefit of a lower rate of tax. Thus, in conclusion, it is that the impugned order of the Tribunal that sets aside the penalty order and assessment order, does not require any interference in these revision petitions. These Revision Petitions fail and are accordingly dismissed.
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TMI Tax Updates - e-Newsletter July 22, 2024

Highlights / Catch Notes

GST

Petitioner's refund amount error excused due to portal glitch. Respondents ordered to pay interest on delayed refunds.

Retrospective GST registration cancellation for non-filing returns violates natural justice. Cancellation must cite reasons. Registration cancellation effective from notice date, not retrospective.

Extraordinary writ jurisdiction can't exclude time for appeal filing. Reagitating decided issues is abuse of process & relitigation.

Motor vehicles for demo by dealers not eligible for input tax credit. Treated as capital goods, not stock for sale.

Works supervised by applicant, material/installation cost by recipient. Applicant charges supervision fees only. GST payable on supervision charges.

Non-edible neem oil falls under HSN 1515 90 20, not fertilizers. Remains neem oil despite chemical modification. No ITC refund allowed.

Vouchers purchased & sold by applicant qualify as movable goods. No service element. Vouchers' title transfer = supply of goods u/s 7(1)(a). Taxable @ 9% CGST & UPGST.

Income Tax

FERA proceedings dropped, IT additions relying on seized docs untenable. Tribunal rightly denied additions for unrelated years.

Authorities can't revise Tribunal's order due to merger, judicial discipline & res-judicata principles. Tribunal settled deduction entitlement in assessee's favor.

Notices u/s 148 by Joint Assessing Officer invalid due to lack of jurisdiction per Sec 151A & Mar 2022 notification. Hexaware case cited.

No TDS on discounts to franchisees under Sec 194H. Victory for assessee.

Purchase from AE: RPM is MAM for buy-sell/sales commission model sans value add. Trading filter 30%-40% accepted. ECMAS rejected. Arrow excluded. Working capital adjustment remitted.

Exemption denied due to auditor's mistake, revised Form 10B filed. Rs. 43,98,666/- exemption u/s 11(1)(a) allowed by ITAT.

Mauritian fund's investments in India for >5 yrs earned legit long-term capital gains. No proof of fund flow from India. Biz model rationale upheld.

Agri income exempted. Increased expenses not as other income sans proof. AO can't estimate expenses sans verification. Order based on assumptions quashed.

Demurrage charges disallowed. Salary reimbursement not taxable. DDT refund rejected, treaties inapplicable. Assessee lost relying on set aside orders.

Non-resident entity's fees for telecasting rights not taxable in India. Reopening invalid due to non-application of mind by AO & DRP.

Property partition among kin: no transfer, co-parcener shares devolved from father. Compromise decree upheld. Long-term capital gains applicable.

Customs

Charges included in assessable value only if condition of sale, not post-importation activities per SC rulings. License fee related to manufacturing process, hence excluded.

PMLA

Illegal sand mining suspicion alone can't trigger PMLA attachment. Scheduled offence case & proceeds determination mandatory.

Service Tax

Maintenance charges refundable, not for services. No double taxation. Extended limitation period set aside due to nascent service tax law. Impugned order quashed.

Central Excise

Refund claim upheld. Duty can't be loaded in LME index pricing. Appellant bore duty burden, entitled to excess duty refund.

Clandestine Sponge Iron manufacture alleged - undervaluation demand based on seized docs - MD penalty & 18,156.96 MT confiscation set aside.

VAT

Penalty u/s 47(6) cancelled. Valid docs, no evasion intent. Tribunal rightly set aside assessment order. Assessee didn't benefit from lower tax rate.

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TMI Tax Updates - e-Newsletter
July 22, 2024