TMI Tax Updates - e-Newsletter
July 26, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Indian Laws

Articles

1. INDIRECT TAX PROPOSALS IN UNION BUDGET 2024-25

   By: Dr. Sanjiv Agarwal

2. BUDGETARY CHANGES IN CUSTOMS ACT, 1962

   By: DR.MARIAPPAN GOVINDARAJAN

3. UNION BUDGET 2024-25: KEY HIGHLIGHTS

   By: Dr. Sanjiv Agarwal

News

1. FAQs issued by CBDT on the new capital gains tax regime proposed in the Union Budget 2024-25

2. Union Minister of Commerce and Industry Shri Piyush Goyal chairs stakeholder interaction with Leather and Footwear Industry

3. CCI approves proposed combination involving, inter alia, Amazon Asia-Pacific, Frontizo, Appario, Haverl and CRPL

4. CCI approves acquisition of 16.12% shareholding in Shriram GI Holdings Private Limited by Sanlam Emerging Markets (Mauritius) Limited

5. CCI approves acquisition by Manipal Health Systems Private Limited and MEMG Family Office LLP in Aakash Educational Services Limited

6. CCI approves acquisition of 16.12% shareholding in Shriram LI Holdings Private Limited by Sanlam Emerging Markets (Mauritius) Limited

Notifications

GST - States

1. CCT/26-2/2024-25/82/1481 - dated 19-7-2024 - Goa SGST

Exempt the registered person whose aggregate turnover in FY 2023-24 is upto Rs. two crores, from filing annual return for the financial year 2023-24

Income Tax

2. 96/2024 - dated 24-7-2024 - IT

Exemption from specified income U/s 10(46) of IT Act 1961 – 'Society for Applied Microwave Electronics Engineering & Research (SAMEER), Mumbai'

3. 95/2024 - dated 24-7-2024 - IT

Exemption from specified income U/s 10(46) of IT Act 1961 – 'Himachal Pradesh State Load Despatch Centre, Shimla'

4. 94/2024 - dated 24-7-2024 - IT

Exemption from specified income U/s 10(46) of IT Act 1961 – ‘Punjab Skill Development Mission Society, Chandigarh’

SEZ

5. S.O. 2903 (E) - dated 19-7-2024 - SEZ

Central Government de-notifies an area of 18.9535 hectares, thereby making resultant area as 51.0565 hectares at Viswanathapuram Village, Hosur Taluk, Krishnagiri District, in the State of Tamil Nadu

Circulars / Instructions / Orders

DGFT

1. Trade Notice No. 10/2024-25 - dated 25-7-2024

Launch of Steel Import Monitoring System (SIMS) 2.0

2. 15/2024-25 - dated 25-7-2024

Amendments in Chapter 5 of the Handbook of Procedures (HBP) 2023, related to Export Promotion Capital Goods Scheme to reduce 'Compliance Burden' and enhance 'Ease of doing Business'

Highlights / Catch Notes

GST

• Paid IGST instead of CGST+SGST? Approach appellate authority for relief from penalty & interest if bona fide mistake.

  Case-Laws - HC : Petitioner paid IGST but respondent did not take benefit of ITC. Dispute not settled. Appellate authority to consider grievance regarding payment of penalty and interest if petitioner made bona fide mistake in paying IGST instead of CGST and SGST. Petitioner directed to approach appellate authority u/s 107 within two weeks along with application for interim relief. If such application filed, appellate authority to consider it within two weeks and pass reasoned order.
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• GST Registration Cancellation Overturned for Lack of Reasoning and Violation of Natural Justice Principles.

  Case-Laws - HC : Cancellation of GST registration without specifying reasons violated principles of natural justice; cryptic show cause notice failed to mention specific provisions allegedly violated, making it impossible to respond meaningfully; unreasoned cancellation order did not disclose grounds for adverse action; impugned show cause notice and cancellation order set aside for lack of reasons and failure to adhere to requisite standards.
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• Court Dismisses Petition Against GST Registration Cancellation; Petitioner to Address Clarified Allegations in SCN Proceedings.

  Case-Laws - HC : Petitioner challenged show cause notice (SCN) for cancellation of GST registration on ground that allegations were not specified; Court observed that while SCN did not set out allegations, respondent clarified allegations during proceedings; setting aside SCN would only require respondent to reissue notice; hence, petition disposed of, allowing petitioner to respond to clarified allegations.
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• Circular No.9 upheld; no need for notification to authorize adjudication power under Sec 2(91). Assessing authority's dual role valid.

  Case-Laws - HC : Circular No.9 dated 24.05.2019 challenged - authority to delegate power of adjudication by circular contrary to Section 167 requiring notification - assessing authority being inspecting authority leading to conflict of interest. Court held circular traceable to Section 2(91), not Section 167, hence notification unnecessary for authorizing adjudication power. Reliance on Gujarat HC judgment rejecting similar challenge. Adjudication of factual disputes beyond Article 226 writ jurisdiction when alternative remedy available. Writ petition against Circular No.9 and assessment orders for 2017-18 to 2020-21 rejected. Petition disposed of.
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• Car lease facility by employer is taxable if exact amount is recovered from employees' salaries as it's a supply of service.

  Case-Laws - AAAR : Car lease facility provided by employer to employees does not qualify as perquisite if employer recovers exact lease amount from employees' salaries; it constitutes supply of service by employer liable to GST as it does not fall under Entry 1 of Schedule III of CGST/TNGST Acts covering services by employee to employer in course of employment.
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• ITC Allowed for Employee Transport Services Under Tamil Nadu Law for Women's Safety During Night Hours.

  Case-Laws - AAR : Input tax credit on services of leasing, renting or hiring of motor vehicles to provide transportation facility to ensure safety and security of women employees as per Tamil Nadu Shops and Establishments Act, 1947 is eligible to be availed, subject to conditions u/s 16 of CGST Act, 2017. ITC shall be available only for tax paid on services for providing transport facilities to women employees arriving or leaving workplace between 8.00 P.M to 6.00 A.M. as notified by Government of Tamil Nadu. ITC can be availed from 28.05.2019 onwards, i.e. date of notification by Tamil Nadu Government, even though proviso to Section 17(5)(b) was introduced from 01.02.2019. Circular clarifying the provision cannot override the notification date for availing ITC. Applicant's submission that ITC cannot be denied on procedural grounds without fault is not in consonance with GST law.
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• Agro-Chemical R&D Services on Insecticide Mosquito Nets Not Exempt from GST, Limited to Pharmaceutical Sector Only.

  Case-Laws - AAR : The Applicant provides research and development services related to the agro-chemical sector, specifically testing and analysis of insecticide-infused mosquito nets. The Applicant sought clarification on the applicability of Notification No. 04/2019-Integrated Tax, which exempts certain research and development services in the pharmaceutical sector from GST. The Authority held that the Notification applies only to services related to the pharmaceutical sector and does not cover the agro-chemical sector. The Applicant's services do not fall within the scope of the Notification as they involve quality studies of insecticide-infused mosquito nets, which are distinct from research and development services aimed at producing new drugs or evaluating drug safety in the pharmaceutical sector. Consequently, the Applicant's services remain taxable u/s 13(3) of the IGST Act, 2017, and the Notification is not applicable.
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• FAO UN grant not a supply under GST Act. Grant received gratuitously, not for goods/services. Activities using grant not taxable supply. No GST payable.

  Case-Laws - AAR : The grant from the Food and Agriculture Organisation of UN is not a supply under the GST Act. The applicant will not supply any goods or services to the FAO for the grant received. It is a gratuitous grant for overcoming obstacles faced by the applicant during the pandemic. The activities undertaken by the applicant using the grant are not covered under the scope of supply. Since the grant is not a consideration, it does not attract GST. The applicant is ineligible to claim a refund of GST paid on the grant u/s 55 of the CGST Act, as the question is beyond the purview of Section 97.
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Income Tax

• Software Payments Not Taxed as Royalty in India; No TDS Deduction Required for Non-Resident Software Providers.

  Case-Laws - HC : Royalty income payments made by the assessee for obtaining computer software were not liable to be taxed in India as royalty u/s 9(1)(6). The amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of computer software through EULAs/distribution agreements, are not payments of royalty for the use of copyright in computer software. Therefore, such payments do not give rise to any income taxable in India, and the persons referred to in Section 195 of the Income-tax Act were not liable to deduct TDS u/s 195. The HC order in Commissioner of Income Tax-(LTU) vs. Reliance Industries Ltd. would govern the present proceedings, as there is a DTAA entered with the countries in question, with whose residents the transactions were entered into by the assessee.
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• Tribunal Rules Pre-2005 Housing Projects Can Exclude Balcony Areas from Built-Up Area for Tax Deductions.

  Case-Laws - HC : Deduction u/s 80IB(10) for an undertaking developing and building housing projects approved before March 31 by a local authority. The scope of the definition of 'built-up area' was examined. The DVO's report showing violation related to two row houses having an area more than 1500 sq.ft. was not considered. It was held that for projects approved prior to April 1, 2005, the assessee could legitimately claim deduction u/s 80IB(10) based on the plans approved by the Planning Authority, as the concept of built-up area, including inner measurement, projections, balconies, and wall thickness, but excluding common areas, was not applicable. Applying such parameters retrospectively would lead to absurd results. The expression 'built-up area' introduced from April 1, 2005, cannot be applied retrospectively, and the Tribunal was justified in excluding the balcony area for the period up to April 1, 2005. The decision was in favor of the assessee.
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• Appellate Tribunal Orders Reassessment of Startup Exemption Claim u/s 56(2)(viib) for Unquoted Equity Shares Valuation.

  Case-Laws - AT : Appellate Tribunal held that the Assessing Officer failed to provide findings for rejecting assessee's claim of exemption as a startup from applicability of section 56(2)(viib) regarding valuation of unquoted equity shares. Commissioner of Income Tax (Appeals) merely endorsed Assessing Officer's reasoning for not accepting valuation report without addressing assessee's claim. The issue was remanded to Assessing Officer to consider assessee's claim of startup exemption from section 56(2)(viib) after providing opportunity of hearing.
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• Business advances sans interest permissible if capital suffices. Market conditions dictate business plans' viability. Consequential expenses allowed.

  Case-Laws - AT : Advances given to 5 persons without charging interest were for business purposes. Non-installation of machinery or renovation in subsequent period due to non-viability cannot negate the business purpose. Assessee decided not to proceed with its plan due to bad market condition, which is a valid business decision and consequential expenditure cannot be disallowed. Assessee had sufficient interest-free capital exceeding the interest-free advances, hence disallowance of interest is impermissible as per jurisdictional High Court precedents.
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• AO failed to inquire alleged bogus LTCG, not examining bankers, brokers, Demat agencies, source of funds, synchronized trades.

  Case-Laws - AT : AO failed to conduct proper inquiry regarding alleged bogus long term capital gain by not examining bankers, brokers, Demat agencies involved in transactions, ascertaining source of funds, verifying synchronized trades, summoning person who deposited cheques in assessee's account. Connivance of bankers, brokers, Demat agencies suspected in such scams. AO directed to make larger inquiry, summon relevant parties, determine real income and rightful assessee. Matter remanded to AO for fresh adjudication after due inquiry, providing fair opportunity to assessee. Appeal allowed.
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• Tribunal quashed notice & proceedings for exceeding time limit u/s 149, despite amendment, favoring assessee's case.

  Case-Laws - AT : Impugned proceedings u/s 147 were held invalid as the notice u/s 148 was issued beyond the time limit prescribed u/s 149. The Tribunal interpreted the amended provisions along with the explanatory memorandum to mean that if the notice was barred by limitation under the erstwhile provisions, it cannot be issued even after the amendment. Consequently, the impugned notice and proceedings were quashed for being initiated beyond the prescribed time limit u/s 149, and the decision was in favor of the assessee.
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• AO Overstepped by Disallowing Depreciation Claim via Section 154; CIT(A) Order Stands, Revenue's Appeal Dismissed.

  Case-Laws - AT : AO exceeded jurisdiction by disallowing claim of brought forward unabsorbed depreciation through rectification u/s 154, as CIT(A) did not direct such disallowance. CIT(A) order attained finality on this issue. Post CIT(A) order, AO cannot rectify u/s 154 in absence of mistake apparent from record. CIT(A) order upheld, Revenue's appeal dismissed.
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• Unverified third-party info can't justify disallowance. Assessee's documents substantiated purchases. Opportunity for cross-examination a must.

  Case-Laws - AT : Disallowance based on third party information about unexplained purchases was challenged. ITAT held that the additions were unsustainable as the disallowance was solely based on unverified third-party information gathered by the Department's Investigation Wing, without providing an opportunity for cross-examination to the assessee, who had prima facie substantiated the purchases through documentation like bills, confirmed accounts, and VAT registration of sellers. The purchases were found acceptable, and the consequent addition to income was directed to be deleted, favoring the assessee.
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Customs

• Import Duty Exemptions: Extensions for Electronics, Renewable Energy, Medical Devices; Some Lapse by 2024; New End-Dates Removed.

  Circulars : Exemptions on import of various goods and inputs for specified purposes such as research and development, manufacture of specified products like fertilizers, pharmaceuticals, electronics, renewable energy equipment, aircraft and ship components, medical equipment, and exports. Concessional duties on imports like artwork, antiques, samples for instructional use. Extension of existing exemptions related to manufacture of electronics, renewable energy, aircraft/ship components, medical devices, export promotion until 31.03.2026. Certain exemptions to lapse on 30.09.2024 including for specified inputs, second-hand computers for donation, exemption from special additional duty. Removal of end-date for exemptions like on additional duty on specified goods, specimens for instruction.
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• Bank Account Attachment Under Customs Act Needs Officer's Justification, Commissioner Approval, and Clear Duration.

  Circulars : Provisional attachment of bank account u/s 110(5) of Customs Act, 1962 requires proper officer's opinion on necessity to protect revenue or prevent smuggling. Order must reflect reasons, be served on account holder, and approved by Commissioner. Initial attachment limited to six months, extendable by recorded reasons after hearing account holder. Order must specify duration, be addressed to bank and account holder. Release communication with DIN mandatory on expiry or if attachment no longer required. Diligent examination of case facts, live nexus to purpose, and expedited adjudication emphasized.
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• Customs Duty Arises on Redeemed Goods with Interest for Delays; Section 28 Applies for Duty Assessment u/s 125.

  Case-Laws - SC : Liability to pay customs duty when confiscated goods are redeemed after payment of fine u/s 125 of the Customs Act, 1962 includes liability to pay interest on delayed payment u/s 28AB. The customs duty obligation arises only after exercising the option to redeem confiscated goods u/s 125. Once exercised, acceptance is subject to conditions specified, primarily payment of fine in lieu of confiscation. This duty obligation is inextricably connected to the redemption option and is a precondition. The duty obligation does not occasion u/ss 12 or 28 but arises due to the option exercised u/s 125. Section 28 applies for assessing and determining the duty payable u/s 125(2). Once Section 28 applies, interest on delayed payment arises u/s 28AB, obligating payment of interest in addition to duty. The Jagdish Cancer case is not an authority against applying Section 28 for duty calculation when liability arises u/s 125.
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DGFT

• Verify e-docs like licenses, certificates via UDIN on DGFT site. Key UDIN to download e-copy & cross-check paper copy.

  Circulars : Directive on verification of authenticity of electronically-issued documents like licenses, authorizations, scrips, certificates by DGFT using Unique Document Identification Number (UDIN). UDIN embossed on documents can be keyed in on DGFT website to download electronic copy for verification against paper copy. Facility informed to all stakeholders, requests for verification not to be referred to DGFT.
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• Export obligation fulfilled by quantity, no penalty if minimum value addition met. Value addition shortfall? Pay 1% FOB online via DGFT site.

  Circulars : Para 4.49 (b) of Handbook of Procedures, 2023 amended. If Export Obligation fulfilled in quantity but shortfall in value, no penalty if minimum Value Addition achieved. If Value Addition below prescribed minimum, Authorisation holder to deposit 1% of FOB value shortfall online through DGFT website, reduced from earlier 3%. Composition fee reduced for ease of doing business and reducing compliances.
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Corporate Law

• Share Transfer Dispute Remanded to Determine Sale Dates and Payment Validity Under RBI Act Section 45MB(2.

  Case-Laws - HC : Transfer of 7000 equity shares - prohibitory order u/s 45MB (2) of RBI Act - Admitted possession of 4000 shares certificates and transfer deeds by Anoop Jain - Issue of consideration for 4000 shares - Anoop Jain relied on Delhi stock exchange register for payment of consideration - Appellants objected discrepancy in timeline of sale by appellant No. 1 and purchase by respondents, lack of proof of consideration payment - Matter remanded to Company Court to inquire when 4000 shares sold to Anoop Jain, 1500, 900 and 600 shares sold to Murari Saraf, Banwari Lal Saraf and Bihari Lal Saraf respectively by appellant No. 1, and whether consideration paid - If established appellant No. 1 divested rights before 09.04.1997 and respondents paid consideration, impugned order to follow - Appeal disposed by way of remand.
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• Company liquidation closed due to lack of assets. Liquidator exempted from publication, allowed to close books after expenses.

  Case-Laws - HC : Company liquidation proceedings warrant closure due to lack of recoverable assets. Official Liquidator exempted from publication requirements, permitted to close books after adjusting expenses, discharged upon company's dissolution. Failure to file Statement of Affairs addressed under relevant provisions. Petition disposed of.
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Indian Laws

• Insufficient funds cheque dishonor: No vicarious liability if not partner/signatory. Unsubstantiated averment trial is abuse of process.

  Case-Laws - HC : Dishonour of cheque due to insufficient funds - no vicarious liability u/s 141 NI Act. Petitioner not shown as partner in firm through certificate from Deputy Registrar of Firms. Cheque issued by firm, signed by Sh. Hoshiyar Singh, not petitioner. No evidence petitioner was partner or signatory. Forcing petitioner to stand trial solely on unsubstantiated averment would be abuse of process. Petition allowed considering factual matrix and unimpeachable material presented by petitioner.
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• CMM can take secured asset possession within jurisdiction. Impugned order outside limits void. Approach DRT u/s 17 for creditor enforcement.

  Case-Laws - HC : Territorial jurisdiction of CMM assessed. DRT has jurisdiction to determine if secured creditor's enforcement of security is as per Act. CMM has authority to take possession of secured asset within jurisdiction, but impugned order without jurisdiction as property situated outside CMM's territorial limits. Petitioner ought to approach DRT u/s 17 of SARFAESI Act. Impugned order suspended for one week to approach DRT. Petition disposed of.
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• Cheque dishonor case dismissed due to lack of petitioner's signature, despite joint account. Vicarious liability not established.

  Case-Laws - HC : Dishonor of cheque - vicarious liability u/s 141 of the Negotiable Instruments Act - Court held that the issue of whether statutory notice was issued is a matter of trial. However, the complaint case must fail due to a fundamental issue. The subject cheque, copy of which was on record, was signed only by petitioner's late husband. Although the cheque was issued from a joint account, it is a fact that the cheque is not signed by the petitioner. The criminal complaint filed against the petitioner is an abuse of process of law and is liable to be quashed and set aside. Consequently, the petition is allowed, and the criminal complaint against the petitioner is quashed.
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Case Laws:

• GST

• 2024 (7) TMI 1246
  Seeking to levy and collect Goods and Services Tax on the same transaction twice along with interest and penalty - HELD THAT:- This Court is of the opinion that the petitioner has already paid IGST but the Power Corporation has not taken benefit of ITC and, therefore, the dispute has not been settled as claimed by the petitioner. It would be appropriate that the appellate authority shall consider the grievance regarding payment of penalty and interest in case it has made a bona fide mistake in making payments of IGST and not CGST and SGST. This petition is disposed of with the direction to the petitioner to approach the appellate authority under Section 107 within two weeks from today along with an application for interim relief. If such an application is filed along with the appeal, the same shall be considered by the appellate authority within two weeks of filing of the appeal and an appropriate reasoned and speaking order shall be passed thereon.

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• 2024 (7) TMI 1245
  Levy of GST - It is the specific case of the petitioner that no GST has to be paid for the work completed prior to 30.06.2017 and that even if the payment was made, subsequently as per the transitional provisions, no tax was payable under GST Act, 2017 - HELD THAT:- If it is the case of the petitioner that the petitioner was liable to pay VAT for the works contract for the period prior to 01.07.2017, it was incumbant on the part of the petitioner to have explained that the tax liability was under VAT and not GST and that the petitioner has already discharged tax liability under VAT. If there was any variance in the rate of tax, the tax can be either collected or refunded from/to the petitioner. The impugned order is set aside and the case is remitted back to the respondent to pass fresh orders by allocating the amounts due payable by the petitioner from and out of the amounts deposited, under the VAT Act and under the GST Act - Petition disposed off by way of remand.

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• 2024 (7) TMI 1244
  Cancellation of GST registration of petitioner - no reason for cancelling the petitioner s GST registration - violation of principles of natural justice - HELD THAT:- The submission that the impugned SCN and the impugned cancellation order are liable to be set aside. The impugned SCN does not contain any specific allegation other than alleging that there was non-compliance of any specified provision in the GST Act or the Rules made thereunder . The impugned SCN does not mention any specific provision, which is alleged to have been violated. It is impossible to ascertain as to which provisions of the Central Goods and Services Tax Act, 2017 (CGST Act) and the Delhi Goods and Services Tax Act, 2017 (DGST Act) are allegedly not complied with by the petitioner This Court has in several decisions held that such cryptic show cause notices fail to meet the requisite standards of a show cause notice. A show cause notice must clearly specify the allegations on the basis of which an adverse action is proposed. The entire object of a show cause notice is to enable the noticee to respond to such allegations and set out why the proposed adverse action should not be taken. The impugned SCN fails to clearly specify the allegations capable of eliciting any meaningful response. Such mechanical exercise of issuing the show cause notice serves little purpose. The impugned cancellation order is also unreasoned and fails to disclose the grounds on which the Proper Officer has cancelled the petitioner s GST registration. Therefore, apart from falling foul of the principle of natural justice, the impugned order is also liable to set aside as not being informed about any reason - the impugned SCN and impugned cancellation order are set aside. Petition allowed.

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• 2024 (7) TMI 1243
  Cancellation of GST registration number - activity of passing fake Input Tax Credit - HELD THAT:- There are merit in the petitioner s contention that the petitioner that the impugned SCN is vulnerable as it does not set out the allegations on the basis of which the petitioner s GST registration is proposed to be cancelled. It is relevant to note that the object of a show cause notice is to enable the noticee to respond to the allegations. In the present case, the petitioner is now duly informed about the allegations on the basis of which his GST registration is proposed to be cancelled. Although, a copy of the Memo, which is referred to in the impugned SCN has not been provided to the petitioner, the learned counsel for the respondent has, in unambiguous terms, stated that the allegations as noted in the counter-affidavit and as noted above, are the only allegations set out in the Memo. In the given facts, setting aside the impugned SCN would serve little purpose apart from the requiring the respondent to once again carry out the exercise of issuing a show cause notice. Petition disposed off.

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• 2024 (7) TMI 1242
  Time Limitation - no findings or reasons for imposing the demand - non-appllication of mind - HELD THAT:- It is considered apposite to set aside the impugned order and remand the matter before the Adjudicating Authority for a decision afresh. The Adjudicating Authority shall examine the reply filed by the petitioner to the impugned SCN and take an informed decision within a period of eight weeks from today. Petition disposed off by way of remand.

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• 2024 (7) TMI 1241
  Service of notice - whether there was a valid service of the notice and the impugned order as contemplated under the GST Act and the Rules? - denial of discretionary relief under Article 226 of the Constitution on the premise that the appellant has filed the writ petition challenging the order dated 09.01.2019 only on 24.05.2024 i.e., almost 5 years after the impugned order came to be passed. HELD THAT:- It is trite law that service of notice or order is essentially a question of fact - It is equally true that valid service of notice or order goes to the root of jurisdiction. This writ appeal stands disposed of granting liberty to the appellant to file an appeal within a period of 4 weeks from the date of receipt of a copy of this judgment.

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• 2024 (7) TMI 1240
  Challenge to assessment order - challenge to Circular No.9 dated 24.05.2019 - authority to delegate the power of adjudication by way of a circular contrary to Section 167 of the Act which contemplates a notification being issued - assessing authority was the inspecting authority and permitting the very same authority to adjudicate would fall foul of the maxim No man can be a judge of his own cause or not. Whether the 4th respondent has no authority to delegate the power of adjudication by way of a circular contrary to Section 167 of the Act which contemplates a notification being issued? - HELD THAT:- With regard to the 1st ground that the authorisation ought to have been made only by way of a Notification as contemplated under Section 167 of the CGST Act, 2017, the same is misplaced inasmuch as the Circular is apparently traceable to Section 2(91) of the Act and not Section 167 of the Act, thus, issuance of a notification may not be necessary for authorising/ assigning proper officers with power of adjudication. In this regard, it may be relevant to refer to the judgment of the Gujarat High Court in the case of Yasho Industries Ltd. vs. Union of India [ 2021 (6) TMI 918 - GUJARAT HIGH COURT] wherein identical contention stood rejected - the challenge to Circular No.9 of 2019 on the ground that the authorisation of power of adjudication by way of Circular is impermissible is liable to be rejected. Whether the assessing authority was the inspecting authority and permitting the very same authority to adjudicate would fall foul of the maxim No man can be a judge of his own cause. ? - HELD THAT:- It is trite law that adjudication of disputed questions of fact falls outside the purview of Article 226 of the Constitution of India - There can be no doubt that even though the High Court can entertain a Writ Petition against any order or direction passed / action taken by the State and / or its authorities under Article 226 of the Constitution of India, it ought not to do so as a matter of course when the aggrieved person could have availed of an effective alternative remedy in the manner prescribed by law. The writ petition challenging Circular No.9 of 2019 and the assessment orders for the period 2017-18 to 2020-21 are liable to be rejected - Petition disposed off.

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• 2024 (7) TMI 1239
  Applicability of GST - Facility of car extended to the employees of the Applicant-Company in the course of employment - HELD THAT:- In the instant case, the Appellant-Company reportedly pays the lease premium directly to car leasing company, and the overall salary cost of the related employees will get reduced to the extent of cost incurred by company in relation car facility provided to employees for office purpose. In order to ascertain whether the instant transaction constitutes a Supply or not, the basic fact as to whether the facility extended qualifies as a Perquisite or not, is required to be determined in the instant case. The applicant claims the same to be a perquisite for the employees and in terms of the CBIC Circular dated 06.07.2022, recovery from employees in relation to car lease premium will not be exigible to GST. In the instant case, having paid the lease premium directly to car leasing company, the appellant admittedly deducts the exact amount from the salary of the employees concerned, i.e., to the extent of cost incurred towards the leasing of cars by the Company. Extending a mere facility does not qualify as a perquisite; that a value in monetary terms is required to be extended to the employees; and that the value of perquisite for consideration is restricted to the value of actual monetary gain extended as in Form 12BA. Therefore, the contention of the appellant that extending the facility of car lease is nothing but a benefit extended to the concerned employee, is not sustainable and does not support their stand. The ownership of car by the company and resultant provisioning of services by the company on their own account amounts to supply of services by them, and this aspect has a direct bearing in determining the taxability in the instant case. It is thus opined that within the facts and circumstances of the case, only the actual value in monetary terms extended to the employee concerned in the course of or in relation to employment, qualifies as a perquisite , and it squarely falls within the ambit of entry No. 1 of Schedule III of the CGST/TN GST Acts, 2017. Whereas, the car lease amount recovered in actual terms by the appellant-company while extending the facility of car to its employees, cannot be considered as a perquisite and accordingly taxes under GST are applicable on the same, as it does not get covered under the entry No. 1 of Schedule III of the CGST/TNGST Acts, 2017.

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• 2024 (7) TMI 1238
  Input Tax Credit - tax paid on input Services in respect of leasing/renting/hiring of motor vehicles to provide transportation facility to ensure safety and security of women employees as per Tamil Nadu Shops and Establishments Act, 1947 - can entire ITC be availed by the applicant for providing the transport facility in all shifts considering the safety of women as mandated under the Tamil Nadu Shops and Establishment Act, 1947? - can ITC be availed for services received from the date of introduction of proviso to Section 17 (5) (b) (iii) of CGST Act, 2017 for the periods up to March 2022?. In the facts and circumstances of the case, whether tax paid on input Services in respect of leasing/renting/hiring of motor vehicles to provide transportation facility to ensure safety and security of women employees as per Tamil Nadu Shops and Establishments Act, 1947 is eligible to be availed as input tax credit (ITC)? - HELD THAT:- Input tax credit on services of leasing, renting or hiring of motor vehicles shall not be available as the same falls under the category of blocked credit. However, the proviso to the said sub-section provides that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force - Further it is seen that CBIC vide circular No. 172/04/2022 dated 06.07.2022, issued by the Ministry of Finance wherein it was clarified that the proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the whole of clause (b) of sub-section (5) of section 17 of the CGST Act. In view of the foregoing provisions of the CGST Act, 2017, CBIC Circular dated 22.07.2022 and Notification of the Government of Tamil Nadu dated 02.06.2022, it is found that the applicant is eligible to avail input Services in respect of leasing/renting/hiring of motor vehicles to provide transportation facility to ensure safety and security of women employees as per Tamil Nadu Shops and Establishments Act, 1947 subject to satisfying and fulfilling the eligibility and conditions provided under Section 16 of the CGST Act, 2017. If eligible, can entire ITC be availed by the applicant for providing the transport facility in all shifts considering the safety of women as mandated under the Tamil Nadu Shops and Establishment Act, 1947? - HELD THAT:- The Input tax credit on services of leasing, renting or hiring of motor vehicles shall not be available as the same falls under the category of blocked credit and the same becomes eligible for availment as per the proviso to the said sub-section which provides that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. Hence, in the instant case the Input tax credit shall be available to the applicant, only on the tax paid on services of leasing, renting or hiring of motor vehicles for providing transport facilities to women employees alone who are arriving or leaving workplace between 8.00 P.M to 6.00 A.M. as the same has been made obligatory vide the Notification of Government of Tamil Nadu. If eligible, can ITC be availed for services received from the date of introduction of proviso to Section 17 (5) (b) (iii) of CGST Act, 2017 for the periods up to March 2022? - HELD THAT:- The input tax credit on leasing, renting or hiring of motor vehicles shall be available to the applicant from 28.05.2019 onwards, i.e the date of notification issued by the Government of Tamil Nadu vide which it was made obligatory on the part of the employers to provide transportation facilities to women employees working in shifts even though the provisions of Section 17 (5) (b) was substituted vide notification no 02/2019 dated 29.01.2019 and the same came to effect from 01.02.2019. It is also reiterated that the said availment of input tax credit shall be subject to satisfying and fulfilling the eligibility and conditions provided under Section 16 of the CGST Act, 2017. A circular is only clarificatory in nature and not a legislation. Whereas a notification is issued to notify the changes made in law or to give effect to provisions of law, a circular is issued to provide a clarification on an already existing provision of law. Hence, the applicants submission that in the instant case until the issuance of Circular more clarity was awaited on the eligibility of ITC and the ambiguity has been removed altogether only after issuance of the said circular and hence the benefit of ITC cannot be denied on procedural grounds without any fault on the part of the Applicant is not in consonance with the provisions of the GST law.

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• 2024 (7) TMI 1237
  Applicability of N/N. 04/2019 - Integrated Tax, issued dated 30th September 2019 - services supplied by the applicant, i.e., research and development services provided in relation to agro-chemical sector - services are rendered in the taxable territory or not - Place of supply - HELD THAT:- The Applicant undertakes testing for the products of their clients (hereinafter referred to as sponsors ), and the Applicant provides the test results in the form of a report. Applicant has a standard practice to execute an agreement/document with the sponsor(s). The sponsor makes available a certain quantity of material (hereinafter referred to as the test item ) based on the agreement pursuant to which the research, development, testing and analysis will be carried out and methodologies adopted for the research, development and testing are well documented as per the global guidelines and standards - The applicant has been supplying the services to its sponsors outside India under tax invoice with 18% GST as the applicant s understanding was that the place oi supply for such services falls in India under Section 13 (3) of the IGST Act, 2017. The Applicant is of the view that with respect to Research, Development and Testing process, the activities carried out by both the industries are inter linked with each other and in few cases, the Research, development, testing and analysis are the same and considering the similarities between pharmaceutical and agro-chemical sectors, the research and development services provided by the applicant squarely falls under the various types of services provided in the notification. Whether N/N. 04/2019-Integrated Tax, issued dated 3O h September 2019 shall be applicable on the services supplied by the Applicant, i.e., research and development services provided in relation to agrochemical sector? - HELD THAT:- Any discussion about the supply of such services rendered within the Taxable Territory is not relevant to the issue in question. However, it is important to delve into the Agreements executed by the IIBAT /Applicant with the sponsors located outside India, in order to ascertain the applicability of the Notification 4/2019, on the facts of the applicant s case. Agreements Entered into with Foreign Service Recipients by the Applicant - HELD THAT:- The Applicant has to analyse the test sample, i.e., in this case, the Mosquito net, received from the service recipient and determine the weight in grams of the alpha-cypermethrin active ingredient content in one kilogram of the Mosquito net (test sample) and weight in milligram of the same in cm square meter of the Mosquito net (test sample) and similarly, has to determine the weight in grams of the BPO active ingredient content of pooled samples present in one kilogram of the test sample as well as weight in milligram of the same in one square-meter of the test sample - The most important condition is that service provider shall follow international best practice guidelines to ensure reliability of results and the personnel involved in the activities should be trained in concerned diagnostic chemical science. On careful reading of the list of services enumerated, it is seen that every line entry of the Table 2 of the Notification No.4/2019, involves research and development services in pharmaceutical Sector in connection with study of drugs or disease. But, on perusal of the services rendered by the Applicant from the copies of the agreement filed in paper book, as discussed in para 18.0 to 18.8, we have no doubt that the said services are not circumscribed under the services enumerated as supply of research and development services related to pharmaceutical sector as specified in the Table B of the notification, but found to be relating to the quality studies in respect of long lasting insecticide infused Bed Nets, which are used to give better protection from mosquitoes, bedbugs, cockroaches, houseflies by keeping them away or by killing them. But, the services enumerated under the Notification No. 04/2019 -Integrated Tax, pertaining to research and development in the field of pharmaceutical sector are with the aim of producing new and potential drugs into the market, ensuring the safety and validity of medical drugs and in the evaluation of safe drugs, which enable quicker patient recovery from diseases. The place of supply in the instant case continues to be covered under Section 13 (3) of the IGST Act, 2017 and are accordingly taxable. Further the provisions of Notification No. 04/2019 - Integrated Tax, dated 30th September 2019 are applicable to research and development services related to Pharmaceutical sector only and shall not be applicable on the services supplied by the applicant, in terms of the agreements entered into with the foreign Service recipients, as there are no provisions to include or consider Agro-chemical sector within the ambit of the impugned notification.

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• 2024 (7) TMI 1236
  Supply or not - grant from the Food and Agriculture Organisation of UN - whether the receipt of the said grant is eligible to classify under the Export of Service as Zero rated supply under Section 16 of the Integrated Goods and Services Tax Act, 2017 or not? - liability to pay GST under IGST or under CGST and TNGST for the receipt of grant from the FAO of UN and what rate - eligibility to claim a refund of GST paid on grant provided to applicant in India under Section 55 of the CGST Act, 2017. Whether the grant from the Food and Agriculture Organisation of UN is a supply or not in accordance with the provisions of the GST Act? - HELD THAT:- In the instant case, the applicant has submitted that in the transaction between the applicant and the FAO of UN, nothing will be supplied to the FAO of UN for the grant given by them. It is purely a gratuitous grant from the overseas UN linked autonomous and Non-Profit Organisation for the use of the applicant to overcome the obstacles suffered in difficult situation and mainly concentrates on the indirect welfare of the people who depends on the applicant Company - That the grant sanctioned by the FAO of UN is a gratuitous grant under the projects of the said UN organization and it has to be utilised according to the budget lines specified in the agreement within the time lines specified. The said budget lines were determined based on the proposal submitted by the applicant Company to the FAO of UN. From the perusal of the provisions of the CGST Act, 2017 regarding Scope of Supply and the submissions made by the applicant regarding the activities to be undertaken by the applicant as mandated by the grant providing organization we find that there is no supply of Goods or services to the grant providing organization, and hence the we are of the opinion that the activities undertaken by the applicant in lieu of receipt of the Grant from FAO is not covered under the meaning of scope of supply . On perusal of the description of the investment as mentioned in the Grant Agreement it is found that the purpose of the investment is .to help the applicant company overcome the losses due to lack of capital, slowing down and stopping of cash flows and collapsing of the distribution network due to the pandemic lockdown and the activities to be undertaken by the applicant are towards strengthening the local green enterprise for sustained livelihood of vulnerable communities, and contribute to positive environmental outcomes, using an inclusive approach that focuses on enhancing the capacities of women in forest-based enterprises as envisioned by FAO - neither the grant received by the applicant can be construed to be consideration under the provisions of the GST law nor the activities to be undertaken by the applicant, as per the work plan developed and agreed upon jointly by the FAO and the applicant qualify to be supply under the provisions of GST law. Since the answer to above question raised by the applicant is answered in the affirmative, the other questions, need not be answered as they cease to exist. Eligibility for refund of GST paid on the grant by FAO of UN under Section 55 of CGST Act - HELD THAT:- On perusal of the provisions of Section 95 (a) and Section 103 (a) of the CGST Act, 2017, it is opined that this question is also out of purview of Section 97 of the CGST Act, 2017.

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• Income Tax

• 2024 (7) TMI 1235
  Royalty income - payments which were made by Assessee for obtaining computer software - whether such payments were liable to be taxed in India as royalty under the provisions of Section 9 (1) (6)? - HELD THAT:- Oder passed by this Court in Commissioner of Income Tax-(LTU) Vs. Reliance Industries Ltd. [ 2024 (6) TMI 1069 - BOMBAY HIGH COURT] which according to the learned counsel for the parties would govern the present proceedings as there is a DTAA entered with the countries in question, with whose residents the transactions were entered into by the assessee. The amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195 - Assessee appeal allowed.

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• 2024 (7) TMI 1234
  Deduction u/s. 80IB (10) - deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March by a local authority - scope of definition of built-up area - non considering the DVO s report available on record wherein violation relating to two row houses having area more than 1500 sq.ft. was shown - HELD THAT:- Similar question of law as raised would stand covered by the decision of Sarkar Builders [ 2015 (5) TMI 555 - SUPREME COURT] wherein while examining the scheme of Section 80-IB of the Act, held that insofar the position prior to 1 April, 2005 was concerned, on the basis of the plans as approved by the Planning Authority, it was legitimate and permissible for the assessee to claim deduction u/s 801B (10), as for such period (prior to 1 April, 2005), the concept of built-up area as inserted by clause (a) in Section 80IB (14), which included inner measurement of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls, but excluding the common areas, shared with other residential units, cannot be the consideration. It was held that in the absence of applying such parameters to the constructions approved prior to 1 April, 2005, it would be to absurd results, as it could not have been expected from an assessee to comply with such conditions, that was not part of the statute when housing project was approved. Admittedly insofar as the facts of the present appeals are concerned, the project Roseland Residence was sanctioned prior to 1 April, 2005. As decided in Tinnwala Industries [ 2014 (7) TMI 90 - BOMBAY HIGH COURT] the expression built up area introduced with effect from 1 April, 2005 could not be applied retrospectively and the Tribunal was justified in holding upto 1 April, 2005, the expression built up area would exclude the balcony area. Decided in favour of the assessee.

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• 2024 (7) TMI 1233
  Addition on account of reduction of long term liabilities, short term borrowing, trade payables and other current liabilities u/s 41(1) - CIT(A) deleted the addition as no cessation of liabilities during the year as assumed by the ld. CIT(A) but it was discharged the liabilities against the trade receivables - HELD THAT:- Assessee could not file any confirmation before the AO with regard to the sundry creditor whether they are still outstanding or not. There were no details about the intention of the assessee to pay the outstanding liabilities nor any reminders from the creditors seeking payment of the amounts due. The details of the litigation or any Court case have not been brought before us. As per CIT(A) that the liabilities brought forward from earlier years, hence, the provisions of Section 68 are not applicable is not emanating from the record. To that extent, the ld. CIT(A) erred in adjudicating on the Section which is not a subject matter of AO - Hence, matter should go back to the AO for due verification as to the existence of the parties, writing of these liabilities as bad debts in their books or not and to afford an opportunity to the assessee to file the confirmations and the relevant details before the Assessing Officer. The appeal of the Revenue on this ground is allowed for statistical purpose

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• 2024 (7) TMI 1232
  Addition of interest income - AO has made the impugned addition on the basis of information available in the insight portal - HELD THAT:- AO has not supplied the said information to the assessee. We find merit in the submissions of Ld A.R. that the assessee could have offered explanations with regard to the information available in the insight portal , if the relevant information were supplied to the assessee. We find merit in the above said submissions of Ld A.R. Principles of natural justice would require the AO to confront the materials relied upon by him for making the addition. In the instant case, we are of the view that there is violation of the above said principle. Accordingly, we are of the view that this issue needs a fresh examination at the end of the Assessing Officer Disallowance made u/s 14A - assessee has not earned any exempt income - HELD THAT:- In the instant case, the admitted fact is that the assessee did not earn any exempt income. Hence, the disallowance under Section 14A of the Act is not called for as per the decision rendered in the case of IL FS Energy Development company Ltd[ 2017 (8) TMI 732 - DELHI HIGH COURT] Hence the AO was not justified in making disallowance u/s 14A of the Act when the assessee has not earned any exempt income. Accordingly, we set aside the order passed by the Ld.CIT(A) and direct the Assessing Officer to delete the disallowance made u/s 14A - Decided in favour of assessee.

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• 2024 (7) TMI 1231
  Addition under the head Other sources - Valuation of unquoted equity shares- - As per AO valuation report for valuation of unquoted shares for the purpose of section 56(2)(viib) by an independent Chartered Accountant is not accurate and is not acceptable- HELD THAT:- After taking into consideration the order of the CIT(A), it comes up that in spite of the assessee taking a specific plea of being exempted as a start up from the application of clause (viib) of sub-clause (2) of section 56 of the Act, no findings was given to reject this claim. CIT(A) has only endorsed the reasoning of the AO for not accepting the valuation report. Thus, we consider it an appropriate case to allow the ground of the assessee for statistical purposes and restore the issue with regard to the claim of the assessee to be exempt from applicability of section 56(2)(viib) of the Act, as a start up to the files of the AO. The AO shall take into consideration the aforesaid findings and evidences filed and further give opportunity of hearing on this issue, to the assessee. Accordingly, the appeal is allowed for statistical purposes.

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• 2024 (7) TMI 1230
  Disallowance being interest at 12% of interest free advances - Advances was given to 5 persons without charging any interest - HELD THAT:- As submitted that the advances were subsequently received back by the appellant. It was also submitted that for the last three years, khandsary business is closed. In view of the above facts, we are of the considered view that loans and advances were given for business purposes. It is the assessee who decides as to how the business should be done and when expansions or modernization should be undertaken. Such a business decision cannot be questioned by any authority. Once it is held that the advances were for business purposes, non-installation of the machinery or renovation in the subsequent period due to non-viability cannot obliterate the purpose of business. The assessee decided not to go-forward with its plan of new machinery and renovation due to bad market condition. Such business decision cannot be a ground to disallow consequential expenditure. Hence, appellant is liable to succeed on the subject issue. Assessee had its own interest free capital which was more than the interest free advances - The Hon ble jurisdictional High Court in case of Gujarat Narmada Valley Fertilizers Co.Ltd. [ 2012 (8) TMI 1161 - GUJARAT HIGH COURT] held that where there was sufficient fund available with the assessee-company on which no interest was paid and out of which loans and advances to associate companies could be made, AO was not justified to disallow the claim of interest on borrowed funds. In the present case, we find that the assessee had its own share capital of Rs. 1,63,55,749/ - whereas the loans and advances given were only Rs. 95,70,601/-. Hence, the assessee had adequate interest free funds with it to make such advances. Therefore, the disallowance is not permissible in view of the decisions of Gujarat Narmada Valley Fertilizers Co. Ltd. [ 2012 (8) TMI 1161 - GUJARAT HIGH COURT] and R L Kalthia Enggineering Auomobilies (P.) Ltd. [ 2013 (2) TMI 754 - GUJARAT HIGH COURT] Accordingly, the ground raised by assessee is allowed.

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• 2024 (7) TMI 1229
  Revision u/s 263 - Addition u/s 68 - HELD THAT:- Regarding the review by the PCIT, it is a settled law that for exercising revisionary powers u/s 263 of the Act, the order must be both erroneous and prejudicial to the interests of the revenue. This twin condition is highlighted in the decision of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT] - The Court held that for an order to be revised under Section 263, it must be shown that the order is erroneous and such error has caused prejudice to the revenue. An incorrect application of law or a failure to make necessary inquiries would render an order erroneous. We noted the contention of the assessee that the AO s inquiry was neither inadequate nor insufficient. AO verified the identity, creditworthiness, and genuineness of the transactions in terms of Section 68 - AO s decision to accept the assessee s submissions after thorough verification cannot be deemed erroneous. We have also reviewed the judicial pronouncements relied upon by the assessee. These judicial precedents establish that revisionary action u/s 263 of the Act is not justified on grounds of inadequate inquiry if the AO has conducted sufficient inquiries and taken a permissible view. PCIT has not demonstrated that the AO s insufficient investigation has led to an erroneous assessment. In our opinion, inadequate inquiry alone does not justify revision unless it results in a prejudicial outcome for the revenue. Thus, if the AO has conducted an inquiry, however minimal, the PCIT must provide concrete evidence of the resultant error and prejudice to the revenue to justify invoking Section 263 of the Act. We hold that the order passed by the AO u/s 143(3) of the Act was neither erroneous nor prejudicial to the interests of the revenue. Therefore, the revisionary action taken by the PCIT u/s 263 of the Act is not justified. Thus, the appeal filed by the assessee is allowed, and the order passed by the Principal Commissioner of Income Tax under Section 263 of the Act is hereby quashed. Appeal of the Assessee is allowed.

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• 2024 (7) TMI 1228
  Reopening of assessment u/s 147 - Reason to believe - period of limitation - HELD THAT:- Reasons taken by the department for re- opening of the case itself were unverified and vague. Moreover, the assessee fully participated in the proceedings before the CIT (A) and all the relevant information pertaining to the credits in her bank account were duly furnished. Based on above observation and time limit discussed, it is found that re-opening was time barred hence liable to be quashed. On merits also the assessee was able to discharge her onus beyond doubt. In the result, grounds taken by the assessee is allowed. Appeal of the assessee is fully allowed.

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• 2024 (7) TMI 1227
  Bogus long term capital gain - Assessee has failed to produce any of other parties before AO and also did not represent before CIT (A) - HELD THAT:- AO should have made inquiry [1] from the bankers about whose funds were routed in the bank account of the assessee, [2] from the brokers on stock exchange how did they make transaction on behalf of this person and to whom did they provided exit , [3] from Demat agencies in whose demat accounts such shares were credited and debited, [4] why bankers, Demat agency and brokers did not report such a huge suspicious transaction to RBI and Stock exchanges, [5] How synchronized trade of purchases by the assessee took place and to whom exit was provided , [6] where the shares appearing in Demat account were diverted to, who operated Demat account of this assessee,] should have summoned to Mr. Kamlesh Sanghavi who deposited cross account payee cheques in the bank account of the assessee as alleged by assessee himself. AO should have definitely made a larger inquiry because such a kind of scam cannot happen without connivance of the bankers, demat agencies, brokers [who sold shares on behalf of assessee] on stock exchange platform. After making all these inquires AO should also take necessary action in case of all other persons in accordance with law. Assessee is also duty bound to support his affidavit and produce those persons. AO should also make independent efforts to bring all other person by using the necessary powers bestowed upon him in the act. It is a trite law that real income should be taxed in the hands of right assessee. As the AO has not made any inquiry but made the addition in the hands of the assessee, instead of restoring the matter back to the file of the CIT (A), in the interest of justice and give a fair opportunity to the assessee, we restore it back to the file of AO to decide the issue afresh in the light of above direction. Appeal of assessee allowed.

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• 2024 (7) TMI 1226
  Penalty u/s 271G - non-maintenance of documents for specified domestic transaction of purchase and sale to associated enterprises - CIT(A) deleted addition - HELD THAT:- The adjustment of transfer pricing was made with respect to the specified domestic transactions covered u/s 92BA(1) of the Act. The co-ordinate Bench in Texport Overseas (P.) Ltd [ 2019 (12) TMI 1312 - KARNATAKA HIGH COURT] has held that transfer pricing provisions do not apply to the case of the assessee for the impugned assessment year in view of the omission of the above clause by the Finance Act, 2017, with effect from 1st April, 2017, having the resultant effect that such provisions never existed. As there is no requirement of or applicability of transfer pricing provisions to the specified domestic transactions of the assessee covered u/s 92BA (i) of the act , consequently there cannot be any requirement of maintenance of the document. Therefore, the assessee cannot be penalized under Section 271G of the Act. Accordingly, the learned CIT (A) has correctly deleted the penalty levied under Section 271G of the Act. Mere deletion of adjustment of transfer pricing cannot automatically result into deletion of penalty for non-maintenance of documents , but in this case, there is no requirement of maintenance of such documents. Therefore, assessee cannot be penalized, for maintaining documents, which is not required by law - Decided in favour of assessee.

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• 2024 (7) TMI 1225
  Estimation of income - Bogus purchases - addition taking 25% of the alleged bogus purchases - HELD THAT:- ITAT, Mumbai in assessee s own case for AY 2009-10 [ 2021 (9) TMI 1555 - ITAT MUMBAI] wherein profit rate of 4% has been directed to be applied on the alleged bogus purchases. Also, in the decision of Co-ordinate Bench in assessee s own case for Assessment Year 2010-11 [ 2024 (7) TMI 1164 - ITAT MUMBAI] dated 18.07.2024 similar direction is given to adopt profit rate of 4%. As in the case of Mohammed Haji Adam Co. [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] had held to restrict the addition to the extent of bringing the gross profit rate on purchases at the same rate of other genuine purchases. Accordingly, we direct the AO to apply the rate of 4% on the alleged bogus purchases. Accordingly, appeal of the assessee is partly allowed.

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• 2024 (7) TMI 1224
  Validity of impugned proceedings u/s 147 - Time limit for notice u/s 149 - proceedings have been initiate beyond the time limit prescribed under provision of Section 149 - HELD THAT:- In the memorandum explaining the provisions in the Finance Bill, 2021, it has been interalia explained that another restriction has been provided that the notice under section 148 of the Act cannot be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit prescribed under the provisions of clause (b), as they stood immediately before the proposed amendment. In our understanding of the law, for the relevant provisions of Section 149 of the Act read with the memorandum explaining the provisions, what could not be done earlier, cannot be done even after the amendment. Meaning thereby that if in the erstwhile provisions, the notice is barred by limitation then, in the amended provision also, the said notice is barred by limitation. Thus, we hold that the impugned notice and the proceedings have been initiated beyond the time limit prescribed under the provisions of Section 149 of the Act making the impugned proceedings vitiated and liable to be quashed - Decided in favour of assessee.

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• 2024 (7) TMI 1223
  Rectification u/s 154 - Disallowance of claim of brought forward unabsorbed depreciation - HELD THAT:- AO has transgressed his jurisdiction while giving effect to the order of the ld. CIT (A) as he cannot go beyond the directions given by the ld. CIT (A) in the garb of rectification u/s 154. The aforesaid observation and the finding of the ld. CIT (A) clearly shows that the ld. A.O. has exceeded his jurisdiction by disallowing the claim of brought forward unabsorbed depreciation by rectifying the order giving effect, because the issue of claim of brought forward unabsorbed depreciation had already attained finality and there was no such direction by the CIT (A) to disallow. Thus, post order of Ld CIT (A) and after giving effect to the order, AO cannot rectify such order u/s 154 as there was no mistake apparent from record. We do not find any infirmity in the order of the ld. CIT (A) and the same is confirmed. Appeal filed by the Revenue is dismissed.

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• 2024 (7) TMI 1222
  Disallowance based on reply on third party information - unexplained purchases - Whether information collected from the back of the assessee from a third party, its purchases could be doubted and disallowance of expenditure is to be made? - diversified views among Accountant Member and Judicial Member - Case assigned to the Hon ble third member through reference u/s 255(4) - HELD THAT:- The Hon ble third member concurred with the view taken by the Judicial Member in deleting the addition confirmed by the CIT(A) by allowing the appeals of the assessee- appellant disallowance based on third party information gathered by the Investigation Wing of the Department without independent verification of the AO cannot be made. The information transmitted by the DIT (Investigation) was a material to ignite assessment machinery in motion but it cannot be treated as gospel truth for disallowing the claim of the assessee without independent cross verification of those information by the AO. Hon ble Supreme Court in the case of Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] has considered this issue. The Hon ble Supreme Court has held that if the statement was recorded from the back of the assessee and assessee was not allowed to cross examine the witness by the authorities, then such statement is to be exclude from the evidence. As per majority view, the impugned order of the CIT(A) is liable to be set aside and the additions are deleted. Decided in favour of assessee.

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• 2024 (7) TMI 1209
  Validity of assessment u/s. 143(3) - jurisdiction assumed by the A.O., ITO-4(2), Raipur - HELD THAT:- No order of transfer u/s.127(1) of the Act had been shown to have been passed, therefore, it is a clear case of invalid assumption of jurisdiction by the ITO-4(2), Raipur who in absence of any valid assumption of jurisdiction had framed the assessment vide his order u/s. 143(3) dated 27.12.2017. As the facts and issues involved in the present appeal remain the same as were involved in the aforesaid cases, therefore, following the same parity of reasoning, quash the assessment framed by the ITO-4(2), Raipur u/s. 143(3) dated 27.12.2017 for want of valid assumption of jurisdiction on his part. As have quashed the assessment framed by the AO, i.e ITO-4(2), Raipur u/s. 143(3) for want of valid assumption of jurisdiction, therefore, refrain from adverting to and dealing with the grounds of appeal raised by the assessee, based on which, the additions made by the AO have been assailed before me, which, thus, are left open. Appeal of the assessee is allowed.

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• 2024 (7) TMI 1208
  Unexplained investment in the immovable property - addition by just relying on the statement recorded during search without any corresponding incriminating evidence / documents - HELD THAT:- There is no specific incriminating document to prove the payment over and above the cheque payment by the Assessee for the purchase of the immovable property. In fact, there are some note pads which indicate where from the Assessee has got money for the purchase of this property but they cannot be treated as incriminating document to prove the cash payment for the purchase of this property. Though it is true that the Assessee in his statement recorded during the search has stated to have paid Rs. 36,00,000/- as total consideration for the purchase of this property but other than his statement the Department could not bring any incriminating document on record to substantiate its claim of cash payment. As the Hon ble Supreme Court in CIT Vs. Mantri Share Brokers (P.) Ltd. [ 2018 (7) TMI 200 - SC ORDER] has held that mere statement recorded during the search cannot be treated as incriminating document for the addition in a search case, therefore, the CIT(A) finding on this issue cannot be sustained. Accordingly, Assessee s appeal on Ground Nos. 1 to 3 stand allowed. Addition on the basis of dumb document - HELD THAT:- We find that the Assessing Officer has treated this dumb document as a noting for cash transaction without indicting whether it is receivable or payable. CIT(A) has not accepted the findings of the AO and he has treated it as a part which he had confirmed as cash paid for the purpose of immovable property. This issue has already been decided by us in the former part of this appeal in Ground Nos 1 to 3 above. Therefore, regarding appeal on this dumb document, as the ld. CIT(A) himself has treated it as part of Rs. 25,85,000/-, therefore, we are of the view that there is no need of any separate adjudication of this issue.

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• Customs

• 2024 (7) TMI 1221
  Liability to pay customs duty when the confiscated goods are redeemed after payment of fine under Section 125 of the Customs Act, 1962 - liability to pay such duty will include the liability to pay interest on delayed payment under Section 28AB of the Act otr not - applicability of ratio of the decision in the Jagdish Cancer case [ 2001 (8) TMI 113 - SUPREME COURT] . Whether there is a liability to pay customs duty when confiscated goods are redeemed after payment of fine under Section 125 of the Act? - HELD THAT:- This issue is no more res integra. The uncertainty about the liability to impose and collect duties in confiscation proceedings was resolved in 1976 by a decision of this court in Union of India v. M/s Security and Finance (P) Ltd. [ 1975 (10) TMI 30 - SUPREME COURT] , hereinafter referred to as Security Finance case, while interpreting identical provisions, as they stood under the Sea Customs Act, 1878. In this case, the court was dealing with confiscation of goods that were imported without a proper license which was and is prohibited by law. Though the goods were confiscated, they were released to the importer, who exercised the option to redeem them under Section 183 of the repealed Act. Consequently, Customs Department sought to collect the duty payable on such goods. The High Court accepted the importer s challenge to imposition and collection of duty on the ground that Section 183 proceedings authorised only a fine and not customs duty. The customs duty obligation on once exempted goods, liable to be confiscated for violation of conditions, arises only after the option to redeem them is exercised under Section 125. Once the option is exercised, the acceptance is subject to the conditions specified in Section 125. The primary condition is payment of fine in lieu of confiscation. Thus, this duty obligation is inextricably connected to the option to redeem the confiscated goods. In other words, it is a precondition for redemption. The decision of this court in Fortis Hospital Ltd v. Commr. of Customs, Import [ 2015 (4) TMI 348 - SUPREME COURT] affirms this position. In Fortis Hospital case, the owner of the confiscated goods chose not to exercise the option under Section 125. However, the revenue sought to recover the duty payable under Section 28 of the Act. In this was ruled that this is impermissible . We conclude by holding that Jagdish Cancer case is not an authority for the proposition that when the liability to pay customs duty has occasioned under Section 125, the calculation, determination or the assessment of such duty cannot be made under Section 28. The customs duty obligation in confiscation proceedings does not occasion either under Section 12 or 28. It has arisen because of the option available and exercised under Section 125. This obligation should not be confused with the method and procedure by which that customs duty is assessed and determined, which is provided under Section 28. It is in this context that it is needed to consider and explain the decision of this court in Jagdish Cancer case [ 2001 (8) TMI 113 - SUPREME COURT] . The Jagdish Cancer case is not an authority for the proposition that when the liability to pay customs duty has occasioned under Section 125, the calculation, determination or the assessment of such duty cannot be made under Section 28. Whether the liability to pay such duty will include the liability to pay interest on delayed payment under Section 28AB of the Act? - HELD THAT:- The text of Section 125(2) clearly provides that, where any fine in lieu of confiscation of goods is imposed under sub-Section (1), the owner of such goods shall be liable to any duty and charges payable with respect to such goods . The sub-section provides that the liability to any duty and charges, that are payable, shall be paid in addition to the fine - It is held that Section 28 would come into operation for assessing and determining the duty and other charges payable with respect to goods redeemed under Section 125(2). Once Section 28 applies for determination of duty obligation arising under Section 125(2), the interest on delayed payment of duty arises under Section 28AB. The said provision obligates payment of interest in addition to the duty - the interest liability under Section 28 AB is also attracted. The decision of the High Court upheld - appeal disposed off.

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• 2024 (7) TMI 1220
  Classification of imported goods - various parts and sub-parts or accessories of cellular mobile phones - to be classified under CTH 85177090 or under CTH 39209999? - demand of differential duty alongwith interest and penalty - it was held by CESTAT that the rejection of the appellant s classification of the front cover, middle cover and back cover of mobile phones under CTH 85177090 in the impugned order and their re-classification under CTH 39209999 cannot be sustained and needs to be set aside. HELD THAT:- The appeal is dismissed.

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• 2024 (7) TMI 1219
  Classification of Betine Hydrochloride (Betine HCL) - CBIC Instruction vide F. No. 401/92/2022-Cus-III - Commissioner (Appeals) held that the product rightly falls under CETH 230990 and has set aside the confirmed demands under the Order-in-Original - it was held by CESTAT that It is seen that Betine HCL 93-98% are classifiable under Animal Feed Grade only . HELD THAT:- The view taken by the Customs, Excise and Service Tax Appellate Tribunal, Kolkata is absolutely correct. Hence, the Civil Appeal is dismissed.

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• Corporate Laws

• 2024 (7) TMI 1218
  Transfer of total of 7000 equity shares in the name of the respondents collectively - issuance of prohibitory order under section 45MB (2) of the Reserve Bank of India Act - HELD THAT:- It is an admitted position that the original share certificates of 4000 RIL shares (96 in number) along with transfer deeds are in possession of Shri Anoop Jain. Now the only issue raised is of consideration for these 4000 shares. Shri Anoop Jain has relied on Delhi stock exchange register within the cycle 12.04.1997 to 25.04.1997 to show that he had paid the consideration. He also stated that he got the delivery of the shares on 02.05.1997 along with the original shares and blank transfer deed. He also states that through his proprietorship concern Jain and company, Mr. Anoop Jain made the payment to Delhi Stock Exchange. In effect the appellants sole objection is that there is discrepancy in the timeline when the shares were sold by the appellant No. 1, and thereafter sold by broker to the respondent No. 1 in each appeal and that in Mr. Anoop Jain s case the contract notes, bills for delivery of possession of shares and proof of having paid the consideration is not coming forth and in Saraf brothers case the contract notes, bills for delivery of possession of shares and proof of having paid the consideration were placed on record by them after the order was reserved by the learned Company Court but they did not get any chance to rebut the same. The matter is remanded back to the learned Company Court only for the limited purpose to inquire when the 4000 shares subject matter of transfer to Mr. Anoop Jain; 1500 shares subject matter of transfer to Mr. Murari Saraf, 900 shares subject matter of transfer to Mr. Banwari Lal Saraf and 600 shares subject matter of transfer to Mr. Bihari Lal Saraf brothers were sold by the Appellant No. 1, CRB Capital Markets Limited and to whom; and that Mr. Anoop Jain, Mr. Murari Saraf, Mr. Banwari Lal Saraf and Mr. Bihari Lal Saraf have paid the consideration for these shares. Once it is established that appellant No.1 had divested itself of the rights in these shares and sale was concluded before 09.04.1997; and that the consideration is paid by the respondent No. 1 in each appeal to the broker from whom they purchased these, the effect of the impugned order shall follow. Appeal disposed off by way of remand.

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• 2024 (7) TMI 1217
  Seeking winding up of the respondent company on the ground of non-payment of outstanding dues - Section 433 (e) read with Section 439 of the Companies Act, 1956 - HELD THAT:- It is the opinion of this Court, that since no substantive proceedings have been undertaken towards winding up of the company, the present petition does not deserve to be continued before this Court. Although this company petition has been admitted by this Court, it is at a nascent stage and no effective orders as such have been passed towards the winding up of the company. In other words, given the prevailing facts and circumstances, it is but evident that no irreversible steps have been taken pursuant to the winding up of the respondent company. Hence, the instant petitions is transferred to the NCLT. It is left to the NCLT to consider the matter and pass appropriate orders in accordance with law - The electronic record of the instant petition be transmitted to the NCLT within a period of one week by the Registry. List before the NCLT on 04.07.2024 - Petition disposed off.

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• 2024 (7) TMI 1216
  Seeking dissolution of the company - seeking that the Official Liquidator be discharged as its Liquidator - Section 481 of the Companies Act, 1956 - HELD THAT:- In view of the facts and circumstances of the present case, these liquidation proceedings warrant to be brought to an end. The company (in liquidation) M/s. Moradabad Syntex Ltd., stands dissolved and the Official Liquidator is hereby discharged as its Liquidator - the present application is allowed.

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• 2024 (7) TMI 1215
  Seeking dissolution of the respondent company (in liquidation) - seeking that Official Liquidator be discharged as its Liquidator - Section 481 of the Companies Act, 1956 - HELD THAT:- Keeping in mind the import of Section 481 (1) of the Act and the facts and circumstances of the present case, these liquidation proceedings warrant to be brought to an end. The Official Liquidator has sought to be exempted from carrying out the publication of the citation of the final winding up, and without further ado the same is allowed and such exemption from publication is granted. Further, the Official Liquidator is permitted to close the books of accounts of the company after adjusting expenses and losses from the CPL - the company is thereby dissolved and the Official Liquidator is discharged. Failure to file Statement of Affairs of the respondent company - Section 454(5) and 5(A) of the Companies Act, 1956 - HELD THAT:- The Official Liquidator has moved CO.APPL. 641/2023 under Section 481 of the Companies Act, 1956 seeking dissolution of the company (in liquidation) wherein it has been stated that the Official Liquidator has no knowledge of any other recoverable asset, either moveable or immoveable from which any money may be realized for the company (In liquidation). The same has been allowed and disposed of, and the company (in liquidation) stands dissolved accordingly. Petition disposed off.

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• Insolvency & Bankruptcy

• 2024 (7) TMI 1214
  Refund of the earnest money deposited by the petitioner - It is alleged that the petitioner filed a belated appeal before the National Company Law Appellate Tribunal (NCLAT) which was dismissed on the point of limitation which order remained undisturbed even before the Supreme Court - invocation of writ jurisdiction under 32 of the Constitution of India - HELD THAT:- The prayer for tagging has been opposed and it has been submitted that since the petitioner has already lost up to the Supreme Court in the previous round no such indulgence ought to be granted to her. Keeping the issue of the maintainability of the writ petition open, this writ petition it is directed to be tagged with Civil Appeal No. 7943 of 2023.

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• Service Tax

• 2024 (7) TMI 1213
  Classification of service - commercial or industrial construction service or works contract service - activity of the appellant namely, turnkey contract for development of ash pond - penalty. Classification of service - HELD THAT:- On going through the scope of work and the agreement placed by the appellant, clearly shows that the services rendered by them include supply of materials also, which is appropriately classifiable under the category of works contract service , which is taxable with effect from 01.06.2007. Admittedly, in the case on hand, the service rendered by the appellant falls under the category of works contract service , which came into effect from 01.06.2007 and the period involved in this case is prior to the said date. Therefore, it is observed that for the said activity, no service tax is payable by the appellant. In these circumstances, it is held that whole of the demand is not sustainable against the appellant under the category of commercial or industrial construction service , which qualified as works contract service . Penalty - HELD THAT:- In the facts and circumstances of the case, no penalty is imposable on the appellant. The impugned order is set aside - appeal allowed.

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• Indian Laws

• 2024 (7) TMI 1212
  Dishonour of Cheque - insufficient funds - vicarious liability under Section 141 NI Act - HELD THAT:- Apart from the bald averment made in the complaint as well as during the course of submissions that the petitioner is the deemed owner of the firm, no other evidence has been produced/placed on record to show that the petitioner is the deemed/real owner or that he was in charge or responsible for the business of the firm at the time of the commission of the offence. On the other hand, the petitioner has placed on record a certificate of acknowledgement of registration from the Deputy Registrar of Firms. The said document nowhere shows the present petitioner as a partner in the said firm. Further, a perusal of the complaint would show that the cheque was issued on account of the firm and was signed by Sh. Hoshiyar Singh and not the present petitioner. There is no evidence on record to show that the petitioner was a partner of the firm or that he was the signatory of the cheque. In the absence of any such evidence to bring the petitioner within the fold of Section 138 r/w Section 141 NI Act, forcing the petitioner to stand trial solely on the basis of a bald averment, that too unsubstantiated, would amount to an abuse of the process of law. Considering the entire factual matrix including the fact that the petitioner has presented an unimpeachable and incontrovertible material in the form of certificate of acknowledgement issued by the Deputy Registrar of Firms, which clearly shows that he is not a partner in the accused firm as well as the fact that the respondent has failed to produce any evidence to the contrary, the present petition is allowed.

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• 2024 (7) TMI 1211
  Territorial Jurisdiction of Chief Metropolitan Magistrate (CMM) - jurisdiction of DRT to assess whether the enforcement of security by the secured creditor - HELD THAT:- The DRT has the jurisdiction to assess whether the enforcement of security by the secured creditor is in accordance with the provisions of the Act. This Court notes that Section 14 of the SARFAESI Act categorically states that the Chief Metropolitan Magistrate or the District Magistrate has the authority to assist the secured creditor in possession of the secured asset. However, the said section further provides that the Chief Metropolitan Magistrate or the District Magistrate, within whose jurisdiction any such secured asset or other documents related thereto, may be situated or found to take possession thereof, then said Chief Metropolitan Magistrate or the District Magistrate, as the case may be, shall upon application made in this regard by the secured creditor, take possession of such asset. Perusal of Section 14(1) of the SARFAESI Act manifests that the learned CMM has the authority to take action and issue directions for taking over the secured assets, where such secured asset is situated within the jurisdiction of the said CMM - In the present case, the order passed by the learned CMM is clearly without jurisdiction, since as per the submission of the learned Additional Standing Counsel for the GNCTD, the area in question where the property is situated, falls for civil and criminal jurisdiction under the North District. This Court is of the view that the petitioner ought to approach the learned DRT since there is an efficacious remedy available under Section 17 of the SARFAESI Act. Since in the present case, it has come to the fore that the impugned order dated 09th January, 2024 passed by learned CMM, North-West, Rohini Courts is without any jurisdiction, therefore, in order to balance the equities, the order dated 09th January, 2024 is suspended for a period of one week, in order to grant opportunity to the petitioner to approach the learned DRT under Section 17 of the SARFAESI Act. The petition is disposed off.

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• 2024 (7) TMI 1210
  Dishonour of Cheque - vicarious liability u/s 141 of the NI Act - HELD THAT:- In the present case, the issue whether the statutory notice was issued, in view of the factual situation wherein the respondent states that the petitioner refused to accept notice while the petitioner states that no such notice was received, is a matter of trial. However, the complaint case must fail owing to a more fundamental issue. The subject cheque, copy of which has been placed on record, was signed only by petitioner s late husband- Arvind Gupta. Although it is conceded that the cheque was issued from an account jointly in the name of the Arvind Gupta and Neeta Gupta (petitioner herein) however, it is a matter of fact that the said cheque is not signed by the petitioner. The criminal complaint filed against the present petitioner is clearly an abuse of process of law and the same is liable to be quashed and set aside - Consequently, the present petition is allowed and the criminal complaint against the petitioner is quashed.

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