Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 24, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
Highlights / Catch Notes
GST
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Attachment of bank account - Principles of natural justice - bank account number indicated in the order of attachment pertains to an account of Another Partnership firm and is not the bank account of Petitioner Firm - Common partners in both the firms - since this writ petition has been filed by a different partnership firm, albeit through a common partner, the allegation in the petition that the relevant assessee did not receive the order-in-original cannot be taken cognisance of - HC
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Cancellation of registration of petitioner - violation of principles of natural justice - The cancellation was based on allegations of the petitioner using more Input Tax Credit (ITC) than available, and discrepancies found in a report submitted by the State GST Authority. - The petitioner was not confronted with or supplied any material relating to these allegations - The order of cancellation of GST registration set aside - HC
Income Tax
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Credit of TDS deducted on salary but not deposited by the employer (Karvy Stock Broking Limited) - Petitioners directed to furnish evidence to the ITO who has issued notice of demand that tax has been deducted at source from their salaries. If such evidence is furnished, the ITO will not take any coercive steps against those Petitioners. - HC
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Nature of expenses - expenditure incurred on capital stores and spares - replacement of spares in the machineries - The ITAT the expenditure incurred cannot be treated as capital expenditure, but as revenue expenditure. - Order of ITAT deleting the additions confirmed - HC
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Deduction u/s 80(P)(2)(d) - Interest income earned on investment in Fixed Deposit with a cooperative bank. - The Hon’ble Apex Court categorically stated that the cooperative societies which earned interest income on its investment made with cooperative bank would be eligible for claim of deduction u/s 80P(2)(d) - Claim allowed - AT
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Bad debts u/s 36(l)(vii) or business expenditure u/s 37 - Addition in respect of the payment made by assessee company to YES Bank on account of a corporate guarantee - assessee in its Proflt & Loss Account had recorded the entry as Debts Written Off - In the instant case the expenditure was rightly held to be deductible u/s 37. - AT
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Revision u/s 263 - AO treated assessee taxpayer as a “cooperative society” registered u/sec.2(19) - The Revenue argues that the assessee is not a "cooperative society" but a "Souharda" society registered under state law(s). - Their lordships’ of High Court have settled the law therein that a “Souharda” cooperative society registered under the state cooperative law(s) very well forms “a cooperative society” u/sec.2(19) of the Act. - Revision order set aside - AT
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Revision u/s 263 - validity of notice as issued by the ITO who is below the rank of ld. PCIT - The statute never permitted in section 263 for delegation of power to the authority below for issuance of notice for initiation of proceedings. - The delegation if possible if permitted by the law. DR was unable to place any judgment against the submission of assessee. Accordingly, the notice issued U/s 263 is invalid. - AT
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Deduction of expenses from capital gain - Amount paid to avoid to litigation, claimed as deduction against the short-term capital gain - sham transaction - The revenue did not initiate proceedings against the company involved in the transaction - The assessee cannot be subjected to tax for the capital gain on the amount mentioned in the memorandum of understanding - Additions deleted - AT
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TP upward adjustment on account of interest free loan to AE - The interest cost compared to the amount of gross import of material and export generated by the taxpayer is negligible. - No adjustment under transfer pricing provisions is required for the interest-free loans and advances to associated enterprises. - The assessee's appeal is allowed. - AT
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Disallowance of Payment Labour Charges - addition made as payment is supported by self-made vouchers and have no signature of recipients - The Tribunal, based on a previous case, deleted the additions made by the AO, stating that the disallowance of labor charges expenditure without rejecting the books of accounts is not legally sustainable. - AT
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Penalty u/s 271AAB - argument of defective notice - the order imposing penalty was passed after the receipt of due approval from the Ld. JCIT. However the appellant during the course of physical hearing failed adduce any evidential material showcasing the mechanical approval and further failed to demonstrate the deficiency in the proceedings - Appeal of the assessee dismissed - AT
Customs
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Violation of the principle of natural justice - confiscation of seized goods - no SCN issued to the petitioners - Import of Lithium Ion Cell - BIS marking / sticker was not found on the imported goods - the impugned orders as assailed in the present proceedings deserve to be quashed set aside - However, department officers are free to take recourse to the appropriate procedure known to law. - HC
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Import of insecticide without a valid licensee or directly from the manufacturer - The goods have been ordered for re-export. The appellant is not contesting the order directing to re-export. Appellant is contesting only the redemption fine and penalty imposed. - The redemption fine and penalties imposed require to be set aside - AT
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Condonation of delay of 3 years - Conversion of shipping bill from one scheme to another - DFIA to Drawback Scheme - It is also pointed out that under general law of limitation the courts are allowed to condone the period of three years as mentioned in the Limitation Act, as per the specific circumstances on case to case basis. - AT
Corporate Law
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Professional Misconduct - Acceptance of audit engagement disregarding Independence requirements - Tampering of Audit File and related lapses-SA 230, Audit Documentation - Lapses in audit relating to fraudulent transactions - Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, NFRA imposed sanctioned against the errant Chartered Accountants (CA) as per the order - NFRA
IBC
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Condonation of delay of 38 Days in refiling of the Appeal against approval of Resolution plan - it was held by NCLAT that The delay in filing the Appeal is beyond 15 days and the Application itself mentions the delay of 29 days in filing the Appeal. - Order of NCLAT rejecting the appeal sustained. - SC
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Validity of admission of application for initiation of CIRP - Prayer for intervention in the Appeal - One Time Settlement (OTS) proposal submitted by the Corporate Debtor before the UCO Bank - The impugned order admitting Section 7 Application was an order, which cannot be faulted in law - In event of a settlement accepted by the Bank, the Bank is permitted to file an application through IRP to close the CIRP. - AT
Service Tax
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Refund of service tax paid - principles of unjust enrichment - The Chartered Accountant (CA) certificate has been rejected stating that it is only a secondary evidence. In the absence of any such ground in the show cause notice and opportunity to the appellant to substantiate his claim on the ground of unjust enrichment this portion of order cannot survive - Matter restored back - AT
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Extended period of limitation - Once the assessee has declared as per their belief that the service falls under negative list and the same has been declared in their ST-3 return, it cannot be said that there is a suppression of the fact on the part of the appellant. - AT
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Demand of serviced ax on collection of liquidated damages, penalty and forfeiture of security deposits - declared service or not - it is not possible to sustain the view taken by the Commissioner that since the task was not completed within the time schedule, the appellant agreed to tolerate the same for a consideration in the form of liquidated damages, which would be subjected to service tax under section 66E(e) of the Finance Act - Demand set aside - AT
VAT
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Invocation of revisional jurisdiction of this Court - The impugned order passed by the Tax Tribunal in Rectification Application filed by the petitioners under Section 47 of the VAT Act is not open to challenge by the petitioners before this Court under Section 48 of the VAT Act. - Also the petition is being beyond the normal period of limitation, dismissed - HC
Case Laws:
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GST
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2023 (7) TMI 914
Validity of Show cause notice - jurisdiction - Inadmissible transitional credit - Education Cess (E Cess) - Secondary Higher Education Cess (SHE Cess) - Krishi Kalyan Cess (KK Cess) - HELD THAT:- Delay condoned. Issue notice.
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2023 (7) TMI 913
Attachment of bank account - Principles of natural justice - bank account number indicated in the order of attachment pertains to an account of Another Partnership firm and is not the bank account of Petitioner Firm - Common partners in both the firms - HELD THAT:- It is evident that the show-cause notice of November 8, 2019 was issued in terms of Section 174 (2) of the Central Goods and Services Tax Act, 2017 read with the Service Tax Rules, 1994. The relevant assessee, including the partners thereof, should reasonably have been aware that upon a show-cause notice of such kind being issued and the response being received, an order would follow, whether dropping the demand or finding the assessee liable for the entirety or a part of the demand. It would not do for the assessee to claim that the assessee had no obligation to keep track of the matter. At any rate, the thin thread on which the present petition hangs is as to whether the relevant order-in-original of August 14, 2020 was issued to or received by the assessee in question. For a start, since this writ petition has been filed by a different partnership firm, albeit through a common partner, the allegation in the petition that the relevant assessee did not receive the order-in-original cannot be taken cognisance of - the writ petitioner or the relevant assessee or its officers should have taken appropriate steps in accordance with law by now. It is nearly 10 months since the receipt of the relevant notice by the assessee. Though there is no period of limitation prescribed for matters pertaining to Article 226 of the Constitution of India, yet the writ court does not come to support a laggard or someone who has slept over his perceived rights. The petition is not entertained and the relevant assessee and its officers are left free to take appropriate steps in accordance with law - Petition dismissed.
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2023 (7) TMI 912
Validity of SCN - Levy of IGST - reverse charge mechanism - SCN ultra vires to Integrated Goods and Services Tax Act, 2017 and Articles 19(1)(g) and Article 265 of the Constitution of India or not - HELD THAT:- The issue involved in this writ petition stands covered by the judgment of the Hon'ble Supreme Court in the case of Union of India vs. Mohit Minerals Private Limited reported in [ 2022 (5) TMI 968 - SUPREME COURT ] where it was held that The IGST Act and the CGST Act define reverse charge and prescribe the entity that is to be taxed for these purposes. The specification of the recipient - in this case the importer - by Notification 10/2017 is only clarificatory. The Government by notification did not specify a taxable person different recipient prescribed in Section 5(3) of the IGST Act for the purpose of reverse charge. Petition disposed off.
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2023 (7) TMI 911
Cancellation of registration of petitioner - registration obtained by means of fraud, wilful misstatement or suppression of facts - vague and ambiguous SCN - no discussion as to why and on what material the said officer had reached to the conclusion and/or the basis forming such opinion - validity of report submitted by the State GST Authority - violation of principles of natural justice - HELD THAT:- It is clearly seen that there is no discussion in the above order as to why and on what material the said officer had reached to the conclusion and/or the basis forming such opinion. There is no material on record to show that any document in regard to the investigation carried out by the office of the Assistant Commissioner was provided to the petitioner, which is one of the grounds for cancellation of the registration, that the petitioner had utilized more Input Tax Credit (ITC) in GSTR 3B than what was available in GSTR 2A. In fact there was not the slightest of reference of any such allegations in the show cause notice. The second ground on which the registration is cancelled was referring to report submitted by the State GST Authority, and which had certain discrepancies as set out in paragraphs 2(a) (b) (c) of the order as noted above. The petitioner was never confronted / supplied any material in this regard. Also for the first time in such order passed by Assistant Commissioner, such reasons have been set out and are being made known to the petitioner. This itself is sufficient to reach a conclusion that the impugned order dated 31 January 2022 passed by the Assistant Commissioner, was in gross breach of principles of natural justice and deserved to be set aside. Conduct of the GST officer / Appellate authority - HELD THAT:- It appears from the record that the fate of the petitioner insofar as the approach of the appellate authority is concerned, was not different. The unfairness in fact stood compounded even in the adjudication of the appeal before such high Officer. This is clear from the reading of the impugned order passed by the Joint Commissioner (Appeals-II). The Joint Commissioner (Appeals-II) while confirming the order passed by the Assistant Commissioner, cancelling the petitioner s registration, has purported to set out reasons - the impugned order does not address the issue of breach of the principles of natural justice suffered by the petitioner before the Assistant Commissioner - the appellate authority however appears to have compounded the inherent illegality by relying on materials which was never supplied to the appellant and which was also not to the knowledge of the petitioner. In fact on the edifice of a patently illegal show cause notice, the consequence of which appeared to be predetermined, the first authority proceeded to pass an order against the petitioner cancelling its registration. If the elementary principles of law of adherence to the principles of natural justice, in regard to issuance and adjudication of show cause notices are not being followed by such authorities, the fate of the citizens at the hands of the authorities, is just to be imagined. This is one case which is an eye opener. At all material times, such authorities would be required to act in strict adherence to the rule of law in passing orders in discharge of their official duties under the Act and the Rules. Such officers can in no manner have an approach to violate any legal rights of the citizens. We are constrained to make these observations so that other assessees who are similarly situated are not affected at the hands of such officers. The pain and suffering of any person who becomes a victim of such approach needs to be felt and realized by them in resorting to such actions. The authorities cannot drag the assessees into unwarranted litigation. The observations of the Court and the anguish needs to reach these officers. Application disposed off.
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Income Tax
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2023 (7) TMI 910
Special audit notice u/s 142 (2A) - As decided by HC [ 2018 (10) TMI 376 - BOMBAY HIGH COURT] these Writ Petitions can be conveniently disposed off without examining the larger issue and Petitions can be disposed off with a direction that the special audit in terms of the impugned notice and the approval need not be undertaken for all the materials in relation to the Petitioner's transactions, their share holdings, are already referred to in the PWC report as also the pending proceedings u/s 148 of the I. T. Act - HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. The special leave petitions are dismissed accordingly.
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2023 (7) TMI 909
Assessment u/s 153A - incriminating documents/materials found and seized at the time of search or not? - HELD THAT:- As Ld.ASG submits that the issues raised in these special leave petitions are covered by the judgment of this Court in Abhisar Buildwell P. Ltd.[ 2023 (4) TMI 1056 - SUPREME COURT] In the circumstances, the special leave petitions stand disposed of in terms of the said judgment.
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2023 (7) TMI 908
Mainatainability of appeal in SC against ITAT order - Interest received on enhanced compensation u/s 28 of the Land Acquisition Act, 1894 - whether it partakes nature of enhanced compensation and is exempt from tax u/s 10 (37) OR provision of section 145B and section 56(2)(viii) ? - As held by ITAT [ 2023 (1) TMI 824 - ITAT DELHI] interest received on enhanced compensation is taxable u/s 56(2)(viii) - HELD THAT:- We note that the petitioner has approached this Court against the order passed by the Tribunal without taking recourse to filing an appeal before the jurisdictional High Court under Section 260-A of the Act. In the circumstances, the Special Leave Petition is dismissed reserving liberty to the petitioner to file an appeal under the aforesaid provision before the High Court, if so advised. If the appeal is filed within a period of 30 days from today, the High Court shall not raise the issue of limitation.
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2023 (7) TMI 907
Credit of TDS deducted on salary but not deposited by the employer (Karvy Stock Broking Limited) - tax credit mismatch - criminal investigation by the Enforcement Directorate for financial crimes including money laundering against Respondent No. 2 Karvy Stock Broking Limited - as petitioner states Respondent No. 2 was deducting tax at source from the salary paid to Petitioners and that since tax has been deducted from the salary of Petitioner, Petitioner cannot be called upon to pay tax to the extent to which tax has been deducted HELD THAT:- Revenue in each of the Petitions state that Petitioners be directed to furnish evidence to the Income Tax Officer who has issued notice of demand that tax has been deducted at source from their salaries. If such evidence is furnished, the Income Tax Officer will not take any coercive steps against those Petitioners. Statement accepted as an undertaking to this Court. Directions issued. If the Income Tax Officer requires any clarification to tally the salary slip with the bank statement, the Income Tax Officer shall issue notice to the concerned Petitioner to attend hearing and notice thereof shall be communicated atleast 5 working days in advance.
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2023 (7) TMI 906
Unaccounted land transactions - Treating incriminating documents in the form of duly written and signed Sauda Chithhi found and seized during the search action taken u/s 132 carried out by the department as dumb documents - HELD THAT:- It is pertinent to note at this stage that this Court in Tax Appeal [ 2021 (7) TMI 747 - GUJARAT HIGH COURT] and after considering various decisions rendered by the Hon ble Supreme Court, this Court has discussed what is the meaning of substantial questions of law. We have gone through the observations made by the Tribunal while passing impugned common order. We have also considered the submissions canvassed by learned Standing Counsel for the revenue. If the facts of the present case are examined on touch stone of the decisions rendered by the Hon ble Supreme Court as observed hereinabove, we are of the opinion that the present appeals do not involve any substantial question of law.
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2023 (7) TMI 905
Nature of expenses - expenditure incurred on capital stores and spares - Revenue or capital expenditure - HELD THAT:- Tribunal has considered all the materials available on record and thereby dismissed the appeal of the revenue it has been observed by the Tribunal that the replacement of spares in the machineries would be allowable as Revenue expenditure only and addition made by the Assessing Officer was erroneous and hence, the same was deleted. The Tribunal has also observed that the expenditure incurred by the assessee cannot be treated as capital expenditure but it can be treated as revenue expenditure only. Addition u/s 14A - Whether no expenditure has been incurred to earn the exempt income disclosed during the year under consideration? - HELD THAT:- The same are already covered by the decision of Gujarat Industries Power Company Ltd [ 2022 (8) TMI 1409 - GUJARAT HIGH COURT] - The aforesaid two substantial questions of law are similar to that of those which were proposed to be framed in the case of Gujarat Industries (supra). Similar substantial questions of law have been proposed in the present appeal. Addition (net of depreciation) being expenses incurred on software treating the same as revenue expenditure - Whether the expenses are for new or different advantage of enduring nature and so to be treated as capital expenditure eligible for depreciation @ 25%? - HELD THAT:- This issue is also no more res-integra based on the observation made in the decision of N.J. India Invest (P) Ltd. [ 2013 (7) TMI 738 - GUJARAT HIGH COURT] . In the present case, Tribunal has specifically observed that the expenditure was incurred only for facilitating the trading operation leaving the fixes untouched. Assessing Officer disallowed the above expenditure and treated as capital expenditure being enduring the nature. Tribunal has reversed the finding of Assessing Officer and CIT (Appeals) in view of the observation made in N.J. India correctly. We are not incline to admit the present appeal, as the proposed substantial questions of law are not substantial questions of law.
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2023 (7) TMI 904
Deduction u/s 80(P)(2)(d) - Interest income earned on investment in Fixed Deposit with a cooperative bank. - intimation u/s 143(1) disallowing deduction - HELD THAT:- The decision of case of Totagars Cooperative Sale Society Ltd.[ 2010 (2) TMI 3 - SUPREME COURT] the principle laid down was elaborately taken into account in case of Mavilayi Service Cooperative Bank Ltd.[ 2021 (1) TMI 488 - SUPREME COURT] The Hon ble Apex Court categorically stated that the cooperative societies which earned interest income on its investment made with cooperative bank would be eligible for claim of deduction u/s 80P(2)(d) - Thus, the interpretation given by the CIT(A) while dismissing the appeal of the assessee is not correct and therefore, in light of the decision of the Hon ble Apex Court in case of Mavilayi Service Cooperative Bank Ltd. (supra) is applicable in the present case. Hence, the appeal of the assessee is allowed.
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2023 (7) TMI 903
Addition u/s 14A - disallowance to be triggered in respect of expenses that shall eventually result in exempt income in future years - HELD THAT:- There is no dispute to the fact that during the relevant previous year no exempt income was earned. CIT(A) has followed the judicial pronouncements wherein it held as settled proposition of law that where no exempt income is earned no disallowance u/s 14A r.w.r 8D can be made. CIT(A) relied the determination of issue in favour of assessee in assessee s own case. Ld. AR has also drawn support from orders in assessee s own case in similar circumstances in [ 2023 (2) TMI 1162 - ITAT DELHI] where Revenue s appeal on that ground was disallowed and order of ld. CIT(A) was upheld. Bad debts u/s 36(l)(vii) or business expenditure u/s 37 - Addition in respect of the payment made by assessee company to YES Bank on account of a corporate guarantee - assessee in its Proflt Loss Account had recorded the entry as Debts Written Off - HELD THAT:- The case of assessee is that in order to create dominant position in the retail market the joint venture was incorporated and being promoters the corporate guarantees were extended for the credit facilities received for the joint venture company. It appears that Ld. AO had fallen in error in not appreciating the fact that although, the joint venture was a separate entity it was promoted by the assessee along with his partners and they had direct interest in the sustenance and existence of that company. There is no allegation that the Joint Venture was any paper or sham transaction but the matter on record show it was a functional unit which ended into loss making. The credibility of assessee was directly on stake with the default of the joint venture company FMRIL. The dues of joint venture were paid on full settlement of the dues standing against the assessee on account of corporate guarantee. The same was certainly a business expenditure as the operations of joint venture was to expand the market of assessee with his partner of joint venture. In the instant case the expenditure was rightly held to be deductible u/s 37. The assessee incurred the expenditure to avoid any adverse effect on its reputation and avoid costs of litigation and in CIT vs. Delhi Safe Deposit Company Ltd [ 1982 (1) TMI 2 - SUPREME COURT] has held such payments to be a valid business exigency. There is no error in the findings of ld. CIT(A) requiring interference. Decided in favour of assessee.
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2023 (7) TMI 902
Revision u/s 263 - AO treated assessee taxpayer as a cooperative society registered u/sec.2(19) - PCIT s revision directions is that the assessee is not a cooperative society within the meaning of sec.2(19) of the Act being only a Souharda society registered under the state law(s) - HELD THAT:- All these Revenue s arguments fail to evoke our concurrence as the instant issue of assessee; a Souharda cooperative society being covered u/sec.2(19) of the Act, is no more res integra in light of the valuable guidance coming from recent decision in Sri Matha Vivododdesha Pathina Souharda Sahakari Niyamitha vs. Union of India [ 2021 (10) TMI 1413 - KARNATAKA HIGH COURT] Their lordships have settled the law therein that a Souharda cooperative society registered under the state cooperative law(s) very well forms a cooperative society u/sec.2(19) of the Act. That being the case, we accept the assessee s contentions challenging correctness of the learned PCIT s revision directions in all these assessment years. AO s corresponding regular assessments stand restored as a necessary corollary. Decided in favour of assessee.
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2023 (7) TMI 901
Revision u/s 263 - validity of notice as issued by the ITO who is below the rank of ld. PCIT - HELD THAT:- ITO has no power to initiate the notice u/s 263 which vitiated the entire proceeding of section 263. The statute never permitted in section 263 for delegation of power to the authority below for issuance of notice for initiation of proceedings. We respectfully relied on the case Alcon Resort Holdings Ltd. [ 2022 (4) TMI 862 - BOMBAY HIGH COURT ] We fully relied on the maxim delegatus non protest delegare sets. The delegation if possible if permitted by the law. DR was unable to place any judgment against the submission of assessee. Accordingly, the notice issued U/s 263 is invalid. The order passed by the ld. PCIT is void and liable to be quashed. Decided in favour of assessee.
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2023 (7) TMI 900
Deduction of expenses from capital gain - Amount paid to avoid to litigation, claimed as deduction against the short-term capital gain - sham transaction or not - HELD THAT:- There is no allegation of the revenue based on the documentary evidence that the payment made by the assessee has come back to the assessee in any form directly or indirectly. Besides the company namely Frontline Financial Services Ltd has also given undertaking to the assessee that it will be solely responsible for the tax liability on the payment received by it. All these facts discussed above were very much available before the authorities below. Despite that no proceeding against the company has been initiated by the revenue by issuing a notice u/s 148 - It is not out of the place to mention that there are certain loopholes in the transaction carried out by the assessee with the company namely Frontline Financial Services Ltd but the same cannot be used against the assessee. It is also important to note that the company namely Frontline Financial Services Ltd by virtue of the MOU dated 15 April 2008 got the right which could have been enforced by way of suit for specific performance. Thus, it appears the assessee has made the payment to the company avoid such litigation. The assessee cannot be subjected to tax for the capital gain on the amount mentioned in such memorandum of understanding - Decided in favour of assessee.
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2023 (7) TMI 899
TP upward adjustment on account of interest free loan to AE - Assessee has provided interest-free advances to its associated enterprises - HELD THAT:- Question whether any adjustment is required under TP provision on account of such interest erosion advances is in negative because the assessee got such huge business from its associated enterprises, which would not have been possible until the assessee had not incorporated a company in UAE and DRC. Transaction for advancing the interest-free loans to the associated enterprises has to be seen in the context of the benefit received by it from such associated enterprises. Transaction of interest free loans/ advances viz a viz the benefit received by the assessee are intrinsic ably linked which has to be evaluated after aggregating both the transactions. Transaction of interest free advances cannot be viewed without considering the benefit derived by the assessee from the associated enterprises. On analyzing the notional interest added by the TPO under the transfer pricing adjustment with the benefit derived by the assessee, the interest cost appears to be negligible. The amount of interest cost as compared amount of gross import of material and export generated by the assessee is far more than the interest expenses after converting in India rupees. No adjustment under the transfer pricing provisions is required to be made with respect to the interest free loans and advances by the assessee to its associated enterprises in the given facts and circumstances. Hence, the ground of appeal of the assessee is allowed.
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2023 (7) TMI 898
Benefit of Section 10(38) - Payment of Securities Transaction Tax (STT) - assessee who carries on general insurance business - HELD THAT:- As decided in own case [ 2023 (1) TMI 1202 - ITAT DELHI] assessee is entitled to exemption under section 10. Therefore, we do not see any reason to differ from the order of the CIT (A) where he has allowed assessee's claim of exemption under section 10(23AAB) of surplus of Participating Pension Business and also dividend under section 10(34). Accordingly Revenue ground on this issue is rejected. Disallowance of depreciation - assessee failed to furnish relevant information before the Assessing Officer along with Audit Report - HELD THAT:- As decided in assessee own case [ 2021 (7) TMI 92 - ITAT DELHI] f acts of the present assessment year are different as Ld. AR sufficiently demonstrated that the details were very much available before Ld. AO and Assessing Officer has not taken any steps to verify the same. In the year under consideration also, the relevant details for addition made to fixed assets in Financial Year 2009-10 have been placed on record by the assessee. The AO has, however, failed to take the same into consideration. We are, therefore, inclined to set aside this issue to the records of the AO for a de novo verification Accordingly this ground raised by assessee stands allowed for statistical purposes. Disallowance being provisions made for standard assets - HELD THAT:- This Bench in assessee s own case for A.Y. 2011-12 [ 2023 (1) TMI 1202 - ITAT DELHI] has deleted the disallowance we find that there is no enabling mechanism in Rule 5(a) mandating an adjustment to disclosed profits by making an addition on account of provision made for Standard Assets - As under Rule 5 the Statute makes profit disclosed in Profit and Loss account sacrosanct, subject only do adjustments prescribed in Rules 5(a) to 5(c). The case law relied is, therefore, 'distinguishable. The Ld. CIT (A), in AY 2011-12, has also not properly addressed the issue. Relevant statutory provisions have been inadvertently misread and hence not properly understood. We therefore delete the disallowance - Decided in favour of assessee. Benefits u/s 44 qua Section 14A - HELD THAT:- It is a settled proposition of law now that as Section 44 of the Act provides a complete code for computation of profit and gain of the business of the assessee insurance company. The assessing officer cannot make any adjustments in the profit of the assessee s business when they are calculated in accordance with the rules contained in first schedule. In assessee s own case for A.Y. 2000-01, 2001-02 co-ordinate Bench [ 2009 (2) TMI 240 - ITAT DELHI-B] have held that in the light of aforesaid provisions of Section 44 of the Act there is no requirement of head wise bifurcation while computing the income u/s 44 in the case of insurance company. Thus, provisions of Section 14A are not relevant to make a disallowance. The findings of Ld. CIT(A) require no interference. The ground is decided against the Revenue.
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2023 (7) TMI 897
TP adjustment - comparable selection - exclusion of UPS Print Systems Ltd. and BNR Udyog Ltd. from the list of comparables for the purpose of determining the ALP of the international transactions - HELD THAT:- Actually the AO issued a notice u/s 133(6) of the Act to M/s. Universal Print Systems Ltd. and no reply has been received from them. Having no option, he considered this company as comparable to the assessee company and included in the lists of comparables. In our opinion, the required information u/s 133(6) of the Act is not made available to the TPO, in such circumstances, T.P. adjustment on this count cannot be made reasonable or accurately made in this regard. Accordingly, this company is to be excluded from the list of comparable companies as reliance placed by this Tribunal while deciding this issue in decision of Zyme Solutions Pvt. Ltd. Vs. ACIT [ 2018 (11) TMI 1793 - ITAT BENGALURU] . Thus we direct the AO/TPO to exclude Universal Print Systems Ltd. from the list of comparables. This ground is allowed. BNR Udyog Ltd.as fails RPT filter and also fails the functionality test - As decided in GTS E-SERVICES PRIVATE LTD. [ 2019 (7) TMI 296 - ITAT MUMBAI] as this entity was engaged in medical transcription, medical coding and medical billing etc. thus medical transcription would not be, at all, functionally similar. Thus we direct the AO/TPO to exclude this company as it fails the functionality test since the assessee is engaged only in trading, distribution of laboratory products and chemicals, strategy sourcing, ITeS, etc. This ground is allowed.
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2023 (7) TMI 896
Disallowance of Payment Labour Charges - pay certain extra amounts to port labourers as speed money for promptly and speedily carrying out the labour work of handling cargo beyond working hours - addition made as payment is supported by self-made vouchers and have no signature of recipients - HELD THAT:- As decided in own case[ 2022 (9) TMI 1480 - ITAT BANGALORE] in the absence of any challenge to the entries made in the books of accounts by the authorities, in our opinion, the finding recorded by the Assessing Officer as well as the Tribunal that it denied the claim of the assessee for expenditure to the extent of 10% on account of payment of speed money, is perverse as the same is duly supported by the documentary evidence - Decided in favour of assessee.
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2023 (7) TMI 895
Deduction u/s. 80IC - manufacturing activity u/s 2(29BA) - profit derived from its Rudrapur, Uttarakhand unit - Whether activities carried out at Rudrapur, Uttarakhand unit comes under the definition of manufacture as defined u/s. 2(29BA)? - HELD THAT:-We are of the considered view that the issue needs to go back to the file of the AO to decide the eligibility of the assessee to claim deduction u/s. 80IC of the Act and thus, we set aside the issue to the file of the AO and direct the Assessing Officer to re-examine the claim of the assessee in light of various averments, including necessary evidences placed to justify the activity carried out in the unit for claiming deduction u/s. 80IC of the Act for both the assessment years. Disallowance of weighted deduction claimed u/s. 35(2AB) - weighted deduction claimed for in house R D expenditure incurred - AO has disallowed expenditure claimed over and above, what was certified by the competent authority in Form no. 3CL- as the argument of the assessee that, once the facility has been approved by the competent authority, then irrespective of quantification of the expenditure incurred for R D purpose, the assessee is entitled to claim deduction u/s. 35(2AB) of the Act. - HELD THAT:- We find that, an identical issue has been considered by the Tribunal in assessee s own case [ 2017 (5) TMI 1749 - ITAT CHENNAI] , where held that the assessee is not entitled for weighted deduction u/s. 35(2AB) of the Act for expenditure incurred over and above, what was certified by the competent authority - Decided against assessee. Depreciation on UPS - @ 15%OR @ 60% - HELD THAT:- As relying on M/s. Sundaram Asset Management Ltd case [ 2014 (2) TMI 224 - ITAT CHENNAI] we are of the considered view that the AO and CIT(A) erred in not allowing 60% depreciation claimed on UPS and thus, we direct the AO to allow 60% depreciation on UPS as claimed by the assessee. Addition u/s 14A r.w.r. 8D - HELD THAT:- Although, the assessee claims that interest expenditure cannot be disallowed because of availability of own funds in excess of investments made in shares and securities which yield exempt income, but no details has been furnished to prove the claim. As regards, second argument of the assessee that, only those investments which yielded exempt income needs to be considered, we agree with the arguments of the assessee because the issue is settled by various decision of courts and Tribunals. However, once again there is no details from the assessee on this aspect also. Therefore,issue needs to go back to the file of the AO for further examination of facts, in light of various averments made by the assessee and also suomoto disallowance computed u/s. 14A r.w.r. 8D of the IT Rules, 1962. Hence, we set aside the issue to the file of the AO and direct the AO to re-examine the issue, in light of various averments made by the assessee as discussed herein above and re-compute disallowance u/s. 14A - In case, disallowance computed by the AO u/s. 14A r.w.r. 8D of the IT Rules, 1962 works out to lesser than amount of suomoto disallowance computed by the assessee, then the AO is directed to restrict the disallowance to the extent of suomoto disallowance. TDS u/s 195 - disallowance u/s. 40(a)(i) - non-deduction of TDS on payment made to non-resident - HELD THAT:- In assessee s own case for assessment years 2006-07 to 2009-10 [ 2017 (5) TMI 1749 - ITAT CHENNAI] where, under identical set of facts, the Tribunal held that payment made to non-resident without deducting the tax at source u/s. 195 of the Act, does not come under the provisions of section 9(1)(vii) of the Act and consequently, assessee need not to deduct TDS u/s. 195 of the Act and thus, question of disallowance of said payment u/s. 40(a)(i) of the Act does not arise - Decided in favour of assessee.
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2023 (7) TMI 894
Penalty u/s 271AAB - argument of defective notice - HELD THAT:- Solitary domain of section 271AAB over undisclosed income where the proceedings u/s 132 of the Act is initiated and at the same time it drags out the authorisation of imposition of penalty u/s 270A and 271(1)(c) of the Act as extra-territorial. Keeping aforesaid in mind, we find that, the appellant s contention that, the aforestated SCN represents the non-application of mind in communicating the exact charge for rebuttal falls like a house of cards on two counts; i) Firstly, the impugned SCN calling upon the appellant to showcase the reasons as to why a penalty u/s 271AAB should not be imposed clearly concluded intimating the consideration of representation before concluding proceedings imposing penalty u/s 271AAB of the Act, as it ostensible from the reproduced text of SCN laid at para 8 hereinbefore. ii) Secondly, the sub-section (2) of section 271AAB intractably expunges the levy of penalty u/s 270A and 271(1)(c), consequently, it communicates the exact charge left i.e. levy of penalty u/s 271AAB(1) for undisclosed income where the proceedings u/s 132 of the Act is carried out. In this context, we heedful to quote that, our aforesaid view finds fortified by the decision of Sandeep Chandak Vs PCIT [ 2018 (6) TMI 106 - SC ORDER ] where in similar facts and circumstance their lordship have dismissed the appeal of the assessee and upheld the order of Hon ble High Court sustaining the penalty imposed u/s 271AAB. Also the order imposing penalty was passed after the receipt of due approval from the Ld. JCIT. However the appellant during the course of physical hearing failed adduce any evidential material showcasing the mechanical approval and further failed to demonstrate the deficiency in the proceedings, for the reason this ground of appeal finds no legs to stand, ergo ordered accordingly. Decided against assessee.
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Customs
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2023 (7) TMI 893
Violation of the principle of natural justice - no SCN issued to the petitioners before passing the impugned orders by Additional Commissioner - HELD THAT:- The nature of the order is quite drastic. When such an order was to be passed certainly, the law would require strict adherence of the principles of natural justice and by prior issuance of a show cause notice. The petitioner ought to have been put to notice of all the grounds on which the goods would be liable for confiscation and of any other consequential orders which would be attracted. It is observed that in passing the impugned order-in-original Additional Commissioner of Customs has exercised powers of confiscation and has imposed penalty Section 124 of the Customs Act 1962 which mandates issuance of a show cause notice, before confiscation of goods. Such provision stipulates that no order confiscating any goods for imposing any penalty on any person shall be made under Chapter-XV of the Customs Act, unless owners of the goods or such person is given notice in writing with prior approval of the Officer of the Customs not below the rank of an Assistant Commissioner of Customs, informing the owner or such person, on the ground on which the goods are proposed to be confiscated or penalty imposed. Such person is required to be given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice, against the grounds of confiscation and imposition of penalty mentioned therewith and thereafter of a reasonable opportunity be given to such person. In GAJANAN VISHESHWAR BIRJUR VERSUS UNION OF INDIA [ 1994 (7) TMI 85 - SUPREME COURT ] the Court was dealing with the validity of confiscation of books imported by the petitioner from People s Republic of China. In the context of the authority to confiscate the Supreme Court observed that an order of confiscation affects fundamental rights of the petitioner to carry on his occupation and business. In METAL FORGINGS VERSUS UNION OF INDIA [ 2002 (11) TMI 90 - SUPREME COURT ] in dealing with a case of a demand under Section 11-A of the Central Excise Act, the Court had observed that in the said case show-cause notice as required in law was not issued by the Revenue - While upholding the orders of the Tribunal the Supreme Court has observed that the Tribunal had rightly come to the conclusion that such material could not be treated as show-cause notice, which was inadequately treated as show-cause notice as contemplated under the rules as applicable. It was also observed that issuance of show-cause notice in a particular form is a mandatory requirement of law. There appears no manner of doubt that the impugned orders as assailed in the present proceedings deserve to be quashed set aside - petition disposed off.
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2023 (7) TMI 892
Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - availment of drawback wrongfully - mis-declaration in terms of Quality and Quantity in 29 Shipping Bills - HELD THAT:- It can be seen from Regulation 20 that the Department has to issue the Show Cause Notice in writing to the customs broker within a period of 90 days from the date of receipt of an offence report informing the Customs Broker, the grounds on which it is proposed to revoke the license or impose penalty - In the present case, there is no offence report. In the case of M/S. M.M. LOGISTICS VERSUS COMMISSIONER OF CUSTOMS (AIRPORT GENERAL) , NEW DELHI [ 2020 (4) TMI 80 - CESTAT NEW DELHI] it was held that in the absence of filing of a specific offence report the date of occurrence itself should be considered as the offence report. In the present case, the date of occurrence /examination of goods is 31.01.2017. The Show Cause Notice ought to have been issued within 90 days from this date. However, the Show Cause Notice has been issued only on 19.01.2018, which is beyond the stipulated time limit of 90 days. The higher courts have always considered that it is mandatory to follow the time period stipulated in these Regulations - The Hon ble High Court in the case M/S. SABIN LOGISTICS PVT. LTD., MR. S. LOGANATHAN VERSUS COMMISSIONER OF CUSTOMS, SHRI FELIX RAJ [ 2019 (4) TMI 1713 - MADRAS HIGH COURT] held that when Regulation spells out specific period of limitation, such period has to be mandatorily complied. In the case of M/S. HSN SHIPPING PRIVATE LIMITED VERSUS THE COMMISSIONER OF CUSTOMS, THE ASSISTANT COMMISSIONER OF CUSTOMS [ 2020 (2) TMI 175 - MADRAS HIGH COURT] the Hon ble Jurisdictional High Court held that time limit for issuing the Show Cause Notice is mandatory and the notice issued after 90 days of offence report is to be quashed. The revocation of license ordered is vitiated for not complying with mandatory procedure. The impugned order therefore cannot sustain - Appeal allowed.
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2023 (7) TMI 891
Import of insecticide without a valid licensee or directly from the manufacturer - importer has not registered their goods with CIB RC as prescribed in the manner - Option to given to re-export the goods - Redemption fine - penalty - import of Cartap Hydrochloride Technical 98% - Paraquat Diochloride 42 % Technical - prohibited goods or not - HELD THAT:- The goods have been ordered for re-export. The appellant is not contesting the order directing to re-export. Appellant is contesting only the redemption fine and penalty imposed. In the appellant's own case [ 2017 (7) TMI 519 - CESTAT CHENNAI ] on the very same issue and import of identical goods, the Tribunal set aside the redemption fine and penalties. Thus, it can be seen that the import was also made from manufacturer viz., M/s. Liyang Chemical Factory, China. The Hon'ble Apex Court in the case of Siemens Limmited Vs. Collector of Custom [ 1999 (8) TMI 84 - SUPREME COURT ] held that no redemption fine can be imposed when the goods are re-exported. The redemption fine and penalties imposed require to be set aside - impugned order is modified to the extent of setting aside the redemption fine and penalties imposed without disturbing the order of confiscation and direction to re-export. The appeal is partly allowed.
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2023 (7) TMI 890
Condonation of delay of 3 years - Conversion of shipping bill from one scheme to another - DFIA to Drawback Scheme - time limitation - Section 149 to the Limitation Act, 1963 - HELD THAT:- An agreement arrived at in the absence of any period having been prescribed in the statute especially for Section 149, the reading of general period of limitation under Article 137 of the Limitation Act, 1963 of three years appears proper - It is accordingly held that when the period has not been specifically provided in the statute, period upto three years can be construed as a reasonable period and all concerned can act accordingly. It is also pointed out that under general law of limitation the courts are allowed to condone the period of three years as mentioned in the Limitation Act, as per the specific circumstances on case to case basis. Appeal allowed to the extent that amendment under section 149 will be duly considered by proper officer.
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Corporate Laws
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2023 (7) TMI 889
Professional Misconduct - Acceptance of audit engagement disregarding Independence requirements - Tampering of Audit File and related lapses-SA 230, Audit Documentation - Lapses in audit relating to fraudulent transactions of Rs 3,769.61 crores with MACEL - Lapses in audit relating to fraudulent understatement of advance to MACEL by Rs 222.50 crores and failure to detect evergreening of loans - Lapses in audit relating to diversion of Rs 130.55 crores to M/s Classic Coffee Curing Works - Lapses in audit relating to capital advance given to Dark Forest Furniture Company Private Limited. (DFFCPL) - Failure to report non compliances with section 134(1) of the Act - Failure to comply with SA 700, Forming an Opinion and Reporting on Financial Statements - Failure to comply with SA 250, Consideration of Laws and Regulations in an Audit of Financial Statements - Failure to comply with SA 260, Communication with Those Charged With Governance (TCWG) SA 265, Communicating deficiencies in Internal Control to Those Charged With Governance and Management - Failure to comply with SA 300, Planning an audit of Financial Statements - Lapses in constitution of Engagement Team (ET) and assigning responsibility among ET members (Additional Lapse on the part of the Audit Firm only). HELD THAT:- Section 132( 4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law - Independent Auditors of Public Limited Companies serve a critical public function of enabling the users of Audited Financial Statements to take informed economic decisions. Quality audits bolster stakeholder' s confidence in the credibility of financial reporting. In the instant case, the Auditors, chose to preserve their professional relationship with the promoters of the auditee company, instead of discharging their statutory duty to protect public interest by exercising professional skepticism and questioning the promoters' dubious activities and transactions leading to diversion of shareholders and stakeholders' money on a large scale. Had they performed the required audit procedures with due professional skepticism, many of the dubious transactions would have been perhaps detected. But by failing to do so, they foreclosed this possibility causing immense harm to shareholders and stakeholders - when NFRA called for the Audit File for examination, the Auditors adopted delaying tactics and then tampered with the Audit File. This is extremely serious because it obstructs the NFRA's ability to protect public interest. This case underlines the need for all Auditors regardless of seniority to be aware of their individual responsibility to act honestly and with integrity in all areas of their work. These Auditors were required to ensure compliance with Standards on Auditing, Laws and Regulations to achieve the necessary audit quality and lend credibility to Financial Statements to facilitate its users. As detailed in this Order, substantial deficiencies in Audit, abdication of responsibility and inappropriate conclusions on the part of the Auditors establish their professional misconduct and lack of due diligence. Despite being qualified professionals, the Auditors have not adhered to the Standards and have thus not discharged the duty cast upon them. Considering the proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, following sanctions imposed: a) Imposition of a monetary penalty of Rs One Crore only upon Mis ASRMP Co. In addition, Mis ASRMP Co. is debarred for a period of two years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. b) Imposition of a monetary penalty of Rs Ten Lakhs only upon CA A. S. Sundaresha. In addition, CA A. S. Sundaresha is debarred for a period of five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. c) Imposition of a monetary penalty of Rs Five Lakhs only upon CA Madhusudan U A. In addition, CA Madhusudan U A is debarred for a period of five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. d) Imposition of a monetary penalty of Rs Five Lakhs only upon CA Pranaav G. Ambekar. In addition, CA Pranaav G. Ambekar is debarred for a period of five years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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Insolvency & Bankruptcy
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2023 (7) TMI 888
Condonation of delay of 38 Days in refiling of the Appeal against approval of Resolution plan - it was held by NCLAT that The delay in filing the Appeal is beyond 15 days and the Application itself mentions the delay of 29 days in filing the Appeal. Our jurisdiction is limited only to 15 days under Section 61(2) proviso of the IBC, 2016 hence we are unable to condone the delay in filing the Appeal. HELD THAT:- There are no good ground and reason to interfere with the impugned judgment and hence, the present appeals are dismissed.
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2023 (7) TMI 887
Validity of admission of application for initiation of CIRP - Prayer for intervention in the Appeal - One Time Settlement (OTS) proposal submitted by the Corporate Debtor before the UCO Bank on the basis of Expression of Interest received from Lemongrass was already under consideration when the order dated 28.10.2022 was passed admitting Section 7 Application - Applicant s case is that the Applicant is ready and willing to propose a better offer to the Banks in the best interest of Respondent No.1 - HELD THAT:- In the present case, the Adjudicating Authority has noticed in the impugned order that there was admission on behalf of the Corporate Debtor of the debt of Rs.50 Crores, which was noticed in paragraphs 8.9 and 8.10 of the order. The present is a case where, there is no denial to the debt and default. On the date when Adjudicating Authority heard the matter and reserved the order, there was no OTS proposal under consideration before the UCO Bank, since according to the Appellant, the letter submitting OTS proposal of Rs.41 Crores was given on 26.10.2022, after it received the Expression of Interest from Lemongrass. Thus, no error can be found in the order of the Adjudicating Authority, admitting Section 7 Application by its order dated 28.10.2022. We, however, cannot be oblivious to the facts and sequence of events, which took place during the pendency of the Appeal. This Tribunal in its order dated 21.11.2022 noticed several difficulties in the running of the Corporate Debtor. This Tribunal noticed that a strategic investor namely M/s. Lemon Grass Organic Tea Limited has entered into an Agreement with the Corporate Debtor to take over three Tea Gardens, which are charged with the UCO Bank subject to entering into and funding the OTS. By the order dated 21.11.2022, certain interim arrangements were made to enable the Corporate Debtor to run as a going concern. The difficulty of payments of wages to the workers, ration to be distributed by the Company to the worker, electricity dues and other dues were taken note of and for mitigating the difficulty in running of the Corporate Debtor, certain directions were issued. The Corporate Debtor is being run as per the said directions till date. The impugned order dated 28.10.2022, admitting Section 7 Application was an order, which cannot be faulted in law - In event of a settlement accepted by the Bank, the Bank is permitted to file an application through IRP to close the CIRP. Coming to the Application filed by the Indian Bank, in event any settlement is entered between the parties and CIRP terminated, the Indian Bank will be free to take its recourse to its rights, either by reviving the Section 7 Application filed earlier or to take up any proceedings in accordance with law. Appeal disposed off.
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PMLA
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2023 (7) TMI 886
Validity of supplementary complaint under the provisions of Prevention of Money Laundering Act, 2002 - HELD THAT:- There are no reason to interfere with the impugned judgment, which dismisses the petition for quashing of the supplementary complaint under the provisions of Prevention of Money Laundering Act, 2002. Accordingly, the present special leave petition is dismissed.
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2023 (7) TMI 885
Discontinuation of further proceedings under the PMLA Act - closure report in the predicate offence - HELD THAT:- Liberty may be reserved to the petitioner herein to take further steps under the said Act, including reviving these proceedings. The submission of learned ASG is placed on record. The Special Leave Petitions are disposed of.
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Service Tax
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2023 (7) TMI 884
Refund of service tax paid - rejection on the ground that the appellant have not been able to establish that the burden to tax paid has not been passed on to the service recipient - principles of unjust enrichment - HELD THAT:- The rejection of the refund claim on the ground of unjust enrichment is improper as per the provisions of Section 11B (2) itself - every determination under section 11 B should first determine the admissibility of the refund claim, and there after examine the applicability of the proviso, i.e. the exception in which the refund amount should be paid to the claimant and if the case is not covered by the exception specified by the proviso, the amount of refund determined has to be credited to the fund. Unjust enrichment - HELD THAT:- No ground has been taken by the Revenue in the show cause notice. Even during the course of hearing Authorised Representative appearing for the Revenue was unable to point out any such ground taken in the show cause notice and for production and giving opportunity to the appellant for production of the document to substantiate his claim on not passing the burden to the ultimate service recipient. The Chartered Accountant certificate has been rejected stating that it is only a secondary evidence. In the absence of any such ground in the show cause notice and opportunity to the appellant to substantiate his claim on the ground of unjust enrichment this portion of order cannot survive - no proper examination of any of the document by which appellant would have substantiate his claim for not having passed the burden on the tax paid to the service recipient has been undertaken by either of the authorities. To give fair opportunities to both the sides this matter on this ground needs to be remanded back to the Original Authority. Appeal is allowed by way of remand - Matter is remanded to the Original Authority for a decision within three months from the date of receipt of this order.
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2023 (7) TMI 883
Classification of services - transportation services - Declared service or not - benefit of entry of Section 66D (p)(i)(A) of the Finance Act, 1994 denied - denial on the ground that Appellant has not provided the services of transportation of goods by road to M/s FCPL, but they have provided services of supply of vehicles to M/s FCPL - extended period of limitation - HELD THAT:- For the truck provided by M/S chartered logistic the GTA service was provided by Fine Tech Corporation Pvt. Ltd. who have issued the consignment note therefore the services provided by the appellant to M/S FCPL does not fall under the category of GTA service even though the appellant have provided service of transportation of goods for the reason that the service of transportation provided by the appellant is to the GTA and for the said service consignment note was issued by FCPL to its client M/S Reliance Industries Ltd. therefore, for the entire activity that is transportation of goods by the appellant to FCPL for which the consignment note was issued by FCPL the GTA service provider is FCPL to its client M/S Reliance industries Ltd. Therefore, the activity of the appellant is clearly covered under section 66D (p)(i)(A) of the finance act ,1994 which clearly falls under negative list of services which is not taxable. Now it is a settled law that even if a person has provided Goods Transport Service but not issued consignment note/LR, Service Tax from that person under GTA cannot be recovered - From the decision in M/S. NARENDRA ROAD LINES P. LTD. AND HARI MOHAN GARG VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE CENTRAL GST, AGRA [ 2022 (3) TMI 803 - CESTAT ALLAHABAD] and M/S. MAHANADI COALFIELDS LTD. VERSUS COMMR. OF CENTRAL EXCISE SERVICE TAX, BBSR-I [ 2019 (7) TMI 1803 - CESTAT KOLKATA] , it is settled that a person even if provides Goods Transportation service but if he does not issue Consignment Notes/LR, he cannot be brought under the ambit of GTA. The case of the appellant is on much better footing on the admitted fact that the appellant s client FCPL is in fact the GTA who issued Consignment Note in respect of the Transportation Service provided to M/s Reliance Industries Ltd. Therefore, appellant is not liable to pay Service Tax. From provision of Sr. No. 22 of the Notification No. 25/2012-ST dated 20.06.2012, it is found that the services of providing vehicles on hire basis to GTA is covered under above Entry and this entry exempts the services by way of giving on hire a means of transportation of goods to a goods transport agency. Even if the contention of the revenue is accepted that the Appellant are not providing the transport of goods services to M/s FCPL and providing the vehicles on hire basis, the demand of service tax still not sustainable in the present matter - in the present matter FCPL has issued consignment notes/ LRs for transportation of goods, hence M/s FCPL is clearly covered under the definition of Goods Transport Agency Service and if at all there is any Service Tax liability it is on the service recipient of FCPL i.e. M/s Reliance Industries Ltd. - there are no reason for denying the benefit of the exemption under this entry to the appellant. Extended period of limitation - HELD THAT:- When an assessee under a bonafide belief claims any exemption, in the present case on the basis of negative list, than it is incumbent on the department to strictly examine the admissibility of such exemption. Once the assessee has declared as per their belief that the service falls under negative list and the same has been declared in their ST-3 return, it cannot be said that there is a suppression of the fact on the part of the appellant. In the present case the appellant have acted legitimately by entering in to legal contract with their service recipient M/s FCPL. All the transaction were recorded in their books of account and all documents such as invoices for their services were issued. Moreover, the issue involved in the present case is strict interpretation of the taxable service - extended period of limitation could not have been invoked - the demand for the extended period is not sustainable on limitation also. The demand of Service tax, interest and penalty is not sustainable and the same is accordingly set aside - Appeal allowed.
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2023 (7) TMI 882
Demand of serviced ax on collection of liquidated damages, penalty and forfeiture of security deposits - declared service or not - HELD THAT:- In M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [ 2020 (12) TMI 912 - CESTAT NEW DELHI] the Tribunal observed activities, therefore, that are contemplated under section 66E(e), when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity. The Circular dated February 28, 2023 issued by Board also provides that service tax cannot be levied on the amount collected towards liquidated damages. In view of the decisions of the Tribunal and the Circular, it is not possible to sustain the view taken by the Commissioner that since the task was not completed within the time schedule, the appellant agreed to tolerate the same for a consideration in the form of liquidated damages, which would be subjected to service tax under section 66E(e) of the Finance Act - As service tax could not be levied, the imposition of interest and penalty also cannot be sustained. Appeal allowed.
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2023 (7) TMI 881
Exemption from Service Tax - services rendered by the appellant to units in Special Economic Zone (SEZ) - Special Economic Zone Act, 2005 (SEZ Act) - HELD THAT:- The present proceedings have arisen out of the Statement of Demand dated May 06, 2014 which refers to the allegations contained in the show cause notice dated October 15, 2013 which had been adjudicated upon and which had resulted in the aforesaid decision of the Tribunal in M/S DLF ASSETS PVT. LTD. VERSUS THE COMMISSIONER, SERVICE TAX, DELHI I [ 2020 (11) TMI 35 - CESTAT NEW DELHI ] in the matter of the appellant, where it was held that Commissioner was not justified in examining whether the conditions set out in the Notification dated March 3,2009 were satisfied or not for grant of any exemption from service tax. Section 26(2) of the SEZ Act does provide that the Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions shall be granted to the Developer under sub-section (1) but what is important to notice, is that, the word prescribe would mean prescribed by rules made by the Central Government under the SEZ Act, in view of the definition of prescribed under section 2(w) of the SEZ Act. The Notification dated March 3, 2009, which has been issued under section 93 of the Finance Act, therefore, has no application. The period of dispute in the Statement of Demand is for the subsequent period from 2012 upto 2013 - As the charges levelled against the appellant in the Statement of Demand are those that were made in the show cause notice dated October 15, 2013, the order dated October 30, 2017 passed by the Commissioner (Appeal) confirming the demand has, in view of the decision of the Tribunal in DLF Assets, to be set aside and is set aside. Appeal allowed.
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Central Excise
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2023 (7) TMI 880
Method of valuation of goods - Rule 8 of the Central Excise Valuation Rules, 2000 or not - related person - mutuality of interest exists or not - extended period of limitation - HELD THAT:- Though, the Department holds that the two units are related, they fail to show the mutuality of interest. Also, the fact that the appellants do not sell 100% of their production, to the related person, so as to invite assessment at the rate of 115% of the cost of production, is completely ignored. That the appellants have correctly relied the case of SOUTH ASIA TYRES PVT. LTD. VERSUS COMMR. OF C. EX., AURANGABAD [ 2002 (11) TMI 167 - CEGAT, MUMBAI] where the Tribunal finds that In the face of the language of the relevant rules, viz. 9 and 10, we accept the plea of the appellants that the department's method of valuation of goods sold by them to M/s. Goodyear India Ltd. on the basis of M/s. Goodyear India Ltd.'s sale price to its customers is not correct and that the price at which the appellants have sold the goods to M/s. Goodyear India Ltd. is the correct basis for determination of assessable value of goods manufactured and cleared by the appellants to M/s. Goodyear India Ltd. Extended period of limitation - HELD THAT:- Looking into the fact that the appellants have deposited the duty demanded well five years before the issuance of show-cause notice there too on a debatable issue, the extended period could not have been invoked and show-cause notice should not have been issued for longer period. The appellants have a strong case in their favour, both on merits and on limitation. Accordingly, appeal allowed partly by setting aside the penalty and interest.
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CST, VAT & Sales Tax
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2023 (7) TMI 879
Invocation of revisional jurisdiction of this Court under Section 48(1) of the VAT Act, 2005 - mistake or error apparent in the order sought to be rectified or not - rate of tax on charger - HELD THAT:- The clear mandate of law, thus, is that this Court can exercise revisional jurisdiction under Section 48 of the Act only against the orders passed by Tax Tribunal either under Section 45(2) or Section 46(3) of the VAT Act. Such jurisdiction can be exercised if the person aggrieved applies to this Court within 90 days of the communication of the order and also if the involvement of any question of law arising out of erroneous decision of law or failure to decide a question of law is found to exist. The impugned order passed by the Tax Tribunal in Rectification Application filed by the petitioners under Section 47 of the VAT Act is not open to challenge by the petitioners before this Court under Section 48 of the VAT Act. Petitioners can also not be allowed to assail the order dated 19.06.2017, passed by the Tax Tribunal being clearly beyond the period of limitation, as prescribed under Section 48 of the Act. The order passed by the learned Tribunal on 19.6.2017 is neither erroneous nor does it amount to non decision of question of law. Since, no question of law has arisen for consideration before this Court, the petition fails and is dismissed.
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Indian Laws
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2023 (7) TMI 878
Dishonour of Cheque - permission to compound the offence - matter settled between the parties - HELD THAT:- Keeping in view the fact that parties to the lis have compounded the offence, which is permissible under the provisions of the N.I. Act, the present petition is allowed by setting aside the impugned judgment of conviction and order of sentence, referred to above and accused is acquitted from the offence, punishable under Section 138 of the N.I. Act, subject to payment of 10% of the cheque amount, as compounding fee. The amount shall be deposited by the accused with the Secretary, H.P. State Legal Service Authority, within two months from today, failing which the revision petition shall be deemed to have been dismissed. The present Revision Petition is allowed.
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