Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 29, 2023
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Securities / SEBI
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Central Excise
Wealth tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Deduction u/s. 80IB(1) - Assessee was not the owner of the land and the approval of the project was not in the name of Assessee - the section does not prescribe anywhere that the commencement certificate should be in the name of Assessee. - Admittedly the Assessee has developed the project. - Benefit of exemption / deduction cannot be denied - HC
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Validity of assessment against non existent company - amalgamation proceedings concluded - the assessment order passed on a non-existent Company is bad in law, inasmuch as, on the date of passing of the assessment order, the respondent company was not in existence, and as such no any liability can be fastened on a non-existent entity. - HC
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Disallowance on account increase in expenditure as excessive payments - Ultimately it is a business decision and does not call for the AO to sit in judgment over this. The increase in expenditure is apparently due to increase in chambers taken on rent. The need for more storage space in Mumbai is also justified with the increase in processing at Mumbai - Thus the genuineness of the extra expenditure is for the purposes of business hence the addition is deleted - AT
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Taxability of income in India - It is not the case of the Ld. AO that the services rendered by the assessee are in the nature of FIS/royalty etc. It cannot be said that the assessee was not engaged in business while rendering talent booking agency services to the Customer and hence the classification of the impugned receipts as ‘Other Income’ which is a residuary head is erroneous. - AT
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Revision u/s 263 - Validity of order passed by the A.O. u/s.143(3) questioned - when the impugned order of reassessment u/s 143(3), in itself had been passed on the basis of invalid assumption of jurisdiction by the AO and thus is invalid and bereft of any force of law; or in fact non-est in the eyes of law, therefore, the same could not have been revised by the Pr. CIT under Sec. 263 of the Act - AT
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MAT u/s 115JB - The findings of the ld.CIT(A) holding the impugned expenses to be not in the nature of prior period expenses, but confirming the adjustment made to the book profits of the assessee as being in the nature of prior period expenses, is nothing but contrary findings. Once the ld.CIT(A) has appreciated the nature of the expenses, categorized by the assessee as prior period expenses, to be not so and categorically held so, the expenses clearly as per the findings of the Ld.CIT(A) do not qualify as prior period expenses. - AT
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Deduction u/s 54EC - LTCT or STCG - Investment of consideration against sale of depreciable assets - Section 50 cannot convert long term capital assets into short term capital assets. So the assessee is entitled for benefit of section 54EC of the Act as it has capital gain arisen out of long term capital assets invested in specified assets - AT
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Scope of total income - Exclusion of amount transferred to special reserve - That special reserve belongs to the assessee only and is reserved for utilization in certain eventualities for the safety and benefit of assessee and its customers as per the RBI guidelines. This fund is in the type of savings that belongs to the assessee itself. Therefore, it cannot be said that transfer of certain profits to reserve fund will not fall in the definition of income of the assessee - AT
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Assessment framed u/s 153A r.w.s 143(3) as barred by limitation - We are of the considered view that the information called for by the department from Swiss authorities could not have been received by them for the period prior to 01.04.2011. Therefore, it would be a futile exercise to wait for such information, and that too, by an invalid reference. Therefore, in our considered opinion, the period of limitation could not be extended as claimed by the Revenue - AT
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TP Adjustment - MAM - adjustment made towards the AMP expenses by adopting an approach similar to bright line test - if the net profit margin meets the Arm's length price, then no separate addition needs to be made. - AT
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Revision u/s 263 - at the time of exercise of jurisdiction under Section 263, admittedly, proceedings before AAR was pending on the issue of taxability of receipts from offshore supply contract. That being the case, learned CIT being conscious of the fact that proceeding is pending before AAR should not have initiated proceedings under Section 263 of the Act as two parallel proceedings on the same issue, cannot be initiated at a given point of time. - AT
Customs
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Power to seizure vehicle - apprehension of misuse in future - If a possible future use of a vehicle as a means of transport for smuggling goods confers a power of confiscation of such a vehicle, that power will be unbridled, absolute and unregulated. The discretion to seize or not to seize a vehicle for apprehended future use as a means of transport of smuggled goods will confer an unregulated discretion devoid of any clarity for its exercise - HC
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Authority and jurisdiction - Power to search versus Power to seal u/s 105 - it does not appear that the premises of the petitioner were not available for the purpose of search and it appears that the customs authorities had straightaway resorted to take a drastic action against the petitioner to seal the premises for the purpose of searching the premises. This is certainly not permissible - Direction to unseal the premises issued - HC
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Revocation of order to operate as ship chandler - levy of penalty u/s 117 of CA - prohibited goods or not - allowing the goods for export - it was the duty of the concerned authorities to verify these facts before allowing 2,00,000 of 3 ply non-woven masks having been permitted and loaded on to the Vessel, they cannot now turn around and make the appellant having grossly failed in his duty to intimate the authorities. - AT
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Levy of Penalty u/s 112(b)(i)- Smuggling of Gold Bars - town seizure - There is violation of the provision of Section 138C of the Act, as well as the principles of natural justice. It is also found that it is the case of town seizure, and revenue have not laid any evidence as to the smuggled nature of gold, save and except assumption and presumption, and relying on the retracted statement. - AT
Indian Laws
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Arbitration Agreement - Section 8 of the Arbitration and Conciliation Act Act - The MoU has been executed between the appellant and the first respondent. The non-family shareholdings, in any event, cannot be bound by the terms of the MoU since they are not parties to the document. - SC
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Dishonour of Cheque - compounding fee- during the pendency of the present petition, parties have settled their dispute -The petitioner is permitted to compound the offence. However, this Court is not inclined to accept the prayer for waiving off the compounding fee, but considering the mitigating circumstances of the petitioner, the same is reduced - HC.
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Dishonour of Cheque - Liability of the Managing Director of the company - The petitioners have failed to bring on record any unimpeachable material or material of sterling quality to show that they had resigned from the accused firm or were not responsible for day-to-day affairs of the firm when the cheque was issued or dishonored or that the dishonoring of cheque in question was not attributable to any negligence or connivance or consent on their part - Petition dismissed - HC
IBC
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Misconduct by Resolution Professional - Now certain new facts from the communication of the Liquidator has come to light and in the normal course, query raised by the Liquidator could have been explained by the Resolution Professional, but he had failed to do so for more than a year. - the CBI is directed to conduct preliminary enquiry - HC
SEBI
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SEBI requisite legal power vested in it to direct the petitioner bank - Right of the bank to recovery dues and proceed with under the SARFAESI Act, 2002 - The orders passed by Whole Time Member of SEBI are applicable to the petitioner bank, they however do not prevent the petitioner bank from auctioning the mortgaged property being Villa in Gurgaon under the provisions of the SARFAESI Act, 2002. - HC
Wealth-tax
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Wealth tax assessment - ownership of the land has been transferred or not - there can be no doubt in holding that the requirements of section 53A of the Transfer of Property Act, 1882 have not been fulfilled. It is pertinent to mention that mere inclusion of the expression in the development agreement that the possession transferred shall be deemed to be in part performance of an agreement to sell for the purposes of section 53A of the Transfer of Property Act 1882, does not hold any significance. - AT
Service Tax
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Refund of Service Tax alongwith Interest - Export of services - even if a person has a fixed establishment in India, but if the services are provided and consumed in foreign country, then they are not chargeable to service tax in terms of Section 64 of Finance Act, 1994. The provisions of Section 66A of Finance Act, 1994 will operate when the person is having a fixed place of business in India and services are provided from outside India and consumed in India - Refund allowed - AT
Central Excise
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Refund - Refund was sanctioned by the lower authority pending the audit objection - The Tribunal ought to have considered the contentions as urged on behalf of the revenue on all the issues instead of confining the scope of the appeal merely on the ground of CERA objections, this more particularly considering the fact that the show cause notice itself was issued on 11th April 2007 which was certainly before closure of the objection, which was the first time recorded by the revenue by a communication dated 26th May 2008 addressed by the office of Commissioner, Central Excise, Raigad to the Assistant Registrar, Central Excise & Service Tax Appellate Tribunal - Matter restored back before the tribunal - HC
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Exemption to specified goods supplied to specified institutions - Even if there is a small lacuna on the part of the authority signing the certificates cannot be considered as infringement of compliance with the requirement of proper submission of certificates and substantial benefit cannot be denied on this ground. However, since there is no denial of the fact that goods have been supplied to research institutions and proper certificates have been issued by the authorities of such institutions, the benefit of the exemption notification cannot be denied to the appellant. - AT
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Scope of SCN - The basis on which the Adjudicating Authority has confirmed the demand has never been subject matter of the show cause notice and therefore, we hold that Adjudicating Authority has travelled beyond the scope of the show cause notice and therefore, violated the principles of natural justice by not disclosing the verification report to the appellant, this clearly amounts to an act of violation of the principles of natural justice. - AT
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Extended period of limitation - if Cenvat Credit has been allowed in respect of the same services to the other assessee’s there is no justifiable reason for denying the same to the present appellant - after the lapse of a considerable time after the audit, revenue proceeded to issue this show cause notice invoking suppression of facts. What is the reason for invoking suppression or other ingredients required for invoking an extended period in this case - no ground existed for invoking the extended period of limitation in the present case. - AT
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Levy of penalty - During the impugned period i.e January 2003 to January 2005, there was no provision to impose penalty for issuance of invoices without supplying the goods. The amendment to Rule 26 of Central Excise Act, 2002 came only with effect from 01.03.2007 - It is found that the effect of law cannot be applied retrospectively unless it is specifically intended and clearly said so in the amendment. - AT
Case Laws:
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GST
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2023 (7) TMI 1168
Seeking grant of Bail - fake firms - input tax credit availed without supplying the goods and on the basis of fake invoices - HELD THAT:- Considering the submissions of the parties; particularly considering that investigation is already complete in respect of the present applicant, complaint has been filed on 21.4.2023, he is in jail since 21.2.2023 i.e. for about 5 months, case is based on documentary and electronic evidence, further considering that in the matter of Ratnambar Kaushik [ 2022 (12) TMI 263 - SUPREME COURT] , the matter relates to GST evasion, offence is punishable up to 5 years fine, in the said case, the accused was in jail for more than 4 months, the Hon ble Supreme Court has allowed the bail by observing that in such type of cases, the evidence to be tendered by the respondent would essentially be documentary and electronic, the ocular evidence will be through official witnesses, due to which there can be no apprehension of tampering, intimidating or influencing; this Court is of the view that the applicant can be released on bail. The applicant is directed to be released on bail on his executing a personal bond for a sum of Rs. 1 lakh with 2 sureties for the like amount to the satisfaction of the trial Court - Bail application allowed.
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2023 (7) TMI 1167
Directions regarding compliance of order of High Court - post decisional hearing issued without complying with the direction by High Court - permission to allow amendment in the registration application by opening the GSTN Portal restricted to the Petitioner - direction to allow rectification and further allow the Petitioner to regularize the credit of tax paid on purchases and to utilize the same as set off against final payment of the tax - disallowance of ITC - penalty or interest on due GST Tax - HELD THAT:- From the record it is apparent that this Court in N.P. INFRA PROJECTS PVT. LTD. VERSUS UNION OF INDIA AND OTHERS [ 2019 (8) TMI 1134 - MADHYA PRADESH HIGH COURT ] had directed the complaint/representation of the petitioner to be considered within two weeks. The same was made by the petitioner on 20.05.2019 and as per the petitioner, the same has not been decided till now and the impugned notice has been issued. It is hence directed that in case no decision has been taken upon petitioner's application/representation dated 20.05.2019 Annexure P/6 till now, then the Nodal Officer shall take a decision thereupon within a period of six weeks from the date of receipt of certified copy of this order and thereafter only the respondents shall proceed further in the matter pursuant to the notice dated 4.10.2022 - Till the decision by the Nodal Officer, the impugned notice dated 4.10.2022 shall be kept in abeyance. The petitioner is directed to furnish a certified copy of this order in the Office of Respondent Nos. 5, 6 and 8 within a period of ten days from today. Petition disposed off.
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Income Tax
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2023 (7) TMI 1166
Reopening of assessment - legality of notice u/s 148A(b) and orders u/s 148A(d) - Scope of new provision section 148A - conducting of enquiries or issuance of show-cause notice or passing of order under section 148A - Scope of amendment by the Finance Act, 2021 as amended Income Tax Act by introducing new provisions i.e. sections 147 to 151 w.e.f. 1st April, 2021 - HELD THAT:- As noticed that notices cannot be issued in a case for AY 2013-14, AY 2014-15 and AY 2015-16 if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Hence, in order to reduce the compliance burden of assessees, it is clarified that information and material may not be provided in a case for AY 2013-14, AY 2014-15 and AY 2015-16, if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Separate instruction shall be issued regarding procedure for disposing these cases. Procedure required to be followed by the Assessing Officers to comply with the Supreme Court judgment in Union of India vs Ashish Aggarwal [ 2022 (5) TMI 240 - SUPREME COURT ] The impugned notices under Section 148A(b) of the Act, having been mailed after 03.06.2022, do not just abrogate the mandate of the CBDT instructions quoted above but also violate the provisions of Section 282A of the Act insofar as the name and designation of the concerned officer issuing the same find no mention in the same. That being so, the notices under Section 148A(b) of the Act impugned in these writ petitions cannot be sustained. In the case of LSR Medical Pvt. Ltd.[ 2023 (4) TMI 1231 - DELHI HIGH COURT] this court to which one of us was a member allowed the writ petition on similar grounds. The notices u/s 148A(b) and orders u/s 148A(d) of the Act, impugned in these writ petitions are set aside and the petitions are allowed
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2023 (7) TMI 1165
Deduction u/s. 80IB(1) - Assessee was not the owner of the land and the approval of the project was not in the name of Assessee - HELD THAT:- As decided in Green Associate [ 2018 (9) TMI 1181 - GUJARAT HIGH COURT] Assessee had undertaken a development of the project at its own risk and cost and therefore, the Assessee was entitled to the deduction as claimed. The Court also held that just because the land was in the name of the original owner when the housing development project was executed would not be detrimental to Assessee s claim of deduction under Section 80IB(10) of the Act. Therefore, in our view the section does not prescribe anywhere that the commencement certificate should be in the name of Assessee. What is required to be seen is whether Assessee has developed the project during the year under consideration and offered the income from the project for tax. Admittedly the Assessee has developed the project. No substantial questions of law arises.
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2023 (7) TMI 1164
TDS u/s 195 - Royalty or FTS or business profits - payment made to NTOs is towards interconnectivity charges - Assessee is an ILD license holder and responsible for providing connectivity to calls originating/terminating outside India. Assessee has entered into an agreement with NTOs for international carriage and connectivity services - whether DTAA cannot be considered under Section 201 ? - HELD THAT:- As decided in Engineering Analysis [ 2021 (3) TMI 138 - SUPREME COURT] while deciding the scope of Section 195(2) it is important to note that the tax which is required to be deducted at source is deductible only out of the chargeable sum. This is the underlying principle of Section 195 - Thus it is clear that an assessee is entitled to take the benefit under a DTAA between two countries. Hence, the ITAT s view that DTAA cannot be considered in proceedings under Section 201 of the Act is tenable. Whether the ITAT was correct in holding that the amendment to provisions of Section 9(1)(vi) inserting the Explanations will result in amendment of DTAA? - The answer to this question must be in the negative because in Engineering Analysis, the Apex Court has held that Explanation 4 to Section 9(1)(vi) of the Act is not clarificatory of the position as on 01.06.1976 and in fact expands that position to include what is stated therein vide Finance Act, 2012. The Explanation 5 and 6 to Section 9(1)(vi) of the Act has been inserted with effect from 01.06.1976. This aspect has also been considered in Engineering Analysis holding that the question has been answered by two Latin Maxims, lex no cogit ad impossibilia i.e. the law does not demand the impossible, and impotentia excusat legem i.e. when there is disability that makes it impossible to obey the law, the alleged disobedience of law is excused. Whether the payments made to NTOS for providing interconnect services and transfer of capacity in foreign countries is chargeable to tax as royalty? - For subsequent years in assessee s own case, the ITAT has held that tax is not deductable when payment is made to non-resident telecom operator. This factual aspect is not refuted. Thus the Revenue has reviewed its earlier stand for the subsequent assessment years placing reliance on Viacom etc [ 2023 (2) TMI 1165 - ITAT DELHI] rendered by the ITAT. In that view of the matter this question also needs to be answered against the Revenue. Whether the Income Tax Authorities have jurisdiction to bring to tax income arising from extra-territorial source ? - Admittedly, the NTOs have no presence in India. Assessee s contract is with Belgacom, a Belgium entity which had made certain arrangement with Omantel for utilisation of bandwidth. In substance, Belgacom has permitted utilisation of a portion of the bandwidth which it has acquired from Omantel. It is also not in dispute that the facilities are situated outside India and the agreement is with a Belgium entity which does not have any presence in India. Therefore, the Tax authorities in India shall have no jurisdiction to bring to tax the income arising from extra-territorial source. Whether the Revenue is right in holding that withholding tax liability should be levied at a higher rate? - As contended this issue is covered in assessee s favour in CIT Vs. M/s. Wipro [ 2023 (1) TMI 173 - KARNATAKA HIGH COURT] and the same is not disputed. Hence, this question also needs to be answered against the Revenue. Whether assessee can be held liable for non-reduction of tax at source for payments made for the A.Ys. on the basis of amendment to Section 9(1)(vi)? - This aspect has been considered by us while answering question No. 2. It is held in Engineering Analysis that an assessee is not obliged to do the impossible. Admittedly, the A.Y.s under consideration are 2008-09 to 2012-13 and the Explanation has been inserted by Finance Act, 2012. In addition, we have also held that assessee is entitled for the benefits under DTAA.
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2023 (7) TMI 1163
Reopening of assessment - Bogus import activities of assessee - DR stated Petitioner has not even submitted any documentary evidence regarding import to refute the claim that imports were bogus - HELD THAT:- It is Petitioner s case that whatever documents were required has been submitted. Instead of issuing vague notices, it would help Assessee also to effectively respond, if the notices are clearly worded and a list of what information/document is required is also sent to Assessee. There is no allegation that Petitioner has made any imports. Petitioner has not been even called upon to produce documents regarding any imports. Therefore, we wonder how could Respondent No. 1 make an allegation that Petitioner has not submitted any documentary evidence regarding imports to refute the claim that imports were bogus. We quash and set aside the order issued u/s 148A(d) of the Act and remand the matter for de-novo consideration.
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2023 (7) TMI 1162
Validity of assessment against non existent company - amalgamation proceedings concluded - HELD THAT:- Tribunal has not committed any error in rejecting the appeal filed by the Revenue, in as much as, admittedly; the respondent-company was not in existence as on the date of passing of the assessment order and this fact was duly informed and was in the knowledge of the A.O. Hence, we hold that the assessment order passed on a non-existent Company is bad in law, inasmuch as, on the date of passing of the assessment order, the respondent company was not in existence, and as such no any liability can be fastened on a non-existent entity. The Tribunal has rightly held that assessment order passed on a non-existent Company is bad in law. Decided in favour of assessee.
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2023 (7) TMI 1161
Deduction u/s 80P(2)(i)(a) denied - treating the assessee as a cooperative bank than a cooperative society u/s.2(19) - HELD THAT:- We find no merit in the Revenue s instant arguments seeking to invoke sec.80P(iv) of the Act in light of case of Mavilayi Service Cooperative Bank Ltd [ 2021 (1) TMI 488 - SUPREME COURT] holding that an assessee s status has to be seen as per it s registration and nature of membership hardly forms the eligibility criteria to deny the impugned deduction. We accept the assessee s instant sole substantive grievance accordingly. Condonation of 1806 days delay as attributable to various communication gaps and other miscellaneous reasons - Hon ble apex court s landmark decision Collector, Land Acquisition vs., MST Katiji [ 1987 (2) TMI 61 - SUPREME COURT] has settled the law long back that all such technical aspects must make way for the cause of substantial justice. We, therefore, condone the impugned delay.
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2023 (7) TMI 1160
Validity of assessment u/s 153A(1)(b) r.w.s. 143(3) - manadation of incriminating material to be found before initiating assessment - HELD THAT:- Jurisdiction to complete assessment u/s 153A(1)(b) r.w.s. 143(3) of the Act was exercised in regard to relevant assessment years without there being any incriminating material and accordingly, the ground raised on behalf of the assessee challenge in the assumption of jurisdiction u/s 153A r.w.s. 153C is allowed. Decided in favour of assessee.
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2023 (7) TMI 1159
Determination of head of income - excess stock found during survey - Unexplained investment u/s 69B r.w.s 115BBE or business income - quantitative differences were found in the physical stock vis- -vis book stock - as per assessee surplus stock found at the time of survey is generated out of business income as brought into the books by way of credit to partners capital account - HELD THAT:- From the fact it emerges that the only source of assessee s income is Business income arising out of sale of gold jewellery and silver articles. Differential was separately offered to tax in the return of income as Business Income . Naturally, the excess stock was acquired out of excess income regenerated from business activity only since the assessee do not have any other source of income since its inception. The entire stock was accumulated out of income from jewellery business. The undisclosed business income was ploughed back into business to acquire further stock. In such a case, the excess stock could be said to have arisen out of normal business activity only and therefore, the same would be assessable as business income only in terms of decision of Bajargan Traders [ 2017 (11) TMI 388 - RAJASTHAN HIGH COURT] wherein held excess stock found during the survey, it could be said that the investment in procurement of such stock was clearly identifiable and related to regular business stock of the assessee. Therefore, the same should be considered as Business Income only. In the present case, the stock difference has arisen in the course of day-to-day business activity only and not otherwise. The entire stock was available as trading stock at the business premises and it was part and parcel of regular business stock. The decision of Hon ble Supreme court in the case of Lakshmichand Baijnath vs CIT ( 1958 (11) TMI 3 - SUPREME COURT] also support the said conclusion as held when an amount is credited in the business books, it is not an unreasonable inference to draw that it is a receipt from business. Therefore, the impugned income, in our considered opinion, would be assessable as Business Income only. Decided in favour of assessee.
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2023 (7) TMI 1158
Addition towards share premium u/s. 56(2)(viib) - consideration for issue of shares that exceeds the face value of such shares - consideration received for said shares which exceeds the fair market of the shares needs to be treated as income of the assessee - HELD THAT:- Assessee is part of M/s. RPP Infra Projects Ltd, who filed application before the Income-tax Settlement Commission, Chennai Benches and offered additional income towards investment with share capital of assessee company. The Income-tax Settlement Commission, Chennai Benches vide their order accepted application filed by the assessee and income disclosed therein and also allowed capitalization with respect of amount invested in M/s. Luncar Finance Pvt Ltd. From the above, it is very clear that addition made by the AO towards security premium in the hands of the assessee was already subjected to tax in the hands of M/s. RPP Infra Projects Ltd, which is evident from the order passed by the Income-tax Settlement Commission. Therefore, further addition towards very same income cannot be made in the hands of the assessee. CIT(A) rightly deleted addition - Decided against revenue.
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2023 (7) TMI 1157
Nature of expenses - Infrastructure development expenses - revenue or capital expenditure - assessee has taken the property on the lease of 99 years, which was as good as ownership and expenses incurred on the development of this property should be capitalized by AO - CIT(A) deleted addition - HELD THAT:- We find that AO has erred in taking the property as ownership property of the assessee. CIT (A) has given a finding of fact that from the agreement of Infrastructure Development produced, assessee company entered into a separate infrastructure development agreement with Sri City Pvt. Ltd. to maintain common facilities and amenities outside the owned property of the assessee company, hence AO has clearly erred. CIT (A) placed reliance on the decision of LH SUGAR FACTORIES AND OIL MILLS PRIVATE LIMITED [ 1980 (8) TMI 1 - SUPREME COURT] as observed that in a case where the advantage consists merely in facilitating the assessee's business operation or enabling management to conduct business in a more efficient manner, leaving the fixed capital untouched, then such expenditure would be on revenue account, even though the advantage may endure for an indefinite time - Decided against revenue. TDS u/s 195 - disallowance made u/s 40(a)(i) - non deduction of TDS on Foreign Remittance - HELD THAT:- AO has not examined the applicability on TDS provisions based on the information available on record. He noted that the provisions of section 40(a)(i) of the Act requires to disallow the expenses on account of non-deduction of TDS on which tax is deductible at source under Chapter XVII-B. Ld. CIT (A) rightly observed that such provisions do not empower to disallow the expenses on non-availability of Form 15CA and CB. Accordingly, we find that CIT (A) has taken a correct view in the matter. Apex Court in the case of GE India Technology [ 2010 (9) TMI 7 - SUPREME COURT] which also supports the case of the assessee. Accordingly, we uphold the order of the CIT (A) on this issue. Disallowance of loss on foreign currency fluctuation - HELD THAT:- CIT (A) duly examined the issue and has found that the net impact of foreign exchange fluctuation was NIL under the profit and loss statement. This finding of ld. CIT (A) has not been disputed by the Revenue. Hence, we do not find any infirmity in the order of ld. CIT (A) and we uphold the same. Addition on account of other expenses particularly when the expenses are not fully verifiable - HELD THAT:- AO has made ad hoc disallowance of 2% of the total expenses without mentioning any specific defects. Ld. CIT (A) has appreciated that there was very little discrepancies to such expenses. However, he also sustained addition of 1% of total expenses. We note that assessee is a corporate entity and ad hoc disallowance of expenditure without pointing out any specific defect is not permissible. Hence, we set aside the orders of the authorities below and decide the issue in favour of the assessee. Disallowance of legal expenses as related to plant (Capital Expenditure) - CIT (A) observed that the amount charged towards drafting agreements, resolutions and rendering legal consultancy services relating to plant which was purely professional services in nature - HELD THAT:- CIT (A) has given a finding that the amount was charged towards drafting agreements, resolutions and rendering legal consultancy services relating to plant which is purely professional services in nature. CIT (A) has rightly applied the judgment of CIT vs. United Breweries Ltd [ 2010 (1) TMI 86 - KARNATAKA HIGH COURT] - Hence, we find that the ld. CIT (A) has passed a reasonable order which does not require any interference on our part. Appeal of the assessee is allowed.
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2023 (7) TMI 1156
Penalty levied u/s 271(1)(c) - quantum addition with respect to Franchise Fees deleted and the issues pertaining to disallowance of air fare, travelling expenses, website charges, Lodging Boarding / food and catering charges have been remitted back to the Assessing Officer for a de-novo adjudication - DR submitted that there are contrary views taken by different benches of the Tribunal regarding the treatment of Franchise Fees and reference u/s 255(3) for constitution of Special Bench therefore, issues in the quantum appeal have not reached finality and that the penalty proceedings should be kept alive accordingly - HELD THAT:- It is settled position that when the additions made in the assessment order, on the basis of which penalty for furnishing inaccurate particulars is levied, are deleted, there remains no basis at all for levying the penalty. Accordingly no penalty can survive and the same is liable to be cancelled as in the given case. With regard to the petition for constitution of Special Bench in our considered view until the constitution and pronouncement of the decision of the Special Bench, the decision of the coordinate bench in the quantum appeal is binding on us. In view of these discussions and considering the facts of the present case, we hold that the penalty levied is not sustainable. - Decided against revenue.
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2023 (7) TMI 1155
TDS u/s 195 - disallowance of commission paid to foreign agents for non-deduction of TDS - CIT(A) deleted the disallowance of commission paid to foreign agents holding that the assessee was not liable to deduct TDS at source on commission paid to agents located outside India for procuring orders from buyers were all located outside India and not having permanent establishment in India - HELD THAT:- Whether commission paid to foreign agents for procurement of orders is liable for TDS u/s 195 r.w.s. 9(1)(vii) is now settled by the decision of Panalfa Autoelektrik Ltd [ 2014 (9) TMI 706 - DELHI HIGH COURT] wherein it has been held that the commission paid to foreign agents for procurement of orders do not fall under Technical, Managerial or consultancy services so as to attract the provisions of section 9(1)(vii) r.w.s. 195. Following the decision of Panalfa Autoelektrik Ltd[ [supra] similar view in the case of ACIT Vs. Kapoor Industries Ltd [ 2021 (1) TMI 1080 - ITAT DELHI] Therefore, we do not find any good reason to interfere with the findings of the ld. CIT (Appeals). Decided against revenue. Disallowance of export promotion expenses for non-deduction of TDS - HELD THAT:- As already held payments to organizations located outside India and not having permanent establishment in India are not covered u/s 9 of the Act and consequently Section 195 of the Act does not come into play as it is not a Fee for Technical Service . Thus payment to persons located outside India is thus allowed - Decided against revenue. Disallowance of interest expense - assessee has claimed interest expenses on secured and un-secured loans - CIT (Appeals) deleted the disallowance of interest for the reason that the advances made by the assessee for purchase of property were fully covered by the non-interest bearing funds as available with the assessee - HELD THAT:- As finding by the ld. CIT (Appeals) that the interest bearing funds have been fully utilized for stock and sundry debtors. CIT (Appeals) deleted the disallowance of interest as the advances for purchase of property are covered by non-interest bearing funds which the assessee is having correctly.Decided against revenue. Disallowance on account of preservation charges u/s 40A(2)(b) - these expenses have been claimed in respect of one of the sister concerns of the assessee - HELD THAT:- As in the course of proceedings the ld. CIT (Appeals) the assessee has filed written submissions explaining why the assessee paid preservation charges and considering the submissions of the assessee the ld. CIT (Appeals) deleted the disallowance as held AO made the impugned addition invoking the provisions of Section 40A(2)(b) by treating the increase in expenditure as excessive payments. The submissions by the appellant that the storage capacity is to be maintained keeping in view the peak requirement and not on the basis of total sales is justified. Ultimately it is a business decision and does not call for the AO to sit in judgment over this. The increase in expenditure is apparently due to increase in chambers taken on rent. The need for more storage space in Mumbai is also justified with the increase in processing at Mumbai - Thus the genuineness of the extra expenditure is for the purposes of business hence the addition is deleted - Decided against revenue.
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2023 (7) TMI 1154
Institution of suits or continuation of pending suits or proceedings against the company in liquidation - Addition of parts and accessories of Air Pollution Control Machineries - HELD THAT:- NCLT has ordered liquidation of assessee company under IBC 2016 by observing that the order of moratorium 03.10.2020 passed u/s. 14 of the Insolvency Act prohibits the institution of suits or continuation of pending suits or proceedings against the company including execution of any judgment, decree, or order of any court of law, Tribunal, arbitration panel or other authority. This being the position no useful purpose is going to be served in continuing with the present proceedings in the appeal filed by the revenue it is relevant to mention that the Hon ble Supreme Court in the case of PCIT vs Monnet Ispat and Energy Ltd. [ 2018 (8) TMI 1775 - SC ORDER] has upheld judgment of Hon ble High Court of Delhi [ 2017 (9) TMI 1907 - DELHI HIGH COURT] wherein it was held that sec 238 of Insolvency and bankruptcy code 2016 will over ride anything in consistent contained in any other enactment, including the I.T Act 1961. Moratorium u/s. 14 of the IBC code 2016 will also apply to the appeals preferred by the Income Tax Department against the orders of the authorities below including CIT(A) and the ITAT in respect of tax liability of a dater under Corporate Insolvency Resolution Process (CIRP). The appeal of the revenue is dismissed with a liberty to the revenue to seek remedial measures in accordance with law. Appeal of the revenue is dismissed in limine for statistical purposes.
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2023 (7) TMI 1153
Revision u/s 263 - admissibility of deduction u/s 80P - PCIT enquired as how the income received from other than co-operative society is eligible for deduction under section 80P(2)(d) - HELD THAT:- Undisputedly, assessee has invested its surplus fund with co-operative bank and earned the interest income part of which the assessee claimed as a deduction under section 80P(2)(d) - As we notice that this issue is no longer res integra having been decided in favour of the assessee in case of Palm Court M Premises Co-operative Society Ltd [ 2022 (9) TMI 650 - ITAT MUMBAI] wherein it is held that interest income earned by the Co-operative Society on its investment made with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act. PCIT is not correct in holding that the order passed by the A.O u/s 143(3) was erroneous in so far it was prejudicial to the interest of the revenue and accordingly we quash the order passed under section 263 of the Act. Decided in favour of assessee.
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2023 (7) TMI 1152
Taxability of income in India - receipts of the assessee from the Customer to make the services of Maroon 5 available to the Customer for a live musical performance in India - Characterisation of income - fees for technical services or business income or Other Income - non satisfy the basic attributes of business i.e. regularity, continuity, frequency and volume - assessee has no PE in India and is a tax resident of USA - assessee is engaged in the business of brand and talent booking agency services and inter alia acts as a mediator, to and in connection with several worldwide event management companies for arranging live performance by renowned artistes from around the world - HELD THAT:- AO arrived at an erroneous conclusion that the impugned receipts from the services rendered by the assessee to the Customer is not business income but Other Income which is taxable in India under Article 23 of the India- USA DTAA. Considering the factual matrix of the present case, in our humble opinion, the reliance placed by the Ld. AO in the case of CIT vs. R.D. Aggarwala Co. [ 1964 (10) TMI 9 - SUPREME COURT] and GVK Industries Ltd. [ 1997 (5) TMI 43 - ANDHRA PRADESH HIGH COURT] is misplaced. Article 7(7) of the India-USA DTAA clearly defines business profit to mean income derived from any trade or business including income from furnishing of services which are other than specified services (Royalties and FIS). It is not the case of the Ld. AO that the services rendered by the assessee are in the nature of FIS/royalty etc. It cannot be said that the assessee was not engaged in business while rendering talent booking agency services to the Customer and hence the classification of the impugned receipts as Other Income which is a residuary head is erroneous. In our considered view the impugned receipts of the assessee from the Customer constitutes business profits and hence are not chargeable to tax in India in the absence of the PE of the assessee in India. Accordingly, ground decided in favour of the assessee.
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2023 (7) TMI 1151
Income taxable in India - taxability of income from technical handling services received from IATP members - India-France DTAA - HELD THAT:- As respectfully following the decision of the Coordinate Bench in assessee s own case [ 2023 (2) TMI 1165 - ITAT DELHI] we hold that the income from technical handling services is not taxable in India as it is covered under Article 8(2) read with Article 8(1) of India France DTAA. Accordingly, the additions made in all theses assessment years are directed to be deleted. Taxability of interest income - Tribunal in its decision [ 2023 (2) TMI 1165 - ITAT DELHI] held that the fixed deposits made by the assessee are out of funds connected with the operation of aircraft in international traffic covered under Article 8(1) of India-France DTAA as the assessee has no other business. Therefore, the interest income will be covered under Article 8(3) of the India-France DTAA and hence not taxable. AO is directed to delete the impugned addition. Appeal of the assessee is allowed.
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2023 (7) TMI 1150
Deduction on account of non-compete fee amortized in the computation of income - Assessee explained that the payment of non-compete fees has been done to the shareholders/contractors of the bottling companies to facilitate the conduct of the assessee s business more efficiently and more profitably, leaving the fees untouched - HELD THAT:- As in assessee s appeal for A.Y 2008 09 [ 2023 (6) TMI 393 - ITAT DELHI] has considered a similar disallowance we find that this is a recurring dispute between the parties from assessment years 1999-2000 onwards and has been consistently decided against the assessee, even by the Tribunal.- Decided against assessee. Reversal of provision towards bad debts - assessee explained that as per the accounting policy and receivables past due for more than 90 days needs to be provided and this amount is offered for tax while computing tax-free income after making provisions for doubtful receivable - HELD THAT:- We have carefully perused the orders of the authorities below. Provision was created in the earlier year and it was written back in that year is not in dispute. CIT(A) has admitted that the issue in hand is a case of reversal of provision of which income has already been offered in the earlier year. Therefore, we fail to understand why the addition has been sustained by the ld. CIT(A). In A.Ys 2008 09 and 2009 10 [ 2023 (6) TMI 393 - ITAT DELHI] also, similar issue arose but no disallowance was made in this regard as the ld. CIT(A) has deleted the disallowance and no appeal has been filed by the revenue against the decision of the ld. CIT(A).No merit in the addition. We, therefore, direct the Assessing Officer to delete the disallowance - This ground is allowed. Disallowance of traffic challans - HELD THAT:- We find force in the contention of assessee. Similar disallowance was considered by this Tribunal in A.Y 2008 09 as held payment of compounding fee for violation of provision under the Motor Vehicles Act, 1988 and Rules thereunder has held that such expenditure is allowable as business expenditure under section 37(1) - Decided in favour of assessee. Addition on account of deposits from customers - assessee is accepting deposit from customers like distributers/retailers etc as a security deposit - CIT(A) accepted that section 41(1) of the Act does not apply, but applied provisions of section 41(2) and 43(6) - HELD THAT:- Facts on record show that the assessee has not claimed any trading liability. Containers and bottles are shown under the head Current Assets and deposits are shown as Liabilities . There is no evidence brought on record to show that liability has ceased to exist. In our considered view, the cessation of liability can only occur either by operation of law or debtors unequivocally declaring his intention to not honour his liability when payment is demanded by the creditor. As considering from all possible angles, neither provisions of section 41(1) of the Act apply [Assessing Officer fails] nor provisions of section 41(2) and 43(6) of the Act [CITA fails]. This ground by the assessee is allowed and similar grievance in revenue s appeal is dismissed. Delayed payment to PF/ESI - HELD THAT:-This quarrel is now settled by the decision of Checkmate Services [ 2022 (10) TMI 617 - SUPREME COURT] . Addition on account of inventory loss and leakages - CIT(A) was convinced that the inventory loss is actually write off and not based on estimation and deleted the addition - HELD THAT:- The undisputed fact is that since the assessee is engaged in the business of manufacturing and distribution of non-alcoholic beverages which are perishable in nature, these beverages are supplied in glass and plastic bottles which are susceptible to breakage. Such breakage and expiry of the products leads to inventory losses in the year under consideration. Write off of inventory is based on actual loss and not on estimation. Therefore, CIT(A) was correct in allowing the same as business expenditure. Such action of the ld. CIT(A) cannot be faulted with. This ground is dismissed. Addition on account of repair and maintenance - steep increase of 53% in these expenses from immediate previous year whereas the turnover of the assessee company has increased by 35% only - HELD THAT:- It is not acceptable the comparison of the increase in sales with increase in repairs and maintenance expenses etc. - difference of 18% between 53% and 38% has no logic without pointing out any error or defect in the books of account which are audited and no adverse inference has been pointed out by the auditors. Decided against revenue.
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2023 (7) TMI 1149
Revision u/s 263 - Validity of order passed by the A.O. u/s.143(3) questioned - Jurisdiction AO to initiate assessment u/s 143(2) - HELD THAT:- As the jurisdiction over her case at the stage of issuance of notice u/s. 143(2) was admittedly vested with the ITO, Ward-4(1), Raipur, therefore, in absence of any notice issued by the latter u/s. 143(2) of the Act, the assessment framed by him vide his order passed u/s. 143(3) of the Act dated 29.11.2017 could not be sustained and is liable to be struck down on the said count itself. Our aforesaid conviction that issuance of a valid notice u/s. 143(2) of the Act is a sine-qua-non for framing of the assessment is supported by the judgments of Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT] and CIT Vs. Laxman Das Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT] . The assessment framed by the ITO, Ward-4(1), Raipur, i.e the jurisdictional A.O, on the basis of notice issued u/s.143(2) by the ITO, Ward-2, Rewa, i.e. a non-jurisdictional Officer is nothing but nullity. Thus now when the impugned order of reassessment u/s 143(3), in itself had been passed on the basis of invalid assumption of jurisdiction by the AO and thus is invalid and bereft of any force of law; or in fact non-est in the eyes of law, therefore, the same could not have been revised by the Pr. CIT under Sec. 263 of the Act. Accordingly, we herein quash the order passed by the Pr. CIT under Sec. 263 of the Act, dated 28.03.2021 for want of valid assumption of jurisdiction. Decided in favour of assessee.
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2023 (7) TMI 1148
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- By respectfully following the above ratio in 24/08/2020 passed in ITA No. 1947/Del/2018 [ 2020 (9) TMI 141 - ITAT DELHI] and also considering the fact that the investment in shares of Karnataka Bank Limited has been made out of own funds of the assessee, we hold that no disallowance can be made out of interest expenditure under Clause (ii) of Rule 8D of the Rules. Disallowance of depreciation on vehicles given on finance lease - HELD THAT:- Hon'ble Supreme Court in the case of ICDS Ltd. [ 2013 (1) TMI 344 - SUPREME COURT] as reaffirmed the position that in a leasing transaction it is the lessor and not the lessee, who is entitled to claim deprecation on the leased assets - A.O. disallowed the excess claim of depreciation over and above the excess income - Disallowance of depreciation claimed on vehicles give on finance lease requires to be deleted. Ad-hoc disallowances of support service fee and reimbursement of expenses - HELD THAT:- Considering the fact that the CIT(A) had observed in its order that payment has not been wholly and exclusively for the purpose of business of the assessee without referring to the documents produced by the assessee we are of the opinion that, if the issue involved is remanded to the file of CIT(A) for adjudicating the same afresh after considering all the documents produced by the Assessee, the substantial issue of the assessee is remanded to the file of CIT(A) with a direction to adjudicate the issue afresh after verifying the documents produced by the assessee in accordance with law. Disallowance of bad debts written off - HELD THAT:- As decided in own case [ 2022 (7) TMI 374 - ITAT DLEHI] on a careful consideration of the matter and analyzing the facts in the light of the addition of the Hon ble Apex Court in the case of Vijaya Bank [ 2010 (4) TMI 46 - SUPREME COURT] we are of the considered opinion that in this matter the assessee not only debited the amount of doubtful debt to the P L Account but in fact registered the value of assets in the Balance Sheet, and therefore we find that it s not the case of mere creating provision but actual writing off of the bad debts, and accordingly the assessee is entitled to the deduction under section 36(1)(vii). Disallowance of interest on compulsory convertible debentures - whether the compulsory convertible debentures are in the nature of debt or equity? - HELD THAT:- The Hon ble Rajasthan High Court in the case of CIT Vs. Secure Meters Ltd. [ 2008 (11) TMI 66 - HIGH COURT RAJASTHAN] held that the expenses incurred on issue of debentures, whether convertible or not, were deductible as business expenditure under section 37(1) of the IT Act. The Court held that the debenture when issued is a debt, and therefore, whether it is convertible or non-convertible does not militate against the nature of the debenture. Thus we hold that CCDs are in the nature of borrowed fund and continued to be debt till conversion thereof into shares and consequently interest on CCDs is allowable as revenue deduction u/s 36(1)(iii) of the Act.
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2023 (7) TMI 1147
Nature of expenditure - replacement of Membrane Cells - revenue or capital expenditure - HELD THAT:- We unhesistantingly hold that the ld.CIT(A) has grossly and unjustly erred in confirming the order for treating the expenses incurred of replacement of Membrane Cell as capital in nature despite the assessee demonstrating before him that the issue had been decided in its favour by various judicial authorities in the preceding years. MAT u/s 115JB - addition on account of Prior Period Expenses under the provision of Section 115JB - Whether the said liability was crystallized and quantified during the year? - HELD THAT:- If the impugned expenses do not qualify as prior period expenses, we fail to understand how the same could be eligible for adjustment to the book profits of the assessee as being in the nature of prior period expenses. The findings of the ld.CIT(A) holding the impugned expenses to be not in the nature of prior period expenses, but confirming the adjustment made to the book profits of the assessee as being in the nature of prior period expenses, is nothing but contrary findings. Once the ld.CIT(A) has appreciated the nature of the expenses, categorized by the assessee as prior period expenses, to be not so and categorically held so, the expenses clearly as per the findings of the Ld.CIT(A) do not qualify as prior period expenses. Therefore, there is no question for making any adjustment of the same to the book profits of the assessee by treating them as period expenses.
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2023 (7) TMI 1146
Validity of assessment against non-existent entity post amalgamation - Notice against company amalgamated - HELD THAT:- We find that factum of knowledge of amalgamation is not disputed by the learned departmental representative nor is there any denial of information with regard to the amalgamation by the Jurisdictional Assessment Officer, the learned dispute resolution panel. We find that recently the honourable Bombay High Court on identical facts and circumstances of the case in New Age Buildtech (P.) Ltd[ 2023 (5) TMI 368 - BOMBAY HIGH COURT] There is no denial that assessee has intimated to the learned assessing officer and the learned dispute resolution panel as well as the jurisdictional assessing officer about the fact of amalgamation, which is comprised in paper book filed for assessment year 2008 09 wherein various correspondences were cited before us supporting the same, we have no hesitation in holding that the assessment order passed in the name of nonexistent entity in the name of Solvay Pharma Ltd is void and liable to be quashed.
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2023 (7) TMI 1145
Claim exemptions u/s 11 and 12 disallowed - delay in filing Form 10/10B - HELD THAT:- CIT(A) held that the AO erred in not allowing deduction to the /assessee for the amount accumulated under the provisions of section 11 - CIT(A) further observed that it was merely a procedural lapse on part of assessee to not file Form 10 alongwith return of income. CIT(A) thus observed that the assessee submitted the audit report at a later stage after filing the return of income and thus the benefit of exemption u/s 11 cannot be denied merely on account of delay in furnishing audit report. We found that the observation of the ld. CIT(A) does not suffer from any infirmity and we find no reason to interfere in the order of the ld. CIT(A). Non-indicating specific purpose/ purpose for which the fund was accumulated - Hon'ble Gujarat High Court, in the case of CIT(Exemptions) v. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust [ 2018 (10) TMI 995 - GUJARAT HIGH COURT ] held that lack of declaration in Form No. 10 regarding specific purpose for which funds were being accumulated by assessee-trust, would not be fatal to exemption claimed under section 11(2). Similar view was taken in the case of CIT v. Hotel Restaurant Association [ 2003 (3) TMI 92 - DELHI HIGH COURT ] CIT(A) respectfully following the above judgments, deleted the addition correctly - Decided against revenue.
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2023 (7) TMI 1144
Unexplained investment in capital assets - CIT-A deleted the addition as assets have been shown in the regular books of account and no defect is found in such books, which were duly audited and certified by the auditors - HELD THAT:- As observed that no books of accounts were submitted by the assessee during the course of assessment proceedings and therefore the AO did not get opportunity to examine the same and therefore there was no question of rejecting the same as well. AO made a specific observations that no documentary evidence regarding the investment was furnished during the course of assessment proceedings, and further source of such investment also remained unexplained. Accordingly,since the ld. CIT(A) has given no basis whatsoever for affording relief to the assessee with respect to this ground of appeal, the order passed by ld. CIT(A) with respect to this ground of appeal is directed to be set aside. Decided in favour of revenue. Payment of lease rent - Addition made as assessee has not been able to prove with evidence that this expenditure has in fact been incurred in the first place - CIT(A) allowed the appeal of the assessee on the ground that the assessee has furnished copies of lease deeds, where complete names, addresses and other details of lease transactions are appearing - HELD THAT:- We observe that even before us, the assessee has not furnished any bank statement reflecting that the aforesaid payment was made to the lessor. Though, copies of lease deeds have been furnished and cheque details have also been furnished on plain paper, and it has been further submitted that all payments towards lease rents were paid through banking channels, however, the assessee has not been able to produce copies of bank statement evidencing that the payments have in fact been made to the lessor. Since the assessee has not been able to furnish copy of bank statement to substantiate that lease payments have been made to the lessor, the addition is liable to be sustained. Decided in favour of revenue. Provision for various expenses - Addition made as no documentary evidence has been submitted by the assessee - CIT(A) allowed the appeal of the assessee in part - HELD THAT:- In our view, so far as opening balance of provision CIT(A) has not erred in allowing the appeal with respect to this issue. With respect to unpaid PF CIT(A) observed that since the assessee has already disallowed the aforesaid sum in the return of income, it would amount to double addition if the aforesaid said sum is again disallowed by the AO. Accordingly,CIT(A) gave relief to the assessee with respect to unpaid PF - We are of the considered view that the ld. CIT(A) on appreciation of facts has not erred in facts and in law in allowing the appeal of the assessee on this issue as well. With respect to provision for unpaid power bills of factory for March, 1997 we observe that the aforesaid amount was disallowed by the AO on specific ground that no documentary evidence has been filed by the assessee in support of the claim. Further, from perusal of the order passed by ld. CIT(A), it is observed that ld. CIT(A) has not given any basis whatsoever for allowing the assessee s appeal with respect to provision for power expenses - Accordingly, relief allowed by the CIT(A) with respect to unpaid power bills is directed to be set aside, since the assessee has failed to produce any evidence to substantiate the claim. Disallowance of interest payments - complete address of the parties was not furnished by the assessee and assessee also did not furnish any evidence in respect of interest payment made to the aforesaid three parties -relief has been given by the ld. CIT(A) to the assessee only on the basis that there was no defects which is pointed out by the Assessing Officer in the books of accounts - HELD THAT:- We observe that ld. CIT(A) has not given any basis whatsoever for affording relief to the assessee. The assessee had not filed any documentary evidence giving details of communication address of the parties to whom interest was paid nor were any details filed as evidence to show actual payment of interest to the aforesaid three parties. Accordingly, looking into the instant facts of the case, the relief granted by the ld. CIT(A) to the assessee with respect to this ground of appeal is directed to be set aside. Disallowance on account of stock difference - HELD THAT:- CIT(A) has simply accepted the assessee s verbal explanation regarding there being no difference in stock due to horizontal method of accounting being forwarded by the assessee. However, no further independent enquiry was made by ld. CIT(A). Accordingly, in the interest of justice, the matter is being restored to the file of Assessing Officer to carry out the necessary verification to ascertain whether there is any difference in stock or whether owing to the horizontal method of presentation followed by the assessee, there is no difference in actual terms, as asserted by the assessee. Disallowance on account of interest payment - AO added the above sum on the ground that the assessee gave no explanation for obtaining the loan or the utilization of aforesaid fund - HELD THAT:- On going through the records, it is observed that the assessee had taken loan from Bank of India amounting to Rs. 5.84 crores on which interest was paid by the assessee. There is no specific allegation regarding the genuineness of loan taken or that and further the ld. CIT(A) made a specific observations that this loan had been taken from earlier years. However, we observe that while as per the assessee, he has furnished a bank statement to prove payment of interest, however, the contents thereof are not legible (pages 106-110 of paper book). Accordingly, the matter is being restored to the file of Assessing Officer only with the limited purpose to verify from the bank statement, whether interest has in fact been paid as stated by the assessee. Disallowance of Depreciation - HELD THAT:- As assessee is eligible for claim of depreciation in respect of new vehicle purchased during the year under consideration. The details of additions to fixed assets, along with supporting evidence have also been placed on record before us. Assessee cross objection allowed. Disallowance out of prior period item - HELD THAT:- As we observe that the above provisions have been made on account of year end unpaid expenses as on 31st March, 1997. The details of expenses have been summed up at page 98 of the paper book. Accordingly, given the facts of the case, assessee s cross objection is allowed. Disallowance of foreign exchange fluctuation loss - AO observed that in absence of any documentary evidence furnished by the assessee against claim of foreign exchange fluctuation, the aforesaid amount was liable to be added to the income of the assessee - HELD THAT:- We observe that the assessee has not furnished any supporting details viz. copy of bank guarantee, copy of purchase contract with Singapore party etc. to substantiate the claim of foreign exchange to substantiate the genuineness of the claim. This fact has also been correctly observed by the ld. CIT(A) while upholding the addition. Accordingly, we find no infirmity in the order of ld. CIT(A) so as to call for any interference. Disallowance of insurance claim written off - HELD THAT:- We are in agreement with the argument of the counsel for the assessee that for insurance claim to be written off there is no requirement that the same should have been offered as income in any earlier year. However, it is also observed that the assessee has filed no details/documents/evidence to substantiate that the above write off was due to settlement entered with Oriental Insurance Company for losses of Soya extraction. In absence of any documents/evidence in support of the write off, cross objection 1(iv) of assessee s cross objection is dismissed. Clearing and forwarding expenses - Addition made as despite several opportunities, assessee did not furnish any details with respect to the above claim - HELD THAT:- As we observe that that the assessee has not furnished any documentary evidence with respect to clearing and forwarding charges. Though, we observe that the ld. CIT(A) did not pass speaking order while confirming the addition, but the assessee has also not filed any supporting whatsoever either before the AO or before ld. CIT(A) and also before the Assessing Officer in remand proceedings to support the genuineness of the aforesaid claim. Liquidity damages - CIT(A) confirmed the addition on the ground that assessee has been unable to demonstrate that the liquidity damages are not a capital expenditure and are not on account of purchase of any capital asset - HELD THAT:- Apart from the explanation furnished by the assessee that the liquidity damages are on revenue account since they pertain to shortage and quality difference on material supplied, the assessee has not furnished any other supporting evidence such as correspondences exchanged with M/s. P G Godrej Ltd. for final settlement of invoice, invoices for goods supplied to M/s P G Godrej Ltd. and further no confirmation of the party was also placed on record at any stage before the Revenue Authorities as well as before us - Thus in absence of any supporting evidence whatsoever, we are of the considered view that the ld. CIT(A) has not erred in facts and in law in confirming the aforesaid addition. Miscellaneous Expenses - AO disallowed the entire claim for want of details and non-compliance on part of the assessee - HELD THAT:- On going through the records of the case, we observe that no details of miscellaneous expenditure have been furnished by the assessee at any stage before the Revenue Authorities. No details with respect to miscellaneous expenditure (breakup of miscellaneous expenses or any supporting documents) were furnished either before the Assessing Officer or before ld. CIT(A) during the course of appellate proceedings. Therefore, the Revenue Authorities did never got an opportunity to examine the nature and/or genuineness of the aforesaid claim, and further no details with respect to miscellaneous expenditure have also been furnished before us as well. Accordingly, in the interest of justice, the matter is being restored to the file of Assessing Officer to enable the assessee to file necessary details. Penalty u/s 271(1) (c) - Concealment of income and furnishing inaccurate particulars of income - HELD THAT:-Since in the preceding paragraphs, we have partly allowed the appeal of the Department in respect of several grounds and also dismissed some of the cross objections filed by the assessee, for reasons mentioned in the preceding paragraphs, accordingly, penalty levied u/s. 271(1)(c) of the Act with respect to the aforesaid additions are also directed to be sustained.
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2023 (7) TMI 1143
TP Adjustment - comparable selection - HELD THAT:- Persistent Systems Limited cannot be accepted as comparable. Accordingly, the AO/TPO are directed to exclude the Persistent Systems Limited from the final set of comparables and re-compute ALP as well as transfer pricing adjustment, if any, accordingly. Wipro Technologies Services Limited/WTSL cannot be selected as a comparable on account of substantial related party transactions. I-Gate Global Solutions Limited be excluded from the list of comparable has been sought by the Appellant, inter alia, for the reason that I-Gate is engaged in IT Services as well as IT enables Services which have been treated as separate international transactions by the TPO. Since no segmental information is available for the financial year relevant to Assessment Year 2011-12, I-Gate cannot be adopted as a comparable. Infosys Technologies Limited (now known as Infosys Limited) - We hold that ITL cannot be accepted as functionally comparable with the Appellant in the present case. Accordingly, the Assessing Officer/TPO are directed to exclude Infosys Technology Ltd. from the final set of comparables and re-compute ALP as well as transfer pricing adjustment, if any, accordingly. Zylog Systems Limited - Absence of any separate segmental result of software development services available in public domain, we reject the company as comparable on functional dissimilarity at entity level. Disallowance of deduction claimed u/s 10A/10AA in respect of receipts under Intellectual Property Services Agreement between Accenture Global Services, GmBH and the Appellant - HELD THAT:- We direct the AO to compute deduction under Section 10A/10AA of the Act taking into account the receipt pertaining to IPSA as per the directions issued by the Tribunal in the aforesaid decisions as well as the directions issued by the DRP for the Assessment Year 2013-14 and 2014-15. Accordingly, Ground raised by the Appellant is allowed. Claim for deduction for education cess - HELD THAT:- In view of retrospective amendment in Section 40(a)(ii) of the Act and the judgment of Joint Commissioner of Income Tax Vs. Chambal Fertilisers Chemicals Ltd. [ 2022 (12) TMI 1098 - SC ORDER] we are not inclined to accept the submissions of the Appellant. Accordingly, Ground raised by the Appellant is dismissed.
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2023 (7) TMI 1142
Deduction u/s 54EC - LTCT or STCG - Investment of consideration against sale of depreciable assets - claim denied as asset transfer should be long term capital asset whereas in this case the assessee himself has offered short term capital gains (STCG) on the sale of office premise - AO also levied tax @ 30% on STCG computed u/s 111A of the Act as against 15% tax rate on the same as claimed by the assessee - HELD THAT:- As in the light of the decision rendered in case of Aditya Medisales Ltd. [ 2013 (11) TMI 576 - GUJARAT HIGH COURT ] and Ace Builders (P.) Ltd. [ 2005 (3) TMI 36 - BOMBAY HIGH COURT ] we are of the considered view that section 54EC of the Act does not make any distinction between depreciable assets and non depreciable assets and as such exemption otherwise available to the assessee under section 54EC of the Act cannot be denied by resorting to the fiction created under section 50 of the Act. Because legal fiction created by the statute under section 50 of the Act is only to deal with capital gain as STCG and not to deem the assets as short term capital assets. Section 50 cannot convert long term capital assets into short term capital assets. So the assessee is entitled for benefit of section 54EC of the Act as it has capital gain arisen out of long term capital assets invested in specified assets and as such the assessee is not liable to be charged capital gains and is entitled for exemption u/s 54EC - AO is directed to allow the same. Grounds No.1 to 3 are decided in favour of the assessee. Tax @30% on STCG computed under section 111A levied - assessee drew our attention towards consolidated account statement available - HELD THAT:- All these documents relied upon by the assessee have not been examined by the AO as well as the Ld. CIT(A). It is not clear from the record if the funds qua which STCG is to be taxed was an equity or in the mutual fund. To consider the same u/s 111A all these documents are required to be examined by the AO. In order to decide the issue once for all we set aside the findings returned by the CIT(A) and remit this issue back to the AO to decide ground No.4 afresh after providing opportunity of being heard to the assessee.
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2023 (7) TMI 1141
Disallowance of provision for leave encashment - HELD THAT:- This issue is covered against the assessee by the judgment of Exide Industries Limited Anr. [ 2020 (4) TMI 792 - SUPREME COURT] . Respectfully following the judgment of the Hon ble Supreme Court, we reject the Ground No. 1 raised by the assessee. Disallowance of claim of Education Cess - HELD THAT:- We find that this issue is covered against the assessee by virtue of amendment with retrospective effect made by the Finance Act, 2022, whereby the Cess has been held to be part of income-tax and not allowable deduction in computing total income. Therefore, this ground of appeal is dismissed. Exclusion of special reserve in computation of total income under the normal provisions of the Act - HELD THAT:- Merely because the assessee is required to transfer the profits to special reserve or there are certain restrictions for using the said profits that itself is not enough to hold that the same is not the income of the assessee. That special reserve belongs to the assessee only and is reserved for utilization in certain eventualities for the safety and benefit of assessee and its customers as per the RBI guidelines. This fund is in the type of savings that belongs to the assessee itself. Therefore, it cannot be said that transfer of certain profits to reserve fund will not fall in the definition of income of the assessee. As relying on Srei Infrastructure Finance Limited . [ 2015 (2) TMI 545 - DELHI HIGH COURT] we dismiss this ground raised by the assessee. MAT computation - The above special reserve should not be taken for computation of income in the book profit under section 115JB as decided in Srei Infrastructure Finance Limited. [ 2015 (2) TMI 545 - DELHI HIGH COURT] Decided against assessee. Short-term capital gain on the receipt from transfer of voting rights - CIT-A deleted the addition - HELD THAT:- AO taxed the said amount as short term capital gains. CIT(Appeals) deleted the addition made by the ld. Assessing Officer holding that since the cost of acquisition of the said rights could not be determined, therefore, the computation machinery will fail. He in this respect relied upon the decision of the Hon ble Supreme Court in the case of CIT vs.- B.C. Srinivasa Setty [ 1981 (2) TMI 1 - SUPREME COURT] D.R. could not point out any distinguishable fact on law for interference in the aforesaid order of the ld. CIT(Appeals), the said is accordingly upheld. Receipt from transfer of rights to purchase the sale shares at a future date treated as Short Term Capital Gain - CIT-A deleted the addition - HELD THAT:- Since the assessee had only entered into an agreement for selling its right to purchase the sale shares of M/s. Potin Pangin Highway, a joint venture of assessee and ECI and the actual transaction had taken place in the assessment year 2021-22 and no transfer of shares took place in the assessment year under consideration and further the amount has been offered for taxation when the transfer was complete in the A.Y. 2021-22. Therefore, we do not find any infirmity in the order of ld. CIT(Appeals) on this issue also. This ground is hereby dismissed. Receipt from assignment of rights - AO treated the said receipt as short-term capital gain - CIT(Appeals) deleted the addition holding that there was no mechanism to determine the cost of acquisition of assignment of right to subscribe to 14.5% shares in the joint venture company as relying on B.C. Srinivasa Setty [ 1981 (2) TMI 1 - SUPREME COURT] - HELD THAT:- D.R. could not point out any distinguishable facts on law to interfere in the order of ld. CIT(Appeals) and the same is accordingly upheld. This ground of Revenue is hereby dismissed. Disallowance u/s 14A - HELD THAT:- The issue is squarely covered by the decision of Reliance Industries Limited [ 2019 (1) TMI 757 - SUPREME COURT] wherein as upheld the proposition made by the various High Courts that if the assessee is possessed of own/interest-free funds sufficient to make the investment, then, under the circumstances, presumption will be that the investments have been made by the assessee out of own funds/interest-free funds available to it. D.R. has not disputed the fact that own/interest-free funds of the assessee were more than the investments made. No infirmity in the order of ld. CIT(Appeals) on this issue and the same is upheld. Ground raised by the Revenue is dismissed. Disallowance u/s 36(1)(iii) - AO computed the notional interest at the rate of 10% on the average investments in SPVs and held that the same cannot be allowed under section 36(1)(iii), on the contention that these investments were not for generating any income nor was there any certainty that they would generate any income in near future and thus were not for the purpose of business - CIT-A deleted disallowance observing that the assessee was having sufficient own funds to make investment and further that investments in SPV (Special Purpose Vehicle) have been made during the course of business - HELD THAT:- . Considering the nature of business of the assessee and the purpose of forming the SPV to secure infrastructure, contracts etc., we do not find any infirmity in the order of ld. CIT(Appeals) in holding that the said expenditure/investment was made for the business purposes. This ground of Revenue s appeal is, therefore, dismissed. Deduction u/s 36(1)(viii) - HELD THAT:- CIT(Appeals) correctly relied upon the decision of National Thermal Power Co. Limited. [ 1996 (12) TMI 7 - SUPREME COURT] and Pruthvi Brokers Shareholders [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] as observed that the assessee is entitled to raise additional grounds not merely in terms of legal submissions before the authorities but is also entitled to raise additional claim not made in the return filed by it. That the appellant authority have jurisdiction to take not merely that additional grounds, which become available on account of change of circumstances or law, but that additional grounds which were available when the return was filed. Decided against revenue. MAT computation - deletion of contingent provision against standard assets in the computation of book profit u/s 115JB - HELD THAT:- We are not satisfied with the above finding of the ld. CIT(Appeals). Since clause (i) to Explanation 1 of Section 115JB provides for addition of amount set aside as provision made for meeting liability and other ascertained liabilities is not applicable and further though the RBI has directed for creation of contingent provision on standard assets in accordance with the prudential norms of RBI, however, that itself cannot be said to be ascertained liability of the assessee. No justification on the part of ld. CIT(Appeals) in deleting the impugned disallowance made by AO while computing the book profit under section 115JB of the Income Tax Act. The order of the ld. CIT(Appeals) on this issue is set aside and this ground of Revenue is allowed.
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2023 (7) TMI 1140
TP Adjustment - Downward adjustment towards purchase of raw-materials from its AE - HELD THAT:- We find that an identical issue has been considered by the Tribunal in assessee s own case for A.Y 2009-10 [ 2017 (3) TMI 1178 - ITAT CHENNAI ] , where the Tribunal after considering relevant facts has set aside the issue to the file of the A.O for reconsideration and give proper adjustment on account of raw-material cost of Lubrizol and mineral oil and also regarding tolling fee for zinc. Thus we remit the issue of downward adjustment towards purchase of raw-materials to the file of the TPO/A.O to give suitable adjustment in respect raw-material cost of Lubrizol and mineral oil and also tolling fee for zinc. Disallowance of TDS on running royalty u/s. 40(a)(ii) - income tax paid on royalty payment made to AE - HELD THAT:- As per clause (4)(i)(c) of agreement between assessee and its AE dated 31.03.2009, the royalty payment to AE is net of applicable Indian income tax (which shall be borne by Indian Additives Ltd.). From the above, it is very clear that the assessee needs to make payment of royalty, net applicable taxes and thereby liability towards TDS is borne by the assessee. Since, the royalty expenditure is considered as revenue in nature, consequent TDS on said royalty is also revenue in nature which needs to be allowed as deduction. Therefore, we are of the considered opinion that the A.O is erred in disallowing TDS on royalty u/s. 40(a)(ii) of the Act because, it is neither a tax nor duty levied on profits of the assessee, but it is an expenditure incurred by the assessee for payment of royalty to its AE. Therefore, we direct the A.O to delete the additions made towards disallowance of royalty u/s. 40(a)(ii). Disallowance on R D cess paid to RBI - assessee has paid 5% cess on total royalty paid to its AE and remitted the same to RB - A.O made addition on the ground that royalty expenditure is capital in nature and not revenue and consequently cess paid on said royalty expenditure and remitted to RBI cannot be allowed as a deduction - HELD THAT:- We find that the Tribunal in assessee s own case for earlier years, held that royalty payment made to its AE M/s. Chevron Oronite Company LLC, USA is revenue in nature which is allowable as expenditure. Since, royalty expenditure is considered to be revenue in nature, cess paid on royalty expenditure and remitted to RBI is also revenue in nature, which needs to be allowed as expenditure. Therefore, we direct the A.O to delete disallowance of R D cess. Disallowance of depreciation for non submission of supporting documents - HELD THAT:- The assessee neither furnished necessary bills and invoices in respect of additions to fixed assets nor justified the rate of additional depreciation. Even before us, the assessee could not file any details, including bills and invoices for addition to fixed assets. In the absence of necessary bills and invoices, the claim of additional deprecation cannot be allowed. Therefore, we are inclined to uphold the findings of A.O and Ld. CIT(A) and reject the claim of the assessee. Addition of interest on unsecured loan - HELD THAT:- We find that the assessee has claimed interest paid on unsecured loan borrowed from HDFC Bank, but could not file any necessary evidences including relevant bank statements and loan sanctioned letter to prove interest on unsecured loan debited into the profit and loss account. Therefor no error in the reasons given by the Ld. CIT(A) to sustain additions made towards disallowance of interest on unsecured loan and thus, we are inclined to uphold the findings of Ld. CIT(A) and reject the ground taken by the assessee. Disallowance of royalty payment - nature of expenditure - HELD THAT:- As royalty payment by the assessee to its AE has no nexus or direct connection with the manufacture of the product and thus in this circumstances, it should only be a revenue expenditure paid for the use of the license, trade mark and technical information for a particular period and accordingly, allowable as a revenue expenditure.
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2023 (7) TMI 1139
Assessment framed u/s 153A r.w.s 143(3) as barred by limitation - Extension of time seeked as reference made to the Swiss Tax Authority - DR stated as reference u/s 90 of the Act was made to Swiss authority and no information till the time of passing the assessment order was received, hence the time limit was extended by one year under Explanation IX to Section 153B - assessee stated that reference referred to by the ld. DR was in itself an invalid reference, therefore, an invalid reference could not have extended the period of limitation provided u/s 153B r.w. Explanation IX of the Act - HELD THAT:- The Notification No. 2903 (E) is loud and clear and has specifically mentioned that Exchange of Information provided for in the said Protocol will be applicable for information that relates to any fiscal year beginning on or after the 1st day of April 2011 and if the said notification is read with the reference made by the department, we find that the specific periods for which the reference has been made calling for information is 01.04.1995 to 31.03.2012. Therefore, qua the notification, information called by the Revenue by issuing the said reference was invalid for the period prior to 01.04.2011. We are of the considered view that the information called for by the department from Swiss authorities could not have been received by them for the period prior to 01.04.2011. Therefore, it would be a futile exercise to wait for such information, and that too, by an invalid reference. Therefore, in our considered opinion, the period of limitation could not be extended as claimed by the Revenue. The impugned assessments are clearly bared by limitation and deserve to be quashed.
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2023 (7) TMI 1138
TP Adjustment - MAM - adjustment made towards the AMP expenses by adopting an approach similar to bright line test - international transaction or not? - as submitted TPO used bright line test to bench mark the alleged AMP expenditure under CUP - HELD THAT:- It is fairly well established that determination of arm's length price of AMP expenditure by applying BLT method is not valid. In a catena of decisions, the Hon'ble Delhi High Court while disapproving the decision of L.G. Electronics India (P.) Ltd. [ 2013 (6) TMI 217 - ITAT DELHI] have held that, BLT method is invalid as it is not prescribed in the statute. Thus in absence of an express arrangement/agreement between the assessee and the AE for incurring AMP expenditure to promote the brand of the AE, AMP expenditure incurred by making payment to third parties for promoting and marketing the product manufactured by the assessee, does not come within the purview of international transaction. Admittedly, in the present facts of the case, the assessee is a distributor and is functioning its activities under the MLM sales model. On perusal of the records and the activities carried out by the assessee described in the TP study reports, no action foised it as an international transaction. The entire sales of the assessee is effectuated in India and the entire profits are also assessee s own profit. The expenditure incurred by assessee is to carry out its day to day business activity of distribution and are directly linked with the business carried out by assessee in India. It is not disputed by the revenue that TDS has been deducted by the assessee on the royalty earning, production bonus u/s. 194H of the Act, and thus payouts are made only when the members / associates /distributors effectuate a successful sale. In any event, all these expenses have been considered by the assessee while computing the margin under the manufacturing segment which already has been held to be at arms length by the Ld. TPO in the transfer pricing order u/s. 92CA. We also find merit in the submission that, if the net profit margin meets the Arm's length price, then no separate addition needs to be made. No adverse inference is drawn by the Ld. TPO in respect of the Manufacturing segment which means that the Ld. TPO has accepted the overall margins of the said segment and respectfully following decision of the Hon'ble Delhi Court in the case of Sony Ericsson [ 2015 (3) TMI 580 - DELHI HIGH COURT] we direct the Ld. TPO to delete the adjustment made towards the AMP. Seeking correction of computation errors of total income and incorrect levy u/s. 234A - HELD THAT:- We direct the Ld.AO to compute the total income correctly in accordance with law. In respect of levy of interest u/s. 234A, we note that the assessee has filed its return on time and therefore 234A interest cannot be levied. Accordingly the same is directed to be deleted.
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2023 (7) TMI 1137
Revision u/s 263 - non-consideration of taxability of receipts from offshore supply of material/equipment in India having regard to the fact whether they are linked to the PE of the assessee, if any, in India - HELD THAT:- AO made detailed inquiry by calling for the copies of contract invoices, the nature of work executed under the contract, details of AEs and subsidiaries in India, details of work executed by AEs/subsidiaries. In response to the queries raised by AO, the assessee furnished a detailed reply with supporting evidences. In so far as receipts from offshore supply contract, the assessee specifically submitted that the transfer of goods having taken place outside the territory of India, receipts are not taxable. Thus, the allegation of learned CIT that the Assessing Officer has not examined the issue is not borne out from the facts and material on record. Also whether the receipts from offshore supply contract are taxable in India or contracts are in the nature of composite contract or whether such receipts are linked to the PE are highly debatable issues which cannot be considered for exercising jurisdiction u/s 263. Except making vague allegation that the assessee has a project office in India which is in the nature of PE, learned CIT has not demonstrated how it fits into the definition of PE as per the treaty. Even assuming that there is a PE, unless, the offshore supplies made are with active involvement of the PE, profit in relation to such contract cannot be attributed to the PE. Therefore, merely on conjecture, surmises and suspicion, PE cannot be established. Issue of taxability of surety commission - As facts on record clearly establish that the assessee had offered the surety commission to tax in the return of income. Therefore, the allegation of learned CIT in this regard is completely unfounded. Allegation made regarding non-examination of transaction with Indian subsidiary from the point of view of transfer pricing, it is observed that in the year under consideration, the assessee has reported the transaction with Indian AEs in Form 3CEB. In the said report, the assessee has claimed the transaction to be at arm s length. Learned CIT has not demonstrated even remotely how the transactions are not at arm s length. Therefore, the observations of learned CIT are in the nature of roving and fishing inquiry without examining the facts and material on record. Allegation of CIT that there is difference in the quantum of FTS offered to tax by the assessee and actually received and further that the Indian subsidiary was paying salary to the personnel of the assessee based in India - As observed, these allegations were neither made in the first show cause notice issued u/s 263 nor they are part of subsequent notices issued by the learned CIT. Though, CIT is empowered to consider fresh issues in course of proceedings u/s 263 even, if they are not part of the show cause notice issued under Section 263 of the Act, however, it is trite law, learned CIT has to issue fresh show cause notice to the assessee confronting the fresh issues on which the revisionary authority seeks to revise the assessment order. This is not the case in the present appeal. Simultaneous proceedings - HELD THAT:- Also at the time of exercise of jurisdiction under Section 263, admittedly, proceedings before AAR was pending on the issue of taxability of receipts from offshore supply contract. That being the case, learned CIT being conscious of the fact that proceeding is pending before AAR should not have initiated proceedings under Section 263 of the Act as two parallel proceedings on the same issue, cannot be initiated at a given point of time. Therefore, exercise of powers under Section 263 of the Act in the facts of the present appeal is invalid. Decided in favour of assessee.
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Benami Property
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2023 (7) TMI 1136
Benami transaction - subject property as joint property - plaint does not disclose a cause of action and that it is also barred by law - HELD THAT:- The plaintiffs do not dispute that the subject property was purchased by defendant No.2 from its erstwhile owners, Davinder Sahni and Pritpal Kaur Chandhok, vide registered Sale Deed dated 27.03.1992. The plaintiffs contend that funds of their partnership firm were used for purchasing the subject property, since they allege, defendant No.2 had no income of her own. Whatever may have been the legitimacy of routing funds in this way, even on a demurrer, the plaintiffs admit that ultimately monies were paid by defendant No.2 towards purchase of the subject property in her name. The subject property accordingly stands in the sole name of defendant No.2 and is her absolute property. There is no averment in the plaint that the sale deed placed any restriction saying that the subject property would not be held by defendant No. 2 as sole and absolute owner. In view of the clear mandate of the section 14 of the Hindu Succession Act therefore, as a matter of law, defendant No.2 holds the subject property as full owner and not as a limited owner, and no averment in the plaint detracts from this position. Besides, the plaintiffs' own best case, as admitted inter-alia in para 8 of the plaint, is that they routed money through third parties to buy the subject property in the name of defendant No.2. This is precisely the kind of mischief that section 4 of the Benami Transactions Act seeks to prevent, and therefore bars any claim made in respect of property so held by a third party benami for the person who funds the purchase. This in fact is the very purpose and intention of the legislature in enacting the Benami Transactions Act. Insofar as the plaintiffs' contention that defendant No.2 falls within the exception engrafted in section 2(9)(A)(ii) to the definition of benami transaction , a bare reading of the plaint would show that there is not even a whisper of an allegation that defendant No.2 was a partner of the partnership firm, the monies of which were allegedly routed for purchasing the subject property. There is also no allegation in the plaint that defendant No.2 was a partner of that firm. At the highest, the plaintiffs contend that defendant No.2 was in a fiduciary capacity vis- -vis them since she was the wife of defendant No.1, who (latter) is a partner of the firm. There is clearly no support for the proposition that a partner s wife becomes a partner, by operation of any law or otherwise. If any doubt was to remain on that count, a bare reading of section 5 of the Partnership Act answers it squarely. Merely because defendant No. 2 is the wife of a partner of the firm, she does not ipso-facto become a partner of the firm, inter-alia since as per section 5 of the Partnership Act, a relationship of partnership arises from contract and not from status of the parties. It is the plaintiffs own case that the alleged oral family settlement happened even before the settlement deed was signed in February 2013. Clearly therefore, the present suit is way beyond the limitation of 03 years stipulated in Article 59 of the Schedule of the Limitation Act, with no scope for any extension or exclusion of time or condonation of delay under any of the provisions of the Limitation Act. It may further be observed that, other than a bald plea, there is no averment in the plaint nor any separate substantive application seeking to address the point of limitation, or explaining how the cause of action is claimed to be continuing in nature. This court is persuaded to hold that the plaint does not disclose any cause of action that requires trial. Furthermore, this court is of the opinion that applying the position of law as cited above, the reliefs claimed in the plaint are also clearly barred by law.
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Customs
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2023 (7) TMI 1135
Maintainability of petition - availability of alternative remedy - Seizure of Vehicle by the Customs - it is apprehension that the vehicle may be used as a means of transport of smuggled goods - Smuggling of Gold - HELD THAT:- The principle of availability of alternative remedies is only a rule of discretion. Considering the admitted facts and the legal issue raised, this Court is of the opinion that the jurisdiction under Article 226 can be exercised in the present case to bring a quietus to the dispute raised, instead of relegating the petitioner to the remedy of adjudication under section 122 of the Act - Section 106 of the Act confers power upon the Department to stop and search vehicles if it is being or is about to be used in the smuggling of any goods or in the carriage of any smuggled goods. The power to search is distinct from the power to seize. On a reading of section 106 of the Act, it is evident that power is conferred upon the officers to search a vehicle if they suspect that the vehicle is involved in smuggling or other offences under the Act. Significantly, the said power to search does not confer a right to seize the vehicle on suspicion. Undoubtedly, section 115(1) has no application in the present case. Section 115(2) of the Act renders a vehicle liable for confiscation if it was used as a means of transport in the smuggling of goods or in the carriage of any smuggled goods - The admitted case of the Department is that the smuggled goods had never found a place inside the car, nor had the person carrying the smuggled goods entered the car, either in the past or in the present. The Department alleges that two persons came to collect the smuggled goods at the Airport and that they were intercepted even before the gold was collected by them. The said circumstance only indicates a possible future use of the car as a means of transport of the smuggled goods. If a possible future use of a vehicle as a means of transport for smuggling goods confers a power of confiscation of such a vehicle, that power will be unbridled, absolute and unregulated. The discretion to seize or not to seize a vehicle for apprehended future use as a means of transport of smuggled goods will confer an unregulated discretion devoid of any clarity for its exercise - the power of confiscation under section 115(2) of the Act can arise only if the vehicle was actually used or is being used for smuggling goods and not for apprehended use or future use. Hence a vehicle cannot be seized by customs on an apprehension that it may be used in future as a means of transporting smuggled goods. The seizure of the vehicle bearing registration No. KL-52-R-9498 owned by the petitioner is illegal and the respondent shall release the vehicle to the petitioner immediately - Petition allowed.
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2023 (7) TMI 1134
Authority and jurisdiction - Power to search versus Power to seal u/s 105 - Power of Assistant Commissioner of Customs to seal the office premises of the petitioner in exercising powers under Section 105 of the Customs Act, 1962, without any notice to petitioner - HELD THAT:- The power to search cannot mean a power to seal. A power to seal the premises is a drastic power. In our opinion, such powers cannot be exercised unless the same is expressly conferred by law. Also the respondents have not supported their contention of such power being vested with the Customs Officers citing any authority on such proposition. As to how Section 105 of the Customs Act has been considered and interpreted by the Supreme Court in upholding its validity can be seen from the observations of the Supreme Court in R. S. Seth Gopikisan Agarwal Vs. R. N. Sen, Assistant Collector of Customs and Central Excise, Raipur Ors. [ 1967 (1) TMI 39 - SUPREME COURT ]. The Supreme Court interpreting Section 105 of the Customs Act, observed that the object of the section is to make search for the goods liable to be confiscated or the documents secreted in any place which are relevant to any proceeding under the Act. It was observed that the legislative policy reflected in the section is that the search must be in regard to the two categories mentioned therein, namely, goods liable to be confiscated and documents relevant to the proceedings under the Act. The customs authorities would not have an explicit power under Section 105 of the Customs Act to seal the premises. This also for the reason that sealing of premises, is a drastic action. It results in tinkering with substantive rights of a person to hold, use and occupy any immovable property. The property may be used for the business purposes or otherwise, hence, any action to seal the premises would have a direct bearing and effect on legal rights of the person to use and occupy the premises as guaranteed by Article 300A of the Constitution - Once the sealing of the premises is of business premises, it would adversely affect the right to carry on business which is a fundamental right as guaranteed under Section 19(1)(g) of the Constitution. It is for such reasons in providing for powers under Section 105 of the Customs Act of search, the legislature has kept out and/or has not included within its purview a power to seal, and has confined the power only to search the premises. In the present case, it does not appear that the premises of the petitioner were not available for the purpose of search and it appears that the customs authorities had straightaway resorted to take a drastic action against the petitioner to seal the premises for the purpose of searching the premises. This is certainly not permissible under the provisions of Section 105 of the Customs Act - the petitioner has shown willingness to co-operate in the search action to be undertaken by the customs authorities. The customs authorities need to unseal the office premises of the petitioner in the presence of the representatives of the petitioner, so that the customs authorities can undertake search of the office premises in regard to the relevant material only - Petition disposed off.
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2023 (7) TMI 1133
Request to reconsider the amount of bank guarantee/ cash deposit ordered to be furnished - provisional release of imported Dry Dates - HELD THAT:- The appellant imported the same goods valued at Rs. 4.08 Crores at Pipavav Port and in the same nature of dispute the goods were seized however in this Tribunal in KL INTERNATIONAL VERSUS C.C. -JAMNAGAR (PREV) , JAMNAGAR, GUJARAT [ 2022 (11) TMI 650 - CESTAT AHMEDABAD ], the appellant was allowed to furnish bank guarantee of Rs. One Crore for provisional release of the goods. Since in the present case, the same dispute is involved and the only difference is Port of import otherwise in the same facts and circumstances it has been decided in above said order that bank guarantee amount was reduced from Rs. 12 Crores to Rs. One Crore. Therefore, there is no reason to defy the order of this Tribunal for fixing the amount of bank guarantee/ cash deposit to be furnished for provisional release of the goods. Merely by issuing a show cause notice which is nothing but only proposals, the circumstances of the earlier case decided in the order dated 11.11.2022 and in the present case are not different, therefore on this count, the amount of bank guarantee cannot be enhanced. There are no reason that despite this Tribunal passed an order in the appellant s own case which was accepted by the Revenue why different yard sticks can be applied in the present case, particularly when all the facts and circumstances of the case involved in the Tribunal s order in KL International and in the present case are absolutely identical - the amount of bank guarantee must be reduced - the goods shall be provisionally released on execution of bond for total value of goods and on furnishing a bank guarantee/ cash security of Rs. 18 Lakh - appeal disposed off.
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2023 (7) TMI 1132
Revocation of order to operate as ship chandler - levy of penalty u/s 117 of CA - prohibited goods or not - allowing the goods for export - HELD THAT:- It is an admitted fact that 2,00,000 of 3 ply non-woven masks which were loaded on to the Philippines Navy vessel BRP DAVAO Delsur was meant for Philippines Government. The Trade Facility Notice No.17/2019 dated 23.5.2019 clearly laid down the procedures for ship stores which was followed by the appellant by filing a Manual Shipping Bill and clearly mentioning that supply of non-woven 3-fold mask (3 ply) 59 Boxes were being shipped on to the vessel. The appellant has placed all the necessary permissions and records filed and signed by the respective authorities at different stages - it appears that the appellant (Ship Chandler) had not deviated nor violated any of the provisions of the Customs Act, 1962 and there is no allegation in the impugned order of violation of any of the provisions of the Customs Act, 1962. The provisions of Section 89 of CA, clearly state that the Proper Officer i.e., the customs authorities have to determine taking into consideration the size of the vessel or aircraft the number of passengers and crew and the length of the voyage on which the vessel or aircraft, have to determine the quantity that need to be supplied as stores on to the vessel. Hence, it was the duty of the concerned authorities to verify these facts before allowing 2,00,000 of 3 ply non-woven masks having been permitted and loaded on to the Vessel, they cannot now turn around and make the appellant having grossly failed in his duty to intimate the authorities. The Appellant in fact has followed all the procedures and with necessary permissions has loaded the said goods on to the vessel - the impugned order is set aside and the appeal is allowed.
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2023 (7) TMI 1131
Levy of Penalty u/s 112 (b) (i) of the Customs Act - Smuggling of Gold Bars - non-production of valid documents for the legal import/possession of the gold bars - discharge of onus to prove - allegation based on retracted statements - HELD THAT:- The statements were retracted within few days at the first opportunity when the appellant (and others) was produced before the court of the magistrate. It is further found that arranging of Creta car for the purpose of smuggling by this appellant, as alleged, is not established as the said car is admittedly purchased by Mr. Sohan Singh and payment for the same was made through banking channel to the seller. From the facts on record, it is not established that this appellant was paying the rent for the Noida flat, where other persons alleged to be involved in smuggling were living. Further, it is found that no statement have been recorded of the landlord in support of allegation of the revenue. Further admittedly gold in question does not belong to this appellant, nor he has claimed the said gold from the department. It is further found that the whatsapp chat relied upon by revenue is also not supported by the appropriate certificate as required under Section 138C of the Act. The revenue have placed reliance on the diary, stated to be recovered from the Noida flat, but the appellant was never put any question regarding the contents of the said diary. Thus the contents of the said diary have been wrongly relied upon by revenue in imposing the penalty. Further admittedly the name of the appellant is not mentioned in the said diary, wherein the name of one Anchal Jain is mentioned, from whom money is received as per the diary for expenses. There is violation of the provision of Section 138C of the Act, as well as the principles of natural justice. It is also found that it is the case of town seizure, and revenue have not laid any evidence as to the smuggled nature of gold, save and except assumption and presumption, and relying on the retracted statement. The provision of Section 123 of the Act are not attracted on this appellant, as neither he was found in possession of the gold, nor have claimed the seized gold. The penalty provision under Section 112(b)(i) is not attracted - Appeal allowed.
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2023 (7) TMI 1130
Levy of penalty u/s 112, 114, 114A, 114AA of the Customs Act, 1962 r/w Section 13 of the Foreign Exchange Management Act, 1999 - it is alleged that the appellant has purchase the smuggled gold through Sh. Ravinder Suri with illicit means - existence of corroborative evidences or not - HELD THAT:- On perusal of the records, it is coming on that the two ladies who were visiting India from Krgyzthan have stated that they have brought gold India through illicit means and the same was sold to one Shri Ravinder Suri, who in turn sold the gold to the appellant but neither the appellant has admitted that he have purchased the gold from Sh. Ravinder Suri nor any other corroborative evidence is available on record to prove that the appellant has purchased the smuggled gold as alleged. In that circumstances, no penalty is imposable on the appellant. Accordingly, the penalty imposed on the appellant is set aside. Therefore, the impugned order qua imposing penalty on the appellant is set aside. The appeal is allowed.
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2023 (7) TMI 1129
Condonation of delay of 18 days in filing appeal - delay due to the ill health of the appellant who had fallen sick when he visited his village during the period of limitation - sufficient reason for delay or not - HELD THAT:- The Commissioner (Appeals) could have condoned the delay for a period of 30 days over and above the aforementioned 60 days. The appeal before him was filed during the said extended period of 30 days. No doubt that para 5.3 in the order under challenge has the reasons for not considering the request for condonation of delay. But as on date it is observed that the contentions of the appellant about reason for delay of 18 days have duly been supported by his affidavit. It has been deposed that he was away to a village where he had fallen sick and thus was unable to come to Delhi to sign the papers required for filing appeal. He deposed that the moment he got recovered he immediately contacted his lawyer to file the present appeal, however delay of 18 days occurred. The possibility of getting no proper medical aid in a village cannot be ruled out. Hence the absence of document stands reasonably explained. The Commissioner (A) has not considered the said explanation as sufficient /reasonable for want of any document to support. The appellant has now produced an affidavit - it is opined that the plea of condonation has always to be looked into liberally, more so, for the reason that the lis has to be adjudicated on merits. The delay is condoned - matter remanded to commissioner (Appeal) to adjudicate the appeal on merits - The appeal stands allowed by way of remand.
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Securities / SEBI
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2023 (7) TMI 1128
SEBI requisite legal power vested in it to direct the petitioner bank - nature of powers conferred upon SEBI - recovery of debts due to banks and FIs - prevention of auctioning the mortgaged property - do the persons or classes of persons referred to in Section 12 necessarily have to be registered with SEBI in order to be subject to its powers under Section 11B? - petitioner is aggrieved by the impugned emails/communications dated 29.01.2021 and 18.03.2021 by which SEBI directed the petitioner bank to comply with the orders dated 29.05.2018 and 14.12.2018 and not to proceed against the mortgaged property under Section 13 of the SARFAESI Act, 2002 without prior permission of the SEBI - HELD THAT:- One plain meaning that can be given to Section 11B(1)(iii)(a), it being, that persons or class of persons referred to in Section 12, are referred irrespective of the registration under Section 12. In other words, in order for Section 11B(1)(iii)(a) to be attracted, one may only need to fall in the person or class of persons referred to in Section 12 irrespective of their registration with SEBI. It may be true that this construction, casts the web of powers that SEBI enjoys, to a larger degree than the other narrower construction would have. But merely on the basis of the consequences, this court cannot limit the plain meaning of a text.This court is therefore of the opinion that Section 11B(1)(iii)(a) of the SEBI Act, 1992 allows for directions to be given to persons or class of persons referred to in Section 12 of the SEBI Act, 1992 irrespective of the persons or class of persons being registered with SEBI. In the facts of the instant case, SEBI does have the power to direct the petitioner bank, however, that power must be exercised with due caution. It must not be exercised so as to curtail the effect of other laws. From the above analysis, it can be concluded that SEBI is possessed with powers under the SEBI Act, 1992 to direct the petitioner bank in specific, and banks in general, regardless of them being registered with SEBI. The orders passed by Whole Time Member of SEBI are applicable to the petitioner bank, they however do not prevent the petitioner bank from auctioning the mortgaged property being Villa in Gurgaon under the provisions of the SARFAESI Act, 2002. The impugned emails dated 29.01.2021 and 18.03.2021 are found to be erroneous and wholly without jurisdiction. The proceedings under the SARFAESI Act, 2002 are to be treated as a carve out to, and remain unaffected by, the orders and directions passed under the SEBI Act, 1992.
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Insolvency & Bankruptcy
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2023 (7) TMI 1127
Misconduct by Resolution Professional - Liquidator is not able to furnish the details called by the NCLT - Resolution Professional not allowed to manage the affairs of the company due to non cooperation and interruption by the erstwhile Manager - HELD THAT:- This communication goes to show that the petitioner herein has already approached the CBI with the complaint followed by the representation that was forwarded to CVC Union Bank and CVC Union Bank after recording the matter that it has already been seized of by the NCLT and Resolution Professional been appointed, warned to approach the appropriate authority. As this Court has already pointed out as one round of complaint had been initiated against the Resolution Professional came to an end by an order passed by IBBI on 29.10.2021 followed by the order in the review application dated 21.11.2021. Now certain new facts from the communication of the Liquidator has come to light and in the normal course, query raised by the Liquidator could have been explained by the Resolution Professional, but he had failed to do so for more than a year. The query raised by the Liquidator regarding non reconciliation of account and stocks, bank cash balance to the tune of 840 Crores need to be proved and explained and therefore, the CBI is directed to conduct preliminary enquiry on the complaint dated 13.08.2021 and the representation been given by the petitioner on 19.01.2021. If need the communication of the Liquidator dated 01.03.2022 shall also be taken for consideration for taking preliminary enquiry and if any cognizable offence is made out, then the CBI can register the complaint and proceed in accordance with law in the course of conducting preliminary enquiry. If the investigating officer need any access to any account in the premises of SLO Industries, party concern shall provide it without any demur or protest. Petition disposed off.
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FEMA
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2023 (7) TMI 1126
Validity of proceedings under FERA, 1973 post introduction of FEMA, 1999 - contention of the appellants that the department had invoked the provisions of the repealed Act of 1973 subsequent to the Act of 1999 coming into force requires consideration - appellants contented that since the department did not act in terms of Section 49 of the Act of 1999 in invoking the provisions of FERA within the time period prescribed, therefore, the act of the department is invalid - HELD THAT:- Sub Section (3) of Section 49 of the Act of 1999 casts an embargo upon a Court from taking cognizance of an offence under the Act of 1973 and on the Adjudicating Officer from taking notice of any contravention under Section 51 of the Act of 1973, after the expiry of a period 2 years from the date of commencement of the Act of 1999. The Act of 1973 has contemplated civil liability for contravention with the power to adjudicate on the same being vested with the Adjudicating Officer under Section 51. Section 56 of the Act of 1973 has provided that, without prejudice to any award of penalty by the Adjudicating Officer, if a person contravenes any of the provisions of the Act of 1973, other than Section 13, 18 (1) (a), 18 A, 19 (1) (a), 44 (2), 57 and 58 or any rule, direction or order made thereunder, such person upon conviction by a Court, be punishable with the quantum of punishment as has been prescribed. The Act of 1973 has therefore contemplated both civil and criminal liability for contraventions of the provisions of the Act of 1973 to be scenario specific. Some contraventions are purely civil in nature while others entail both civil and criminal liability. Therefore, the Act of 1973 does not contemplate that in respect of a particular case, there must be simultaneous taking of notice of contravention by an Adjudicating Officer and cognizance of the same by the Court. The functions of the two Adjudicating authorities have been prescribed to be disjoint. In such circumstances, it would be appropriate to construe the word and used in Section 49 (3) of the Act of 1999 as or . Any other construction would militate against the scheme of the Act of 1973 and would do violence thereto. Appellants in the first appeal had sold foreign currency on sponsoring of fictitious firms who in turn sponsored fake names between the period April 1, 2000 and May 6, 2000. The records produced in court have established that, Manas Kumar Moitra and Mrs Rooma Maitra had formed some fictitious firms/companies who gave certain names or sponsored persons for purchase of foreign currency projecting their impending foreign business tour but all such persons were not traceable. These persons had been sponsored repeatedly within a short period of time. Similar is the case in the next two appeals where Manas Kumar Maitra along with 4 others had been involved in creating fake firms/companies for sponsoring persons for alleged business travel within a short period of time. In both the set of cases, both at the level of the Adjudicating Officer as also at the level of the Appellant Authority, there is a concurrent finding that, the appellants had acted without due care and in violation of the guidelines of the Reserve Bank of India in selling foreign currency to those persons. It has been concurrently held that, the appellants had failed to discharge their duty of reasonable care in selling foreign currencies to those persons involved when such currencies were sought for within such a short period of time with same dates of travel. In all the three appeals, there have been on current finding on facts. The adjudicating officer in all the proceedings had found violations of the guidelines of the Reserve Bank of India by the appellants, in their dealings with the sale of foreign currency to the delinquents. The findings returned by the adjudicating officer and by the appellate authority on such factual aspects have not been established to be perverse in these appeals. Thus the appeals FEA 5 of 2008, FEA 22 of 2009, FEA 23 of 2009 being without any merit are dismissed without any order as to cost.
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2023 (7) TMI 1125
Offence under FERA - sum received by petitioner from person outside India and the Petitioner was to make payment to various persons in India on behalf of the person outside India - contravention of the provisions of Section 9(1)(b) and 9(1)(d) of the FERA - HELD THAT:- As after being unsuccessful in the first round, the E.D. had issued a second Show Cause Notice. The E.D. department had not recorded statement of any person who according to them had received any benefit from the said amount - There was no evidence to prove the petitioner guilty as regards proposed distribution. Petitioner had officially received these amounts and had shown the same in the Income tax returns. In fact, in the Order of the CIT (Appeals), it has been quoted that the assigning officer in his remand report dated 17th June, 2004 had admitted that seized cash seems to be cash on hand on the firm. There is nothing on record to prove that the Petitioner had committed an offence under Section 9 (1) (d) of the FERA Act. No case is made out for holding the Petitioner guilty for violation of Section 9(1)(d) r/w Section 64(2) of the Customs Act. The seized documents do not corroborate the fact of receipt and distribution of said amount by the Petitioner. This is a clear case where the Petitioner appears to have been deprived of his amount of Rs. 1,48,000/- without authority of law on a totally untenable basis. The Petitioner could have utilized the said amount, the value of which at the relevant time was substantial. Considered from all angles, the Respondents could not have retained the said amount depriving the Petitioner from his legitimate entitlement. We would, hence be justified in allowing interest to the Petitioner in allowing this Writ Petition. An amount of Rs. 1,48,000/- shall be refunded by the respondent to the petitioner within a period of four weeks from today with simple interest at the rate of 6% per annum from 12 May 1988.
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PMLA
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2023 (7) TMI 1124
Money Laundering - proceeds of crime - scheduled offence - it is alleged that a part of the laundered money was parked with the husband of the petitioner in his account - HELD THAT:- The proceeds of crime means not only a property derived or obtained directly, but also indirectly as a result of criminal activity relating to a scheduled offence. The explanation to the provision would make it further clear that the proceeds of crime would also include property derived or obtained as a result of criminal activity relatable to a scheduled offence - In the present case, it is alleged that a part of the laundered money was parked with the husband of the petitioner in his account. This was, in turn, used by the petitioner and her said husband for purchasing a property. Therefore, the monetary trail would make it abundantly clear that the altered form of such tainted money can fairly be termed as proceeds of crime. Section 3 of the PMLA Act, 2002 practically brings within the ambit of money laundering any activity or process connected to an act of money laundering. A person can be hauled up for money laundering if he either directly or indirectly attempts to indulge in or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime. So far as the present petitioner is concerned, she could come within its swipe, if not for directly or indirectly attempting to indulge, at least for knowingly assisting or knowingly being a party or for actually getting involved in a process or activity connected to the proceeds of crime - The explanation to Section 3 of the said Act sets out the process or activities connected with the proceeds of crime that could attract the offence of money laundering, their concealment or possession or acquisition or use or projecting as untainted property or claiming as untainted property. In the present context, the petitioner could be held responsible for any of the above referred processes or activities. Thus, it cannot be said that no prima facie case is made out against the petitioner, more particularly in the peculiar circumstance that not only was the tainted money used for purchasing a property in the joint names of the petitioner and the husband, but the petitioner had also been a shareholder in the company the transfer of whose shares was itself a subject matter of the case of money laundering - Even if the petitioner wants to deny any knowledge of the money used being obtained by fraudulent means, she has to do the same if and once a trial commences. Before that, on the present facts it may have to be presumed, in terms of Section 24 of the PML Act, that such proceeds of crime were involved in money laundering. The decision of the Hon ble Apex Court in Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT ] only further strengthens the case against the petitioner. There, Section 24 of the PML Act was held to be constitutionally valid. As prima facie case is made out against the present petitioner in the facts and circumstances of the present case, she cannot be exonerated from the charges at this stage and before a full-fledged trial commences - the revisional applications are dismissed.
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Service Tax
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2023 (7) TMI 1123
Short payment of service tax - amount deposited by the Respondent assessee M/s. BSNL before issuing the show cause notice - pre-deposit at the time of admission of the appeal or not - principle of unjust enrichment. HELD THAT:- It is a matter of record that M/s. BSNL deposited Rs. 2.37 crores with the Revenue during the course of inquiry for the alleged short payment of service tax. Subsequently, the matter got adjudicated and finally this Tribunal has decided that there is no short payment of service tax on the part of the respondent assessee and therefore as of today there is no demand against the respondent assesse with regard to the alleged two show cause notices which was subject matter of litigation in this regard. The amount which was deposited has also been taken as pre-deposit at the time of the admission of the appeal of the Respondent and it is a settled principle of law now that deposit taken during the course of investigation or as a pre-deposit at the time of the admission of the appeal will not be hit by the provision of the Section 11 B of Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Reliance placed on the judgment of Allahabad High Court in the case of EBIZ. COM PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX AND ORS. [ 2016 (9) TMI 1405 - ALLAHABAD HIGH COURT] where it was held that The consensus of the authorities of various High Courts as well as Supreme Court is that any amount received by Revenue, as deposit or pre-deposit i.e. unauthorizedly or under mistaken notion, etc., cannot be retained by Revenue since it has no authority in law to retain such amount and it must be refunded with interest Principles of unjust enrichment - HELD THAT:- The amount of Rs. 2.37 Crores deposited by the assessee with the revenue, they could not have been passed by respondent assessee to its customers. Firstly as the charges of telephone/mobile phones which are charged by BSNL from its customers cannot be changed on the discretionary basis, at the same time the department has not established that the respondent assessee have issued any supplementary invoices of the above mentioned amount to their customers - since the rate of the BSNL for telephone/mobile phone are pre-determined and therefore the expenditure incurred later on by the respondent assessee cannot be directly be passed on to the customers by any chance. The element of unjust enrichment in this particular case are not present - the respondent assessee is entitled for refund of the deposit which was made them during the course of inquiry and which was further taken as pre-deposit by this Tribunal while admission of their appeals. Impugned order upheld - appeal dismissed.
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2023 (7) TMI 1122
Recovery of CENVAT Credit - credit availed on inputs/capital goods and input services to erect telecom towers - Department claims as immovable property and that it is neither excisable goods nor leviable to service tax - appellant gone into CIRP during the pendency of these appeals - HELD THAT:- The matter is no more res integra, as the Hon ble Supreme Court in the case of GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. [ 2021 (4) TMI 613 - SUPREME COURT] has held that all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued. Appellants have also claimed that the refund of pre-deposit paid by them at the time of filing the captioned appeals should be paid back to them. In this regard, we find that the matter has already been decided by the Hon ble Supreme Court in the case of M/S. RUCHI SOYA INDUSTRIES LTD. VERSUS UNION OF INDIA ORS. [ 2022 (3) TMI 60 - SUPREME COURT] where it was held that Admittedly, the claim in respect of the demand which is the subject matter of the present proceedings was not lodged by the respondent No. 2 after public announcements were issued under Sections 13 and 15 of the IBC. As such, on the date on which the Resolution Plan was approved by the Learned NCLT, all claims stood frozen, and no claim, which is not a part of the Resolution Plan, would survive. From the above decisions of the Hon ble Supreme Court, it is clear that from the date of approval of the resolution plan approved by the NCLT, the appeals filed by the applicant has abated and CESTAT has become functus officio in the matters relating to this appeal. Taking note of the fact that the NCLT has approved the resolution plan in the insolvency proceedings in regard to the corporate debtor, it is concluded that the appeals before this Tribunal are abated.
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2023 (7) TMI 1121
Refund of Service Tax alongwith Interest - refund claimed on the ground that services were rendered outside India and also were received outside India - whether the services received by the appellant outside India are to be treated as received in India and hence taxable as per the reverse charge mechanism? As per Anil G. Shakkarwar, Member (Technical) HELD THAT:- Hon ble Bombay High Court in INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA [ 2008 (12) TMI 41 - BOMBAY HIGH COURT] had clarified that before enactment of Section 66A ibid, there was no authority vested by law in Revenue to levy service tax on a person who is resident in India and who has received services from outside India - It is noted that the period for which the present dispute relates is after the enactment of Section 66A ibid. Therefore, the said ruling by Hon ble Bombay High Court which was relevant for the period before insertion of the said Section 66A is not relevant for deciding the present issue. The other ruling by Hon ble Supreme Court in UNION OF INDIA VERSUS INDIAN NATIONAL SHIPOWNERS ASSOCIATION [ 2009 (12) TMI 850 - SC ORDER] relied upon by learned AR is in respect of Indian National Shipowners Association wherein the earlier referred ruling by Hon ble Bombay High Court was not interfered with. It is noted that even if a person has a fixed establishment in India, but if the services are provided and consumed in foreign country, then they are not chargeable to service tax in terms of Section 64 of Finance Act, 1994. The provisions of Section 66A of Finance Act, 1994 will operate when the person is having a fixed place of business in India and services are provided from outside India and consumed in India - In the present case, the services were not consumed in India. Therefore, as observed by Hon ble Delhi High Court in the case of ORIENT CRAFTS LTD VERSUS UNION OF INDIA [ 2006 (9) TMI 2 - DELHI HIGH COURT] , it is opined that in the present case, the services were not consumed in India, therefore service tax was not liable to be paid by the appellant in the present case - appeal allowed. As per Dr. Suvendu Kumar Pati, Member (Judicial) Dr. Suvendu Kumar Pati is in complete agreement with findings of technical member, however, some additional facts and laws for the purpose of better clarity also given. The appellant had its branch office in China from where goods were purchased and majority of the invoices were raised, against which service tax was paid under the reverse charge mechanism. Further, it is also clear that the appellant had agents/representatives in China and other countries wherein it was effecting purchase and sale of those purchased items and some of service providers were agencies in the foreign countries. More importantly, goods were cleared from one foreign country to another foreign country, for which the facts of the case can be stated to be identical with the cases where the goods were exported from India, but services related to such exports are availed from overseas service providers, which were mostly fact based situations and required to be ascertained to find out the exact status of the appellant as service recipient. On unjust enrichment, direction was also given to the adjudicating authority to verify the book of accounts to ascertain if duty element had been passed on to any other person! A close scrutiny of Section 66A under Clause 2 read with Explanation No. 1 would clearly go in favour of the appellant since the order of CESTAT passed in 2014 and the order-in-appeal under challenge both have observed from the record and through examination of invoices respectively that not only the appellant had branch office in China but also it was operating through agencies to carry out the business of trading in two or more different foreign countries. In business parlance is treated as merchant trading - without satisfaction of the conditions of Section 66A, Rule 3 of the Taxation and Services (Provided from outside India and Received in India), Rules 2006 could never be made applicable to the appellant. In respect of payments made from India, it is noticeable from the sample invoices submitted additionally by the appellant that to the agents employed by the appellant in foreign countries and the service providers, all payments were made in foreign exchange from appellant s foreign exchange account maintained in the Union Bank of India from its Mumbai branch and it is surprising that the appellant had not claimed any benefit under Foreign Trade Policy or as a deemed exporter generating foreign exchange for India, since both the definitions of import and export as contained in Section 2(23) and Section 2(18) are not confined to the import taking place from outside into India and export taking place out of India to a place outside India, in view of the fact that both the definitions are conditional to its grammatical variations and cogent expression and general meaning of export in the business parlance is also equated with export from one country to another country - the appeal succeeds and the order of the Commissioner Appeals in confirming Refund rejection order is set aside. Thus, the appeal allowed by both of the members.
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2023 (7) TMI 1120
Valuation - inclusion of value of consumables used for providing the service to various service station, in the assessable value - HELD THAT:- The appellant have raised service bill on which service tax was paid and in respect of the consumables the same was sold by raising sales bill on which VAT was paid. Therefore, part for which the goods were sold clearly covered under the sale of goods on which no service tax should be charged. This issue has been considered by this Tribunal in various judgments - reliance can be placed in the case of M/S TANYA AUTOMOBILES PVT LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, MEERUT-I [ 2016 (1) TMI 704 - CESTAT ALLAHABAD] where it was held that in view of the settled legal position in the case of Samtech Industries (2014 (4) TMI 995 - CESTAT NEW DELHI), upholding the order of this Tribunal by the Hon'ble High Court of Allahabad [2014 (8) TMI 1023 - ALLAHABAD HIGH COURT] and also in view of the letter of the CBE C accepted the legal position that the cost of items supplied/sold and there is documentary proof specifically indicating value of the goods, the demand of Service Tax against the assessee for the cost of the goods supplied during repair does not appear sustainable. The issue is already settled hence, the same is no more res-integra - Appeal allowed.
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Central Excise
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2023 (7) TMI 1119
CENVAT credit of additional excise duty in lieu of Sales tax [AED(GSI)] (Additional Excise Duty (Goods of Special Importance) paid on Nylon Tyre Chord Fabric used in the manufacture of tyres - HELD THAT:- The High Court has placed reliance on a judgment of the Bombay High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III VERSUS M/S CEAT LTD. [ 2013 (7) TMI 568 - BOMBAY HIGH COURT] where it was held that In the instant case, the debits were held to be of no consequence when the assessee was required to pay duty initially discharged using AED (GSI) credit. It is also noted that the said judgment has not been assailed before this Court by the Revenue - there are no infirmity in the impugned order of the High Court which has followed the aforesaid judgment of the Bombay High Court. SLP dismissed.
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2023 (7) TMI 1118
Refund - Refund was sanctioned by the lower authority pending the audit objection - Reversal of decision on the show cause notice till the final settlement of audit objection between the Department of Revenue and the Comptroller Auditor General of India - refund of unutilised cenvat credit - HELD THAT:- The Tribunal ought to have considered the contentions as urged on behalf of the revenue on all the issues instead of confining the scope of the appeal merely on the ground of CERA objections, this more particularly considering the fact that the show cause notice itself was issued on 11th April 2007 which was certainly before closure of the objection, which was the first time recorded by the revenue by a communication dated 26th May 2008 addressed by the office of Commissioner, Central Excise, Raigad to the Assistant Registrar, Central Excise Service Tax Appellate Tribunal - However, it is quite surprising that neither the appellant revenue nor the respondent had brought to the notice of the Tribunal such communication and as to what would be the effect and consequences thereof, more particularly in relation to the adjudication of the show cause notice dated 11th April 2007 and the reason for the appellant/Revenue to take recourse of the provisions of Section 11A read with Sections 11AC and 11B of the Central Excise Act, 1944. It is also clear that there could have been no warrant for issuance of the show cause notice in view of the subsequent developments which has been taken place after about 7 months of issuance of the show cause notice that is in view of the order dated 22nd November 2007 by which the revenue s appeal against refund order itself came to be rejected. All these issues ought to have been raised and fell for consideration on rival contentions raised. Impugned order set aside - Matter restored back before the tribunal - appeal disposed off.
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2023 (7) TMI 1117
CENVAT Credit - rectified spirit arising in the course of manufacture of sugar - excisable goods or not - recovery of input credit alongwith interest and penalty - Extended period of time limitation - levy of penalty - HELD THAT:- The very same issue was considered in the cases of RAJSHREE SUGARS AND CHEMICALS LTD. AND OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY AND OTHERS [ 2014 (11) TMI 919 - CESTAT CHENNAI] , COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S. DHARANI SUGARS AND CHEMICALS LTD. [ 2022 (3) TMI 274 - SC ORDER] . The Tribunal in RAJSHREE SUGARS AND CHEMICALS LTD. AND OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY AND OTHERS [ 2014 (11) TMI 919 - CESTAT CHENNAI] held that the denial of Exemption Notification No.67/95-CE on molasses captively consumed to manufacture Rectified Spirit and Extra Neutral Alcohol (ENA) cannot be justified. Accordingly, denial of credit on molasses was also set aside. Thus, the impugned order cannot sustain and requires to be set aside - appeal allowed.
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2023 (7) TMI 1116
Exemption to specified goods supplied to specified institutions - Denial on the ground that the product Metal Finishing Chemical does not fall under the category of products mentioned in Notification No. 10/1997-CE dated 01.03.1997 - denial also on the ground that certificate has not been produced by the appellant or certificate have not been issued by the proper authority - penalty on the Shri Mahendra Bhurat, GM of the appellant Company - HELD THAT:- The product which is manufactured by the appellant is nothing but Metal Finishing Chemical/ Electroplating salt which are consumables for various Electronic and Scientific institutions - the products manufactured by the appellant are covered under the category of consumables as mentioned in the Notification No. 10/97-CE dated 01.03.1997 at serial No. 2(b). It is also that even if there is a small lacuna on the part of the authority signing the certificates cannot be considered as infringement of compliance with the requirement of proper submission of certificates and substantial benefit cannot be denied on this ground. However, since there is no denial of the fact that goods have been supplied to research institutions and proper certificates have been issued by the authorities of such institutions, the benefit of the exemption notification cannot be denied to the appellant. The personal penalty imposed on the Shri Mahendra Bhurat, GM of the appellant Company is also set-aside - Appeal allowed.
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2023 (7) TMI 1115
Scope of SCN - demand confirmed on the grounds which were never subject matter of the impugned show cause notice - Reversal of CENVAT Credit - inputs or input service used in manufacture of dutiable goods or in providing output services as well as exempt goods - non-maintenance of separate records - principles of natural justice - HELD THAT:- The impugned order-in-original has violated the principles of natural justice as the verification reports on the basis of which the demand has been confirmed, considering that the principal manufacturer has availed exemption notification while clearing the finished goods and therefore, the intermediate goods manufactured by the job worker would also hit by the same and therefore, the Cenvat credit need to be reversed by the appellant as per the provisions of Rule 6(3) of Cenvat Credit Rules, 2004. The principal manufacturer Le. M/s. Metal and Steel Factory, has cleared the final product without payment of duty, and the fact that the Noticee had not exercised any option as envisaged under Rule 6(3) of the CCR, and had availed and utilized Cenvat Credit on the inputs and input services used for of both dutiable products (their own) and exempted products (job worked goods), without maintaining separate records as envisaged under Rule 6(2) of the CCR. Therefore, the Noticee is liable to pay an amount @ 5% of the value of exempted products for the period from January 2009 to 31.03.2012 and @ 6% from 01.04.2012 to 31.03.2013 as per provisions of Rule 6(3) of the CCR, as amended for the job work carried out in respect of M/s. Metal and Steel Factory, Ishapur West Bengal. The verification report reveals that the Noticee for the period from January, 2009 to March, 2013 have carried out the job work without payment of duty in respect of M/s. Metal and Steel Factory. The basis on which the Adjudicating Authority has confirmed the demand has never been subject matter of the show cause notice and therefore, we hold that Adjudicating Authority has travelled beyond the scope of the show cause notice and therefore, violated the principles of natural justice by not disclosing the verification report to the appellant, this clearly amounts to an act of violation of the principles of natural justice. The impugned order-in-original set aside - matter remanded to the Adjudicating Authority for de-novo adjudication.
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2023 (7) TMI 1114
CENVAT Credit - input services - Insurance Services (Vehicle Insurance Life Insurance) - Civil Work - period from April 2010 to October 2012 - history of amendments made in Rule 2 (l) of CCR - extended period of limitation - penalty - Requirement of notice as per section 11 (A) (2) of the Central Excise Act, 1944 - HELD THAT:- While adjudicating authority has in his order referred to the definition as it existed during the period prior to 01.04.2011, Commissioner (Appeal) has referred to the amended definition as it existed subsequently for upholding the order of the original authority. Rule 2(l) of the CENVAT Credit Rules, 2004 as it was first incorporated in the CENVAT Credit Rules, 2004, by the Notification No 24/2004-(NT) dated 17.09.2004 - Admittedly, in the present case, the concern is with CENVAT Credit taken by the appellant during the period to the amendments made with effect from 01.04.2011. The reliance placed by the Commissioner (Appeal) on the exclusion clause as inserted in the definition of input services, in Rule 2 (l), is totally uncalled for and unjustified. Both show cause notice and Order-in-Original seek to deny the CENVAT credit in respect of insurance services for the reason that these services are not used in Appellant in or in relation to manufacture of the finished goods. It is also observed that no ground for denial of CENVAT Credit in respect of construction services has been indicated either in the show cause notice or in the Order-in-Original. It is only in the order of the appellate authority that the ground for denial of CENVAT credit on the construction services is put forth, by stating that it falls within the exclusion clause - it is arriving at a loss to make out as to what quantum of CENVAT Credit sought to be denied in respect of life insurance services and what is quantum in respect of construction services. There are no finding recorded by the Commissioner (Appeals) in his order in respect of submission made by the appellant, if Cenvat Credit has been allowed in respect of the same services to the other assessee s there is no justifiable reason for denying the same to the present appellant - The show cause notice should not have been issued to the appellant. It is observed that after the lapse of a considerable time after the audit, revenue proceeded to issue this show cause notice invoking suppression of facts. What is the reason for invoking suppression or other ingredients required for invoking an extended period in this case - no ground existed for invoking the extended period of limitation in the present case. Since the extended period could not have been invoked, the show cause notice itself could not have been issued and the matter should have been settled on the basis of the amount reversed by the appellant. Penalty imposed under Rule 15 of the CENVAT Credit Rules, 2004 read with section 11 AC of the Central Excise Act, 1944 - HELD THAT:- Impugned order has held in favour of the penalty imposed. As there are no merits in the invocation of the extended period of limitation as per Section 11A (4) of the Central Excise Act, 1944, the penalty imposed also set aside. Requirement of notice as per section 11 (A) (2) of the Central Excise Act, 1944 - HELD THAT:- In absence of any concrete reasons to invoke extended period of limitation there is no reason why this subsection should have not been invoked by the revenue for not issuing any show cause notice to the appellant. It is quite evident that impugned order cannot be sustained on any of the grounds - Appeal allowed.
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2023 (7) TMI 1113
Clandestine Removal - opportunity to cross-examine the witnesses not provided - demand confirmed on the basis of the statements given by the supplier of goods - violation of Section 9D of Central Excise Act, 1944 - HELD THAT:- The appellants have made a request to the Adjudicating Authority to give an opportunity to cross-examine particularly, Shri Ram Bilas Bansal, Shri Abhay Gupta and Shri D.K. Gupta, the witnesses. However, the Adjudicating Authority has not accepted the request - the Adjudicating Authority has rejected the request of cross-examination for the reason that though they had requested for cross-examination vide their Letter dated 30.09.2009, they did not stress for cross-examination. We find that this argument is not acceptable as it was incumbent upon the Adjudicating Authority to follow the provisions of Section 9D of Central Excise Act, 1944. Hon ble Punjab Haryana High Court observed in the case of M/S JINDAL DRUGS PVT. LTD. AND ANOTHER VERSUS UNION OF INDIA AND ANOTHER [ 2016 (6) TMI 956 - PUNJAB HARYANA HIGH COURT] that (i) after the person whose statement has already been recorded before a Gazetted Central Excise Officer is examined as a witness before the adjudicating authority, and (ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for cross-examination, can arise. Hon ble Supreme Court in the case of ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II [ 2015 (10) TMI 442 - SUPREME COURT] held that it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. With due difference to the Hon ble Supreme Court and Hon ble High Court of (Punjab Haryana), it is found that not allowing the cross-examination of key witnesses vitiates the proceedings even under the quasi-judicial proceedings. Therefore, as requested by the learned Counsel for the appellants, we are inclined to accept the contention and the request of learned Counsel for the appellants that the interest of justice would be properly served if the case goes back to the Adjudicating Authority to adjudicate the case afresh after giving the opportunity to the appellants to cross-examine the key witnesses whose statements have been relied upon by the impugned order. Penalty on Shri Ram Bilas Bansal - HELD THAT:- During the impugned period i.e January 2003 to January 2005, there was no provision to impose penalty for issuance of invoices without supplying the goods. The amendment to Rule 26 of Central Excise Act, 2002 came only with effect from 01.03.2007 - It is found that the effect of law cannot be applied retrospectively unless it is specifically intended and clearly said so in the amendment. Before the amendment, the penalty under Rule 26 was only applicable to any person who dealt with the goods in any manner and in the impugned case, the main allegation is that only invoices were exchanged without commensurate transfer of goods - penalty imposed on Shri Ram Bilas Bansal set aside. Appeal allowed by way of remand to the Adjudicating Authority.
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2023 (7) TMI 1112
Seeking to recover CENVAT Credit, fraudulently availed by the appellant - allegation is that goods were removed from the appellant No.1 on job-work challans and sold in the open market - Third party documents, sufficient evidence or not - Documentary proof of correctness of quantification - Charge made on assumptions and presumptions - Apprehension can take place of evidence or not - cross examination not allowed (violation of principles of natural justice or not) - violation of provisions of Section 9D of the Central Excise Act, 1944 - Penalty on Director of Company. The main contention of the appellants is that the allegations in the show cause notice are mainly based upon statements of the persons, stray and partial un-official records. HELD THAT:- The Counsel for appellant No.1 submits that the Department has built up the case on the basis of the raw material, purchased by the appellant No.1 from M/s GAIL, which was found in the premises of R.K. Trading Company; on this basis, it was alleged that the appellant No.1 has diverted the prime purchase from M/s GAIL and purchased seconds material from open market and availed CENVAT credit fraudulently on the strength of invoices issued by M/s GAIL; however, the Department has not bothered to compare the Batch/ Lot numbers of the raw materials; the Batch/ Lot numbers of the materials seized from M/s/ R.K. Trading do not match with that of the material purchased from M/s GAIL and therefore, the entire argument of the Department falls flat. The appellants also contend that a show cause notice has been issued to M/s R.K. Trading (Appeal No. E/1159/2008) on the same set of investigation and has been dropped by the Adjudicating Authority and the Department has accepted the said order by not preferring to make any further appeal. Under the circumstances, it is not open for the Department to substantiate a case against the appellants on the same set of evidence. The Department has also not considered the fact that the appellant No.1 have been supplying the material to telecom companies which have high quality standards; Department has also ignored the fact that a representative of the telecom companies was always present in the premises of the appellant No.1 to supervise the quality of production. It was not possible for the appellant No.1 to produce the sheathing compound required by the telecom companies using low standard raw material. During the course of arguments, learned Counsel for the appellants submits that the statement of Shri Ajay Kumar, operator of M/s Ajay Plastics India, dated 10.01.2002 was relied upon and requests for cross-examination of Shri Ajay Kumar was not granted; this is in clear violation of the provisions of Section 9D of Central Excise Act, 1944 - However, it is found that there is no finding given in the impugned order regarding the request for cross-examination and as to why, the same has been denied. Hon ble Punjab Haryana High Court observed in the case of M/S JINDAL DRUGS PVT. LTD. AND ANOTHER VERSUS UNION OF INDIA AND ANOTHER [ 2016 (6) TMI 956 - PUNJAB HARYANA HIGH COURT] that (i) after the person whose statement has already been recorded before a Gazetted Central Excise Officer is examined as a witness before the adjudicating authority, and (ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for cross-examination, can arise. Hon ble Supreme Court in the case of ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II [ 2015 (10) TMI 442 - SUPREME COURT] held that it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. With due difference to the Hon ble Supreme Court and Hon ble High Court of (Punjab Haryana), it is found that not allowing the cross-examination of key witnesses vitiates the proceedings even under the quasi-judicial proceedings. Therefore, as requested by the learned Counsel for the appellants, we are inclined to accept the contention and the request of learned Counsel for the appellants that the interest of justice would be properly served if the case goes back to the Adjudicating Authority to adjudicate the case afresh after giving the opportunity to the appellants to cross-examine the key witnesses whose statements have been relied upon by the impugned order. Matter remanded to the Adjudicating Authority for a fresh re-consideration of the issue involved after duly allowing, the appellant No.1, to cross-examine key witnesses Shri Parmeshwar Lal Sharma, Munim of M/s R.K Trading and Shri Ajay Kumar, operator of M/s Ajay Plastics India - appeal allowed by way of remand.
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2023 (7) TMI 1111
Valuation of Excise Duty - inclusion of excess amount collected from the customers over and above the actual freight in the assessable value/ transaction value - HELD THAT:- As held in BARODA ELECTRIC METERS LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [ 1997 (7) TMI 126 - SC ORDER] that excess amount of freight from the customer is profit on account of transportation and not part and parcel of the value of the goods therefore, same cannot be included in the assessable value. It is observed that this judgment was given with reference to un-amended Section 4 and Rules made thereunder prior to 01.07.2000. However, in the identical case for the period post 01.07.2000, in various judgments a view was taken that the Baroda Electric Meters prevails even after amended Section 4 and Rules made thereunder after 01.07.2000. Thus, excess freight collected by the appellant from the customers shall not be included in the transaction value for charging excise duty - the impugned orders are set-aside - appeal allowed.
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2023 (7) TMI 1110
Clearance of cement in 50 kgs bags - concessional rate of duty at Sl.No. 1C of the Rate Notification No. 4/2006-CE dated 01.03.2006 and Sl.No. 52 of Notification No. 12/2012-CE dated 17.03.2012 - denial of benefit on the ground that the buyers cannot be recognised as industrial or institutional customers. HELD THAT:- Reliance placed in appellant own case ULTRATECH CEMENT LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE [ 2014 (9) TMI 966 - CESTAT NEW DELHI] where it was held that CESTAT in the case of M/S HEIDELBERG CEMENT (INDIA) LTD AND M/S ULTRA TECH CEMENT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2014 (8) TMI 251 - CESTAT MUMBAI] has clearly held that cement in 50 Kg bags sold to builders/developers qualifies as sales to institutional consumers and benefit of serial number 1C of Notification No. 4/2006-C.E., is available to such clearances. The issue is no more res integra, therefore, the demand of duty is not sustainable against the appellant as the cement in 50 kgs bags sold to the above buyers qualifies as sale to institutional/industrial customers to avail the benefit of the above cited Notification. Thus, no demand is sustainable against the appellant - appeal allowed.
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Wealth tax
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2023 (7) TMI 1109
Wealth tax assessment - ownership of the impugned urban land - whether the assessee has transferred ownership of the impugned urban land to CIDL? - crux of the argument of the AR is that, as on the valuation date, the impugned urban land did not 'belong to' the assessee in view of the master development agreement - HELD THAT:- It is a fact that CIDL, the developer, did not develop the property except for constructing boundary walls along the property. (Even the construction of boundary is disputed, since the cost of improvement for same was disallowed by the AO while computing LTCG when the same property was sold in AY 2008-09) This eventually led to the 'Settlement Agreement' between the parties whereby the master development agreement was terminated. In view of the above, there can be no doubt in holding that the requirements of section 53A of the Transfer of Property Act, 1882 have not been fulfilled. It is pertinent to mention that mere inclusion of the expression in the development agreement that the possession transferred shall be deemed to be in part performance of an agreement to sell for the purposes of section 53A of the Transfer of Property Act 1882, does not hold any significance. It is the conduct of the parties that determine the satisfaction or otherwise of the requirements of section 53A of the Transfer of Property Act 1882. Therefore, we are of the view that there is no transfer of ownership of the impugned urban land under the master development agreement. Effect of 'No objection certificate' issued under Chapter XX-C of the IT Act - Revenue right from the start of the controversy surrounding development agreements was always of the view that when the possession of land was handed over to the developer for development purposes, the transfer was effected. Legislature through the Memorandum to Finance Bill 2017, in the context of insertion of n/s 45(5A) to the Income-tax Act, 1961, clarified that the year in which the completion certificate has been issued by the competent authority shall be the year of transfer. In view of the conclusion drawn in Seshasayee's case ( 2019 (12) TMI 702 - SUPREME COURT] which was post insertion of section 45(5A), that the provisions of section 2(47)(v) would not be applicable if the development agreement merely grants a license to the developer to develop and sell the superstructure. Therefore, the 'no objection certificate' does not in our view hold significance. Chargeability of wealth tax - Land occupied by any building which has been constructed - In the present case, it is undisputed that only boundary walls have been constructed along the property. It is not brought on record as to whether there exists an approval of the appropriate authority for constructing any building on the land. Irrespective of such fact, the impugned urban land would not fall within the above clause for the following reason. The Hon ble Karnataka High Court in Commissioner of Wealth Tax vs. Giridhar G Yadalam [ 2007 (3) TMI 334 - KARNATAKA HIGH COURT] has interpreted the said expression to mean a land on which complete building stands. It was held that a building in the process of construction cannot be construed as a building which has been constructed' as affirmed by Giridhar G Yadalam v Commissioner of Wealth Tax [ 2016 (1) TMI 826 - SUPREME COURT] - Therefore, in the absence of any building on the impugned urban land, this clause will not apply to the present case. Land held by the assessee as stock-in-trade - The assessee has not demonstrated that the lands were held as stock-in-trade. It is also pertinent to note that the assessee cannot take conflicting stands before the court -Therefore, on totality of facts of the case, this clause will not apply to the present case. In view of the aforesaid reasoning we hold that the assessees are liable for wealth tax for the respective assessment years. Decided against assessee.
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Indian Laws
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2023 (7) TMI 1108
Scope of the arbitration agreement / MOU - MOU entered into by the brothers to conduct business - Section 8 of the Arbitration and Conciliation Act Act - - HELD THAT:- The narration of facts indicates that the MoU dated 14 September 2010 is between the appellant and the first respondent. The appellant instituted two suits. In the first suit, the first respondent has been impleaded as the first defendant while Sachdeva and Sons Industries Private Limited is impleaded as the second respondent. Admittedly, Sachdeva and Sons Industries Private Limited is not a party to the MoU which is executed solely between the appellant and the first respondent. In the second suit, apart from the two defendants who are parties to the first suit, relief has been sought against Canara Bank - it is evident that there are several parties to the suit who are not parties to the arbitration agreement. The MoU which is executed between the parties indicates that the Sachdeva family comprising of both the appellant and the first respondent was carrying on business in several companies, partnership firms and proprietorship under the joint ownership of the Sachdeva family. The MoU contains a description of the respective family units and their concerns. The MoU indicates that there are certain non-family shareholdings. Since the MoU was executed exclusively between the appellant and the first respondent, the reference to arbitration under Section 8 of the trial Judge was patently in error. Neither Canara Bank nor the company are parties to the arbitration agreement. The MoU has been executed between the appellant and the first respondent. The non-family shareholdings, in any event, cannot be bound by the terms of the MoU since they are not parties to the document. The impugned judgment and order of the Single Judge of the High Court is set aside - appeal allowed.
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2023 (7) TMI 1107
Dishonour of Cheque - insufficiency of funds - vicarious liability - it is claimed that petitioner is neither the Director nor the signatory of the opposite party no.2, but the company secretary - HELD THAT:- The petitioner a company secretary not being the signatory to the cheque, was also not involved in running the day to day affairs of the Company. The petitioner was only the company Secretary. The job was to assist the persons involved in running the day to day affairs of the Company - the petitioner is not liable in the present case, there also being no specific averments against her in the petition of complaint. The proceeding under Section 138/141 of the Negotiable Instrument Act, 1881 (as amended up to date) pending before the court of the learned Chief Metropolitan Magistrate at Calcutta, is hereby quashed in respect of only the petitioner, Namarta Vashisht. The trial in respect of the other accused persons to proceed in accordance with law. Revision application allowed.
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2023 (7) TMI 1106
Dishonour of Cheque - during the pendency of the present petition, parties have settled their dispute - compounding of offence - waiver of compounding fee - HELD THAT:- Hon ble The Supreme Court in the case of DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ] had held that in case of dishonour of cheque, accused convicted, there is no stage prescribed for compounding of offence under the Act and it was observed that It is true that the application under Section 147 of the Negotiable Instruments Act was made by the parties after the proceedings had been concluded before the Appellate Forum. However, Section 147 of the aforesaid Act does not bar the parties from compounding an offence under Section 138 even at the appellate stage of the proceedings. It was further observed that, Even though the imposition of costs by the competent court is a matter of discretion, the scale of costs has been suggested in the interest of uniformity. The competent Court can of course reduce the costs with regard to the specific facts and circumstances of a case, while recording reasons in writing for such variance. The petitioner is permitted to compound the offence. However, this Court is not inclined to accept the prayer for waiving off the compounding fee, but considering the mitigating circumstances of the petitioner brought out by his learned counsel, the same is reduced in view of the afore-referred judgment and he is ordered to deposit an amount of Rs.10,000/- as costs, with the Haryana State Legal Services Authority on or before 30.07.2023. Revision petition disposed off.
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2023 (7) TMI 1105
Dishonour of Cheque - accused persons were summoned by the learned MM - accused resides beyond the jurisdiction of the territory of the Court - no inquiry carried out by the learned MM - HELD THAT:- In view of the decision of Hon ble Apex Court in Sunil Todi v. State of Gujarat [ 2021 (12) TMI 175 - SUPREME COURT ], the Magistrate while considering the complaint in relation to offence under Section 138 of Negotiable Instruments Act under Section 202 of Cr.P.C., in case where an accused resides outside the jurisdiction of the Court, is not required to examine the witness on oath for conducting the enquiry as contemplated under Section 202 of Cr.P.C., rather can itself advert to the documents and evidence by way of affidavit filed on record by the complainant and reach a satisfaction as to whether the accused should be summoned or not. A perusal of the impugned order reveals that the learned MM has considered the contents of the complaint, the documents annexed thereto, the affidavit filed by the complainant as well as the submissions made by the learned counsel for the complainant and only thereafter, having been satisfied that prima facie case existed against the accused persons, had issued summons to the accused persons. Having considered the same, this Court does not find any illegality or perversity in the impugned order as far as conformity of the same with Section 202 of Cr.P.C. is concerned, especially in light of the judicial precedents of Hon ble Apex Court. Jurisdiction - HELD THAT:- It is not in dispute that the cheque in question was presented by the complainant/ respondent no. 1 at HDFC Bank,Kailash Building, No. 26, Kasturba Gandhi Marg, New Delhi-110001 which is situated within the territorial jurisdiction of Delhi and the cheque had got dishonoured upon presentation with the said bank. Thus, the courts in Delhi would have the jurisdiction to try the present complaint. Next claim is petitioner no. 2 and 3 had resigned from the accused firm before the issuance of cheque in question dated 06.02.2018 and its subsequent dishonor on 26.02.2018 - HELD THAT:- This Court can reach only one conclusion that the issues raised before this Court are all triable issues, which would require detailed consideration of the documents as per law, which may include all the relevant document pertaining to the resignations if any of the petitioners, and as to what role they had in issuance of cheque in question and dishonour of the same - However, as prima facie apparent from the records of the case, the complainant in the complaint under Section 138 of Negotiable Instruments Act has specifically averred that the accused firm represented by its Managing Director i.e. accused no. 2along with the other accused persons, including the petitioners, had approached the complainant for grant of loan and all the partners in connivance with each other had issued the cheque in question for repayment of the said loan. It was also averred that the present petitioners were active partners of the accused firm and, thus, were liable for the issuance as well as dishonour of the cheque in question. This Court cannot hold anything contrary to what has been pleaded by the complainant as the same would require scrutiny of the relevant materials and documents as well as examination of witnesses by the concerned Court during the course of trial. The petitioners have failed to bring on record any unimpeachable material or material of sterling quality to show that they had resigned from the accused firm or were not responsible for day-to-day affairs of the firm when the cheque was issued or dishonored or that the dishonoring of cheque in question was not attributable to any negligence or connivance or consent on their part - there are no reasons to interfere with the impugned summoning order, the present petition stands dismissed. Petition dismissed.
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