Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 29, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
GST
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Tax officer's dual role challenged. Court quashed orders, remanded cases for fresh hearing within 2 months with petitioner's cooperation.
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Widow's tax liability overturned due to letterhead technicality. Court orders reassessment after reply to notices. Petition allowed.
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Unreasoned order violating natural justice set aside. Alleged irregular ITC u/s 16(2)(c) sans concluding supplier's non-payment.
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Transfer of goods between own units without sale shouldn't attract interest/penalty. Authorities must give reasons as per CBIC circular & court precedents.
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Differential dealer margin by petroleum cos. is a taxable supply of service under GST, being consideration for agreeing to refrain from an act.
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Application inadmissible under Sec 97(2) CGST/KSGST Act. Sec 98 procedures not followed. Questions already decided/pending for applicant.
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Advance ruling on ITC reversal based on credit notes & GSTR mismatch - questions admissible u/s 97(2)(d). Notice issued, proceedings pending - application liable to be rejected u/s 98(2).
Income Tax
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Himachal SLD Centre exempted from income tax on fees/charges under Electricity Act & interest on bank deposits for 2021-24.
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Punjab Skill Development Mission Society gets income tax exemption on grants, CSR funds, service charges & interest income. No commercial activity allowed.
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Delay of 294 days invalidated SLP filing. Reopening assessment sans proper sanction u/s 151(1). ITO's satisfaction from non-competent authority.
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Receipts from Indian customers for services outside India not taxable u/s 9(1)(vi). Treaty overrides domestic law amendments u/s 90(2).
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Expatriate salaries paid abroad in foreign currency deductible in India under Indo-Japan tax treaty. Exception for statutory prohibition inapplicable if Tribunal/Court directs. Relief granted.
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Interest on receivables & management fees rightly allowed. Receivables beyond period not recharacterized as loans. TPO can't doubt commercial expediency or disallow legitimate expenses.
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Development rights acquired, not immovable property. Stamp duty value differential not taxable u/s 56(2)(x) as per SC's Seshasayee Steels.
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Appellant failed to acquire new property within time limit, but relevant date for deduction u/s 54 is payment & possession, not "one year before transfer". Entitled to deduction.
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Penalty on NRI unsustainable if income declared accurately despite higher TDS deduction based on legitimate expectation.
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Shares allotted to holding firm by subsidiary at DCF value of CCPS is valid. Can't reject prescribed method. Losses later irrelevant. Intra-group transaction not tax evasion.
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Return filed u/s 139(1) can't be treated as response to notice u/s 148. Non-issuance of Sec 143(2) notice is fatal defect, not curable.
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Assessee failed to file return, received notice u/s 148. Despite presumptive taxation, liable to maintain books u/s 44AA.
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HCIL not liable to deduct TDS on payments to non-resident AEs for raw materials as AEs had no PE in India. Offshore supplies & FTS receipts not taxable without PE.
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Additions based on unsubstantiated docs like loose sheets, jottings, Excel sheets & unaccounted cash receipts from students rejected. Mere notes require corroboration.
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AO wrongly reopened assessment; assessee disclosed receipts, provided details in scrutiny. AO relied on assumptions sans inquiry despite CIT(A)'s info.
Customs
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2nd SCN issued despite withdrawal of 1st SCN for different amount permissible if within limitation, no new grounds allowed in review.
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Imported goods' classification hinges on complete article's components availability. "Business" under Customs Act broadly covers business models.
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Roasted areca nuts classified under CTH 2008 19 20, not CTH 08 02 80; specific entry prevails over general entry.
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Imported tyres: Provisional release ordered due to lack of technical analysis. Classification based on import parameters, not end-use. Customs can't assume transport authority role.
DGFT
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Govt launches SIMS 2.0 for steel imports monitoring; SIMS 1.0 discontinued. File new apps on https://sims.steel.gov.in after 25.07.2024, 2 pm.
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Export Promotion Capital Goods Scheme simplified: Installation certificate time extended, export obligation period relaxed. Reduced compliance burden.
FEMA
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Show cause notice issued by competent authority (Additional Director) valid in Rs.11.27 crore FEMA case as per pecuniary limits. Transfer from Special Director valid.
Corporate Law
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Company dissolved after liquidation due to lack of funds/inability to continue. Remaining balance transferred to Common Pool Fund.
Bill
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Proposed amendment allows recovery of Black Money Act liabilities from seized assets, aligning with Income-tax Act provisions.
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Benami Act amendments: 3 months for owner's reply, 4 months for provisional attachment decision, 1 month for Adjudicating Authority referral. Effective 10/1/2024.
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New law offers immunity to benamidars for disclosing benami deals, targets real owners. Effective Oct 2024.
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Amendments broaden proof of origin, restrict warehouse ops, extend trade facilitation beyond importers/exporters & align customs law.
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Protective duty levy provision scrapped as Tariff Commission defunct. Effective from Finance Bill 2024 enactment.
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Tariff hikes from 24.07.2024: PVC flex films 25%, garden umbrellas 20% or Rs. 60/pc, lab chemicals 150%. From 01.10.2024: roasted nuts 150%.
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Revised customs duties for agri, aqua, minerals, steel, copper, chemicals, textiles, leather, cancer drugs, precious metals, medical, IT, electronics, renewables, shipping & capital goods.
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Notification exempts basic customs duty & AIDC on crude soyabean & sunflower oil imports till 10.5.23 under TRQ quota & Bill of Lading condition. GST Cess exemption for SEZ imports.
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New Shipper Review provision added to countervailing duty rules. Allows review of rates for new exporters not involved in original investigation.
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Customs extends aircraft/vessel export for repair from 6 months to 1 year. Duty-free re-import period rises from 3 to 5 years.
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BCD exemption extended for various goods till 2026/2029. Includes raw materials, machinery parts, renewable energy, pharma, aircraft, and more.
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BCD exemption extended for motion pictures, gaming software, renewable energy machinery, exports, artworks, precious stones, copper, gold, silver.
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Customs duty exemptions/concessions on various items like telecom equipment, medical devices, renewable energy components to lapse from 30.9.2024.
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SWS: Exemption for natural graphite, sands, quartz, ores & concentrates of Cu, Co, Sn, W, Mo, Zr, Hf, V, Nb, Ta, Sb, Te, Si, Se, rare-earth metals, oxides/salts.
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Revised AIDC rates: Gold bar 1%, dore 0.35%, Silver bar 1%, dore 0.35%, Precious metals 1.4%, Coins 1%, Findings 1% from 24.07.2024.
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Mega Power Project certificate submission period extended from 120 to 156 months. Clean Environment Cess exempted on pre-GST stock.
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CGST: Exclude ENA from central tax, refer to new Sec 74A, regularize non-levy/short levy, time of supply for reverse charge services, allow input tax credit with conditions.
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IGST: No integrated tax on Extra Neutral Alcohol for alcoholic liquor. Regularizing non-levy/short levy. Zero-rated supply for refund. No refund if export duty paid. Pre-deposit reduced for appeals.
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Sub-section (1) in Section 7 exempts Extra Neutral Alcohol for alcoholic liquor from UT tax. Section 8A regularizes non/short levy of UT tax.
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Govt empowered to validate erroneous GST cess collection retrospectively under new Sec 8A, regularizing non-levy/short levy.
Indian Laws
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Dishonour of cheque: SC upholds strict interpretation of "drawer" as cheque issuer, excluding authorized signatories from primary liability.
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Permanent injunction for outstanding storage charges allowed. Separate suit maintainable for distinct causes of action like damages.
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Writ against SARFAESI notices rejected; new contract superseded old restructuring letter. SC precedents followed.
IBC
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Wilful defaulter can't misuse IBC to evade debt; unclean hands disentitle Sec 10 relief. Stalling tactics, selective reprieve bid negate resolution objective.
SEBI
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SEBI: Bars insiders from misusing unpublished info. Mandates tracking database. Restricts trading on inside info. Requires disclosures. Prescribes code of conduct, controls & disciplinary actions.
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SEBI mandates new insider trading rules effective Nov 1, 2024 under SEBI Act, 1992.
Service Tax
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Tax evasion by suppressing service value in returns. Dept relied on TDS data. Non-cooperation led to extended period invocation & penalties.
Central Excise
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CENVAT credit allowed on ISD invoices sans prescribed details; splitting tax permissible. Credit distribution to units okayed as per HC ruling. Demand & penalty set aside.
VAT
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Secured creditor's priority charge upheld over dues. Precedent grants priority over taxes. Bank claim registered earlier. Tax authority can recover from debtor.
Articles
Notifications
News
Case Laws:
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GST
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2024 (7) TMI 1350
Violation of principles of natural justice - non-service of SCN - petitioner has failed to notice the notices issued in Form - DRC - 01A dated 07.09.2023 and Form - DRC - 01 dated 12.10.2023, which had been uploaded in the GST Common Portal - Challenge to impugned order in Form GST DRC 07, dated 26.12.2023 passed for the Assessment Year 2017-2018 - HELD THAT:- Although the respondent submits that the Writ Petition is devoid of merits in the light of the decision of the Hon'ble Supreme Court in ASSISTANT COMMISSIONER (CT) LTU, KAKINADA ORS. VERSUS M/S. GLAXO SMITH KLINE CONSUMER HEALTH CARE LIMITED [ 2020 (5) TMI 149 - SUPREME COURT] , the petitioner can be given a partial reprieve in this Writ Petition by quashing the impugned order on terms. The petitioner shall deposit 25% of the disputed tax to the credit of the respondent from the Electronic Cash Register, within a period of 30 days from the date of receipt of a copy of this order. The impugned order which stands quashed in this order shall be treated as Addendum to the show cause notices already issued to the petitioner. The petitioner shall file a consolidated reply within a period of 30 days from today. This Writ Petition stands disposed of.
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2024 (7) TMI 1349
Cancellation of GST registration of petitioner with retrospective effect - impugned order does not indicate any reason for cancelling the petitioner s GST registration - violation of principles of natural justice - HELD THAT:- There are merit in the contention of the petitioner that the petitioner s GST registration could not have been cancelled without affording the petitioner an opportunity of personal hearing to address the aspect of cancellation of GST registration with retrospective effect. The impugned order is set aside and the matter is remanded to the Proper Officer for consideration afresh. The petitioner may file its reply to the impugned SCN within the period of two weeks from date. The Proper Officer will consider the reply of the petitioner and take an informed decision after affording an opportunity of being heard to the petitioner. Petition disposed off by way of remand.
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2024 (7) TMI 1348
Challenge to assessment order - same Officer has assumed dual role both as the Commercial Tax Officer and the State Tax Officer (Data Analytics) (Intelligence Wing), Virudhunagar - respondents is unable to explain as to why the same officer has signed in two different capacity, one as the Commercial Tax Officer, Tirunelveli and another as the State Tax Officer, (Data Analytics) (Intelligence Wing), Virudhunagar - HELD THAT:- Since there is no proper explanation, the Court is inclined to set aside the impugned orders and remit the cases back to the second respondent to pass fresh orders on merits and in accordance with law as expeditiously as possible preferably within a period two months. Needless to state, the petitioner shall be heard, before passing the orders. The petitioner shall co-operate with the second respondent. In case, the petitioner fails to co-operate with the second respondent, the respondents are at liberty to proceed against the petitioner based on the available materials on record. The petition is disposed off.
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2024 (7) TMI 1347
Challenge to assessment order - liability of tax based on deceased husband's business - recovery of the tax from the petitioner, after husband's death - whether business of the deceased husband was carried on by the petitioner or not - HELD THAT:- The petitioner appears to have replied to the respondent on the letterhead of the proprietary concern implying as if the petitioner was carrying on the business of her late husband, namely Sundaramurthy, who has died on 20.12.2022. This Court is inclined to set aside the impugned orders and remit the cases back to the respondent to pass a fresh order on merits and in accordance with law. The petitioner shall file a reply to the notices that preceded the impugned orders. Petition allowed.
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2024 (7) TMI 1346
Violation of principles of natural justice - impugned order is unreasoned and the only ground for rejecting the petitioner s response to the impugned SCN is that the same has not been found satisfactory and the petitioner has not been able to submit substantial proof in support of his reply - irregular availment of ITC - HELD THAT:- The impugned SCN did not allege that the petitioner had not received the goods from the dealer in question. The impugned SCN is premised on Section 16 (2) (c) of the CGST/DGST Act which, according to the Revenue, disentitles a taxpayer from availing ITC in respect of supplies, if the actual tax on the said supplies has not been deposited by the supplier. And, the impugned order does not indicate that the Adjudicating Officer had finally concluded that the dealer in question (Modern Traders) had not paid the taxes due on the supplies made to the petitioner. Although, the petitioner has a remedy of preferring an appeal against the impugned order, considering that the impugned order is unreasoned, in the peculiar facts, it is not considered apposite to relegate the petitioner to avail the remedy of an appeal. The impugned order is set aside. The matter is remanded to the Adjudicating Officer to decide afresh in accordance with law after affording the petitioner an opportunity to be heard - petition disposed off by way of remand.
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2024 (7) TMI 1345
Principles of natural justice - no reasons are assigned for levying interest and penalty - transfer of goods between two establishments or not - HELD THAT:- The respondent authority ought to have assigned reason for levy of penalty of Rs. 01,32,774/- as well as levy of tax when the goods were admittedly not by E-invoice for sell but the goods were transported from head office to Halol plant of the petitioner and therefore, it can be said to be transfer of goods between the two establishments of the petitioner. This Court in case of Dhabriya Polywood Ltd. v. Union of India [ 2022 (5) TMI 184 - GUJARAT HIGH COURT] has relied on the Circular of the CBIC dated 14th September, 2018 and has held ' The manner in which the writ applicant has proceeded so far and also having regard to the fact that very promptly he brought to the notice of the authority concerned and admitted its mistake, we would like to give the writ applicant some benefit of doubt.' In case of Orson Holdings Company Ltd. [ 2023 (1) TMI 1026 - GUJARAT HIGH COURT] , while considering the provisions of Section 129, it was held ' it can be gathered that there does not appear to be any ill-intent on the part of the petitioner to use the expired e-Way bill. The company is situated at Howrah, West Bengal and the place of delivery was Jamnagar, Gujarat and in transit, this e-Way bill has expired.' The respondent authorities having not assigned the reasons, the impugned orders are not sustainable and are accordingly quashed and set aside. The matter is remanded back to respondent No. 2 to pa fresh de novo order after giving opportunity of hearing to the petitioner by assigning reasons in detail taking into consideration the above decisions while passing the order in accordance with law. Petition allowed partly.
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2024 (7) TMI 1344
Levy of GST - supply of service or not - differential dealer margin provided by the petroleum companies to its retail dealers - rate of GST - If it is taxable, then what is the justification for bringing the same under the purview of GST? - HELD THAT:- The amount paid as differential dealer margin is in the nature of a consideration in return of the applicant agreeing to run the dealership despite low sales volume. This amount is therefore in the nature of a consideration received for agreeing to the obligation to refrain from an act, and squarely falls under clause (e) of Sl No. 5 of Schedule II of the CGST Act, 2017 and hence taxable to GST. Hence, the first reason cited by the applicant for nonpayment of tax is not valid, Further, in view of the above, Circular 29/2019 (F 17(134) AACT/GST/20I 7/4596 dtd 28-06-2019 cannot be cited as a reason for non-payment tax by the applicant. Section 15 of the Act deals with the calculation of the value of taxable supply and sub-section 3 deals with taxability of discount given on that value of taxable supply. In the instant case, the sale of petrol/diesel is not the supply under section 15 (3) as interpreted by the applicant. The taxable supply under discussion in the present matter is agreeing to the obligation to refrain from an act , for which a differential dealer margin is given by HPCL to the applicant. Though the consideration for this supply is linked to the sales volume of petrol, it is not a discount given on the supply of petrol. Hence, section 15 (3) of the Act is not applicable in the instant case. Further, in view of the above, GST Circular 29/2019 (F 17(134) AACT/GST/2017/4596 dtd 28-06-2019 cannot be cited as a reason for non-payment tax by the applicant. Rate of GST - HELD THAT:- There is no dispute that the applicant s supply of petrol/diesel to end customer is not taxable to GST. However, the supply in the present case is that of the service of agreeing to the obligation to refrain from an act. As per the Annexure: Scheme of Classification of Services annexed to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended from time to time, the service of Agreeing to refrain from doing an act is classified under Section 9, Heading 9997, Service Code (Tariff):999793. As per SI. No. 35 of the aforementioned notification, the same is taxable 18%
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2024 (7) TMI 1343
Scope of Advance Ruling application - issuance of delivery note and e-way bill by job-worker, if the principle is not issuing the delivery note - Value to be shown in delivery note and in e-way bill by the job worker pre and post job work - Any other related or associated questions - HELD THAT:- The questions do not fall under the purview of any of the clauses of section 97 (2) of the CGST/KSGST Act 2017. Moreover section 98 of the Act specifies the procedures to be followed on the processing of receipt of an advance ruling application. As per subsection (1) of section 98, the authority shall forward a copy of the application to the concerned jurisdictional officer, if necessary, call upon him to furnish the relevant records. Sub-section (2) of section 98 provides that the authority can either admit or reject the application after examining the application and records called for and hearing the applicant and the jurisdictional officer either directly or through authorized representative. On a combined reading of the above provisions governing advance ruling under the CGST Act it is evident that the authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of the CGST/SGST Act. The applicant does not raised any other related or associated questions.
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2024 (7) TMI 1342
Maintainability of Advance Ruling application - Reversal of input tax credit to the extent of tax element in credit note - no agreement between applicant and original supplier saying that the credit notes should not be treated as financial/ commercial credit notes - no agreement between the applicant and the supplier to have the ITC claim reduced - mismatch of ITC claim figures between GSTR-3B and GSTR-2A figures - impact of incorrect claim of output tax liability reduction based on a financial/ commercial credit note issued by him to applicant. Whether the questions on which advance ruling is sought are admissible as per the provisions of the CGST Act, 2017 governing advance ruling Sec. 97 of the CGST / SGST Act specifies about the application for advance ruling? - HELD THAT:- The questions regarding Liability to reverse input tax credit (ITC) based on credit notes and Eligibility to claim ITC based on original supply invoices, falls within the purview of clause (d) of sub-section (2) of Section 97 of the CGST Act, 2017; i.e, admissibility of input tax credit of tax paid or deemed to have been paid . The question on Rejection of ITC claims due to mismatch between GSTR-3B and GSTR-2A and Impact of supplier's incorrect output tax liability reduction on applicant's ITC claim, are not in respect of any matter that IS specified in Sect. 97 (2) of the CGST Act. This authority being a creature of statute has to function within the limits of the jurisdiction conferred on it. Accordingly, the jurisdiction of this authority does not extend to Issue rulings on these questions. It is seen that in the instant case it is apparent that the original supplier has issued credit notes with tax elements and reduced their output tax liability, resulted in mismatching of the input Lax credit available in GSTR 2A of the applicant and the ITC availed in GSTR-3B. The applicant has not furnished adequate reasons for the said mismatch; instead they have filed an application for advance ruling to the competent authority and also submitted their readiness to reply to the proceedings on the receipt of advance ruling. The GSTR 2A of the applicant shows that the supplier had issued credit notes in the form of reducing selling price through Invoices and it is seen that the credit notes issued by the supplier to the applicant are not commercial ones - Further, the Jurisdictional Officer has reported that the applicant has been served with a notice GST ASMT-10 dated 09.07.2020 under Section 61 of the CGST/SGST Act 2017 to the applicant for the discrepancies noticed in the scrutiny as per the scrutiny task parameters. The advance ruling application has been filed by the applicant on 19.08.2021. On a combined reading of the provisions governing advance ruling under Sect, 97 98 of the CGST Act it is evident that the authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of the CGST/SGST Act - Therefore, it is apparent that, proceedings are pending against the applicant on the date of filing of advance ruling online application on 19.08.2021 and liable to be rejected under first proviso to Section 98 (2) of the Act.
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Income Tax
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2024 (7) TMI 1341
Delay of 294 days in preferring the Special Leave Petition - Validity of Reopening of assessment - assessment of the petitioner company was not done u/s 143(1) but u/s 143(3) - Sanction / Satisfaction of the proper authority u/s 151(1) - Income Tax Officer, Ward-I, Tinsukia had obtained satisfaction of Additional Commissioner of Income Tax, an authority who is not covered by the provision of Section 151(1) - as decided by HC [ 2023 (5) TMI 963 - GAUHATI HIGH COURT] writ petition under Article 226 of the Constitution would be maintainable because the two pre-conditions for exercise of power under Section 148 does not exist in this case HELD THAT:- As perused the application seeking condonation of delay. It is noted from the memorandum of special leave petition that the affidavit verifying special leave petition is dated 24.05.2024 and the special leave petition has been filed on 04.06.2024. However, of the application seeking condonation of delay what is stated is otherwise. The explanation offered for the said delay is also not satisfactory and neither is it sufficient in law to condone the same. In the circumstances, the application seeking condonation is dismissed. Consequently, the Special Leave Petition is also dismissed on the ground of delay.
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2024 (7) TMI 1340
Taxability of receipts in India - Income deemed to accrue or arise in India - receipts from Indian customers for services provided outside the territory of India - whether taxable u/s 9 (1) (vi) of the Income Tax Act, 1961 read along with Article 12 of the DTAA between India and Singapore - According to the appellants, the receipts become taxable under the Act since the services provided are liable to be viewed as being in connection with the use or right to use of process or equipment - Scope of amendments introduced in Section 9 - HELD THAT:- Section 90 is a self-contained code which enables the Union to bring a tax treaty into force and is not predicated upon Parliamentary legislation. Convention and domestic legislation - Changes in domestic legislation cannot, principally speaking, override the treaty provisions. If a contrarian position were to be accepted, it would lead us to hold that treaty provisions could be amended or overcome based upon the will of Legislatures of independent nations to amend domestic legislation unilaterally and without being bound by the Convention. That is clearly not the position which merits acceptance from either a constitutional or statutory point of view. It is this fundamental position which appears to have weighed upon the Court in New Skies Satellite [ 2016 (2) TMI 415 - DELHI HIGH COURT] to observe that a treaty cannot be overridden by independent legislative amendments that a contracting nation may choose to introduce. The fact that treaty provisions supervene and the option available to the assessee to opt for the more beneficial scheme stands statutorily recognised and reiterated in Section 90 (2) of the Act. Applicability of Section 9 (1) (vi) and its provisions being liable to be read as overriding provisions contained in a Treaty - The arguments raised by the appellants based on the language employed by Section 9 as well as the Explanations inserted therein are clearly misconceived. Quite apart from us having serious reservations as to whether those Explanations could legitimately be accepted as being clarificatory and designed to remove an existing ambiguity in the statutory position, we are of the firm opinion that those unilateral amendments introduced in a domestic law cannot be accorded an overriding effect over the provisions of the DTAA. Even otherwise and as would be evident from the discussion which ensues, the transaction in question would not become subject to taxation even if it were tested on the anvil of Section 9 (1) (vi). However, we defer that discussion to subsequent parts of this decision. Use/ Right to use question - Legal position in New Skies Satellite [ 2016 (2) TMI 415 - DELHI HIGH COURT] constitutes a resounding negation of the submission that was addressed based on Article 3 (2) of the DTAA. The ancillary argument relating to the DTAA having not defined the word process must consequently and for reasons aforenoted suffer a similar fate. All that need be additionally observed is that the broad intent of the amendments comprised in Explanation 6 would not override the use and the right to use tests which form the bedrock of the royalty Article comprised in the DTAA. In any event, the essay of Explanation 6 cannot be interpreted in a manner which would essentially amount to a reintroduction of Section 9 (1) (vi) yet again through a secretive back door. Of equal significance are the doubts which were expressed in respect of the amendments which were introduced in Section 9 and which was sought to be described to be clarificatory of the statutory position. Section 9 (1) (vi) speaks of situations where income by way of royalty would be deemed to have accrued or arisen in India. Explanation 2 of Section 9 (1) (vi) while defining the word royalty in Clause (i), provides for taxation of consideration received for the transfer of all or any rights (including the granting of a licence in respect of a patent, invention, model, design, secret formula or process or trademark for similar property). In clause (iii), the word royalty is conferred a further expansive meaning, extending its coverage to the use of any patent, invention, model, design, secret formula or process. Explanation 6 of Section 9 (1) (vi) stipulates by way of a purported clarification that the expression process would include and shall be deemed to have always included transmission by satellite, cable, optic fibre or by any other similar technology irrespective of whether or no such process was secret. We, on an overall analysis of all of the above, find no justification to either draw a different line or doubt the correctness of the decisions handed down in Asia Satellite and New Skies. even though Section 9 in its amended form had come to exist on the statute book, no corresponding amendments were introduced in Article 12. In fact the category of activities which are spoken of in Explanation 6 were also not included in the Hong Kong, Romania, Latvia, Malaysia and Sri Lanka Treaties which came to be enforced thereafter. A provision seeking to encompass subjects covered by Explanation 6 is however found in the DTAA pertaining to the United Mexican States. These facts further fortify the view that we have taken in respect of the Section 9 amendments. On an overall conspectus of the above, we have no hesitation in holding that the issues which were sought to be canvassed on these set of appeals stand conclusively answered and settled by this Court in Asia Satellite and New Skies Satellite. Any doubt that could have been possibly harboured with respect to the amendments introduced in Section 9 stand laid to rest by virtue of the binding declaration of the law by the Supreme Court in Engineering Analysis [ 2021 (3) TMI 138 - SUPREME COURT] We are also of the firm opinion that even if one were to assume that Explanations 2 and 6 to Section 9 of the Act applied, the position would remain unaltered. This since there was no transfer or conferment of a right in respect of a patent, invention or process. Customers and those availing of the services provided by Telstra were not accorded a right over the technology possessed or infrastructure by it. The underlying technology and infrastructure remained under the direct and exclusive control of Telstra. Parties availing of Telstra s services were not provided a corresponding general or effective control over any intellectual property or equipment. The agreements merely enabled them to avail of the services offered by it. Similarly, the expressions use or right to use as they appear in clauses (iii) and (iva) of Explanation 2 would have to be understood in light of the principles that we have enunciated hereinabove. A person who is provided mobile communication services or access to the internet does not stand vested with a right over a patent, invention or process. The word process being liable to be construed ejusdem generis is lent added credence by clause (iii) employing the expression or similar property which follows. It thus clearly appears to be intended to extend to a host of intellectual properties. This we observe only as an aside since the question raised in these appeals stands conclusively answered in any case in light of our conclusions rendered in the context of the extent of the applicability of Section 9 of the Act and the scope of Article 12 of the DTAA. Thus, we would answer the question posited in the negative and against the appellants. We hold that neither the concept of process nor equipment royalty stand attracted and the consideration is thus not taxable as per Article 12 of the DTAA.
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2024 (7) TMI 1339
Taxability of income in India - deduction with respect to salaries paid by the appellant in foreign currency and outside India, to the expatriates of the appellant working in India - Indo-Japan tax treaty - HELD THAT:- As following the decisions of Emirates Commercial Bank Ltd. [ 2003 (4) TMI 2 - BOMBAY HIGH COURT] this ground is allowed. We also bear in mind the view expressed by the Supreme Court in Goetze (India) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] and where an exception was carved out in respect of the statutory prohibition of a deduction being claimed outside the Return of Income and of the same not being applicable in case of a direction issued by a Tribunal or Court. The writ petition is accordingly allowed. We quash the order dated 13 May 2022 insofar as it denied relief to the petitioner in respect of the deductions which were liable to be made pursuant to the order of the Tribunal dated 03 June 2019.
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2024 (7) TMI 1338
TP Adjustment - interest on receivables - payment of invoices raised to its AEs had not been received on time - it chose to treat those outstanding receivables as being liable to be recharacterized as unsecured loans - HELD THAT:- Issue stands conclusively answered against the appellants by a Coordinate Bench of this Court in terms of the judgment rendered in Principal Commissioner of Income-tax v. Kusum Health Care Pvt. [ 2017 (4) TMI 1254 - DELHI HIGH COURT] held that entire focus of the Assessing Officer was on just one assessment year and the figure of receivables in relation to that assessment year can hardly reflect a pattern that would justify a Transfer Pricing Officer concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself. With the assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-a-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re-characterised the transaction. This was clearly impermissible in law as explained by this court in CIT v. EKL Appliances Ltd [ 2012 (4) TMI 346 - DELHI HIGH COURT] TP Adjustment - payment of management fee - whether payment made for Intra Group Services[IGS] was for commercial expediency? - assessee had not undertaken any benchmarking exercise in respect of IGS - HELD THAT:- We find that the TPO has essentially doubted those payments on the anvil of commercial expediency. In our considered opinion, this issue has been correctly answered by the Tribunal and which drew sustenance for its conclusions bearing in mind the decision rendered by this Court in Commissioner of Income-tax v. EKL Appliances Ltd [ 2012 (4) TMI 346 - DELHI HIGH COURT] as held So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the Transfer Pricing Officer to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is expected to examine the international transaction as he actually finds the same and then make suitable adjustment but a wholesale disallowance of the expenditure, particularly on the grounds which have been given by the Transfer Pricing Officer is not contemplated or authorised. As this Court had held in EKL Appliances, it is clearly impermissible for the TPO to disregard the actual transaction unless it comes to the conclusion that an unrelated party would not have undertaken the same in usual course of business. More importantly it is wholly impermissible for the TPO to doubt commercial soundness of the expenditure that may be incurred. It would also not be permissible for the TPO to engage in the restructuring of a transaction, unless the economic substance of a transaction differed from its form and if the form and substance of the transaction were the same but the arrangements relating to the transaction when viewed in totality differed from that which would have been adopted by independent enterprises acting in a commercially rational manner.This position has been duly affirmed by the decision rendered by this Court in Sony Ericsson Mobile Communication India P. Ltd. [ 2015 (3) TMI 580 - DELHI HIGH COURT] as held here is no material or justification to hold that no independent party would incur the AMP expenses beyond the bright line AMP expenses. Free market conditions would indicate and suggest that an independent third party would be willing to incur heavy and substantial AMP expenses, if he presumes this is beneficial, and he is adequately compensated. The compensation or the rate of return would depend upon whether it is a case of long-term or short-term association and market conditions, turnover and ironically international or worldwide brand value of the intangibles by the third party. Decided against revenue.
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2024 (7) TMI 1337
Income from other sources u/s 56(2)(x) - difference in the stamp duty value and actual purchase value - HELD THAT:- . We find that the AO has drawn support from the provisions of Section 56(2)(x) of the Act. In our understanding of the law, Section 50C of the Act applies to the seller whereas Section 56(2)(x) applies of the buyer. Accordingly, immovable property is restricted only to land or building or both but not applicable to a developer who has taken over the possession of lawn or building or both for the purpose of the development in terms of the relevant development agreement or MOU for development of a property. The assessee has not purchased any immovable property but has only acquired development rights and considering the facts of the case, in light of the decision of in the case of Seshasayee Steels (P) Ltd [ 2019 (12) TMI 702 - SUPREME COURT] we do not find any reason to interfere with the findings of the ld. CIT(A). Accordingly, the effective grounds raised by the revenue are dismissed.
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2024 (7) TMI 1336
Denial of exemption u/s 11 - Assessee failed to file Form 10B due to delay of the auditors in filing the audit report, which it filed the same belatedly, but before the assessment was finalised - HELD THAT:- As decided in the case of Ramji Mandir Religious and Charitable Trust [ 2023 (12) TMI 1295 - ITAT AHMEDABAD] after reviewing the entire case law on this aspect, in unequivocal terms, it was held that the requirement of filing Form 10/10B is merely directory in nature and failure to furnish Form 10/10B before the due date prescribed under section 139(1) of the Act cannot be so fatal as to deny the claim of exemption under section 11(2) of the Act, especially when Form 10/10B was available on record when the intimation was passed by CPC under section 143(1) of the Act. Thus, since the Form 10B was available when the CPC passed the intimation in this case, disallowance of the claim of the assessee under section 11 of the Act is not proper. AO is, therefore, is directed to consider Form 10 available on record and to pass appropriate orders. Appeal of the assessee is allowed.
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2024 (7) TMI 1335
Exemption u/s 11 - activities of the Association are not charitable in nature - cancellation of registration u/s 12AA due to change in the definition of charitable purpose u/s 2(15) - assessee company is a section 25 company registered with Registrar of Companies and is a sports organization working for the advancement and promotion of games and sports, particularly, cricket in the State of Uttar Pradesh HELD THAT:- As decided in Ahmedabad Urban Development Authority[ 2022 (10) TMI 948 - SUPREME COURT] Court is of the opinion that the ITAT as well as the High Court fell into error in accepting at face value the submission that the amounts made over by BCCI to the cricket associations were in the nature of infrastructure subsidy. In each case, and for every year, the tax authorities are under an obligation to carefully examine and see the pattern of receipts and expenditure. Whilst doing so, the nature of rights conveyed by the BCCI to the successful bidders, in other words, the content of broadcast rights as well as the arrangement with respect to state associations (either in the form of master documents, resolutions or individual agreements with state associations) have to be examined. It goes without saying that there need not be an exact correlation or a proportionate division between the receipt and the actual expenditure. This is in line with the principle that what is an adequate consideration for something which is agreed upon by parties is a matter best left to them. Therefore, the issue is restored to the files of CIT(A) to decide afresh in the light of the Judgment of the Hon ble Supreme Court in the case of ACIT vs. Ahmedabad Urban Development Authority (supra).
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2024 (7) TMI 1334
LTCG - Deduction u/s 54 - appellant did not fulfill the mandatory condition of acquiring a new residential flat within the specified time period - CIT(A)-NFAC invokes the former limb of one year before the transfer i.e., 28.03.2012 and the date of transfer itself dated 29.03.2012 to conclude that the same falls beyond the prescribed period of one year and therefore, the assessee is not entitled for the same - HELD THAT:- The relevant date in such an instance; for the purpose of computing the limitation in all three eventualities in sec.54, has to be taken in light of the payment of consideration and possession of the new house property only. DR could hardly rebut the fact that the various judicial precedents in learned CIT(A)-NFAC s detailed discussion Smt. Beena K. Jain [ 1993 (11) TMI 7 - BOMBAY HIGH COURT] , Sunil Amritlal Shah [ 2024 (5) TMI 699 - ITAT MUMBAI] Bastimal K. Jain [ 2016 (6) TMI 1243 - ITAT MUMBAI] Sanjay Vasant Jumde [ 2023 (3) TMI 1222 - ITAT PUNE] already stand duly considered and therefore, we hold the assessee is entitled for the impugned sec.54 deduction in very terms. Decided in favour of assessee.
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2024 (7) TMI 1333
Penalty u/s. 271(1)(C) - Appellant assessee is non resident Indian and did not file the return of income for the assessment year 2014 15 - HELD THAT:- Perusal of records show that the appellant assessee, being non resident Indian, was not required to furnish return of income u/s. 139(1) of the Act, if TDS on her only income of interest on investment, was deducted @12.5% as against 10% as per said DTAA between India UAE. The assessment order does neither contain any direction nor any satisfaction of the Assessing Officer for initiation of the penalty proceedings u/s. 271(1)(C) of the Act. The instant case is neither a case of concealment of income nor a case of furnishing of inaccurate particulars of income as the income declared by the assessee was accepted by the revenue. The submissions of the assessee, that she was under a bonafide belief that the tax at source was deducted properly and no additional tax was payable by her, being based on her legitimate expectation, deserves to be accepted. The penalty proceedings cannot thus be sustained under the law. The aforesaid point is thus determined in favour of the assessee and against the revenue.
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2024 (7) TMI 1332
Addition u/s 56(2)(viib) - valuation method adopted for Compulsory Convertible Preference Shares (CCPS) - transaction between holding and subsidiary companies - HELD THAT:- Shares are allotted to the holding company by wholly owned subsidiary and the financial projections were prepared and validated by independent technical expert. We conclude that the DCF method adopted by the assessee for valuing the CCPS is legitimate and in accordance with Rule 11UA. The AO cannot reject the method chosen by the assessee if it is prescribed by law. AO s reliance on the company s subsequent financial losses to question the valuation is misplaced. The projections must be assessed based on the facts and data available at the time of valuation, not on future outcomes, as held in various judicial pronouncements. The issuance of CCPS to the holding company does not align with the legislative intent of Section 56(2)(viib) of the Act to prevent the generation and use of unaccounted money. The transaction between a wholly owned subsidiary and its holding company does not create any unaccounted income or inflated share value for tax evasion purposes unless it is specifically proved. CIT(A) correctly applied the provisions of law and judicial precedents in deleting the addition made by the AO. The valuation of shares based on the DCF method is valid, and the AO s objections lack merit. The order of the CIT(A) is upheld. The addition u/s 56(2)(viib) of the Act is hereby deleted. Appeal filed by the Revenue is dismissed.
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2024 (7) TMI 1331
Validity of assessment proceedings - no notice u/s. 143(2) has been issued, after taking into account the return filed by the assessee - whether curable defect u/s. 292B - HELD THAT:- AO had not issued any notice u/s. 143(2) of the Act before considering the return of income filed by the assessee and, therefore, the same is not in accordance with the law and the non issuance of the notice u/s. 143(2) is a fatal one and it cannot also be cured u/s. 292B of the Act. In view of the above discussion we come to the conclusion that the legal issue raised by the assessee is well founded. As no notice u/s. 143(2) has been issued, after taking into account the return filed by the assessee, and, therefore, the assessment order passed by the ld. AO is illegal and liable to be set aside. Further in our case the assessee had filed a letter dated 20.05.2019 and requested the AO to treat the return filed u/s. 139(1) of the Act as return filed in response to the notice issued u/s. 148 whereas in the orders and judgements relied upon by D.R., no return or reply was filed by the assessees and, therefore, the above said order and judgements are not similar to the facts of the present case. In the result we accepted the legal issue and held that the assessment order are not sustainable, hence allowed the appeal filed by the assessee.
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2024 (7) TMI 1330
Addition u/s 68 - unexplained cash deposited in the bank account - No return of income was filed by the assessee u/s. 139 but in pursuance to notice issued u/s. 148 - assessee argued that since he had opted for the presumptive taxation scheme u/s 44AD, which does not require maintaining books of accounts - HELD THAT:- The assessee having not maintained its books of accounts in the instant case, although was liable to maintain such books of account as are stipulated u/s 44AA cannot take the plea that provisions of Section 68 cannot be applied, as the assessee cannot take benefit of his own wrong, as there cannot be premium on non compliance. Thus, hold that the assessee was required to explain the sources of cash deposits in his bank account maintained with IDBI Bank, genuineness of the transaction of the aforesaid cash deposits and creditworthiness as well identity of creditors, as are required under the deeming fiction of Section 68, which in the instant case, the assessee having failed to do so, and the authorities below have rightly invoked provisions of Section 68 and made the additions as income of the assessee within the four corners of deeming fiction of Section 68. The case laws relied upon by the assessee were decided on their own facts and are not applicable to the instant case - Appeal filed by the assessee is hereby dismissed.
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2024 (7) TMI 1329
TDS u/s 195 - Taxability of income in India - PE in India - taxation of offshore supplies - Taxation of Fee for Technical Services (FTS) in the absence of FTS article under India-Thailand DTAA - HELD THAT:- In the case of HCIL for AY 2009-10, the issue under consideration was if HCIL, which is a subsidiary of M/s Honda Motors Company Ltd., was required to deduct tax at source for payments made for purchase of raw material, components, etc. from non-resident companies and those non-resident companies being associated enterprises numbering 17 were found to be not having a PE in India. In fact, the Tribunal in its order [ 2016 (9) TMI 439 - ITAT DELHI] dated 29.06.2016 observes that the fact that these associated enterprises which included assessee also do not have PE in India stands accepted by DRP and the Department has not gone in appeal and, thus, the issue stands finalized. In this order it was held that except for Honda Motors, Japan, payments made to all other 17 non-resident associated enterprises does not attract the provisions of section 195 and, consequently, section 40(a)(i) of the Act has no operation on the income of these companies arising from the supply of part, etc., and same was not liable for tax in India. This question was determined in favour of the assessee on the basis that the assessee was not having a PE in India. Taxation of offshore supplies - DRP after considering various contentions raised by the assessee, observed that since it has been held by DRP that the assessee has PE in India, profits need to be attributed to various operations carried out in such PE in India. Further, since the assessee is not maintaining India specific accounts, the AO is right in applying Rule 10. However, the panel directed that instead of adhoc profit rate of 25%, global profit rate of the assessee should be applied and 25% of such profits should be attributed to PE in India. Thus, where we have concluded that the assessee has no PE in India, the directions to attribute profits to various operations carried out in PE in India are not left with any substratum and, accordingly, the ground No.3 deserves to be allowed in favour of the assessee. FTS receipts are not liable to tax in the absence of FTS article in India-Thailand DTAA - Section 9 of the Act enumerates certain incomes to be deemed to accrue or arise in India and Section 9(1)(vii) of the Act provides under what conditions FTS income shall be considered to accrue or arise in India. Explanation 2 to Section 9(1)(vii) of the Act gives definition of FTS and which provides that any service falls within the definition of FTS are either be in the nature of managerial services, technical services or consultancy services. Thus FTS is a species of business income with specific definition and components and in DTAA, are made taxable specifically. If not, then they are brought to tax, as business income and in that case, again the existence of PE in India is necessary, but which is not established in case of assessee. Accordingly, this ground is decided against the Revenue. Interest under section 234A, 234B and 234C - HELD THAT:- As grounds challenging levy of interest are consequential and, accordingly, adjudicated in favour of the assessee.
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2024 (7) TMI 1328
Addition on the basis of statement recorded u/s 132 (4) supported by unsubstantiated documents found during the course of search - unaccounted cash receipts from students - HELD THAT:- As we examine the seized material relevant to this addition of Rs.50 lakhs. For making addition of Rs.50 lakhs, the ld. AO relied on the following seized materials received from Utsav Shetty for the academic year 2019-20 containing two cheques for Rs.25 lakhs each for MBBS course. The screen shot of the ledger submitted by the assessee in this case shows that Utsav Shetty paid Rs.40 lakhs and Rs.10 lakhs on 19.8.2019 and 1.2.2021 respectively for the academic year 2019-20. AO made addition as unaccounted fees collected from Utsav Shetty. It is to be see that statement from Uday Shetty, father of the student has been recorded on 14.3.2022. He stated that Rs.15 lakhs discount has been given by management due to Covid and remaining fees Rs.10 lakhs was paid through RTGS and he was advised by the management not to disclose the giving of discount to him and therefore, he has mentioned cash instead of discount in his Whatsapp message and he has paid only Rs.15 lakhs cash. AO observed that Dilip Kumar as mentioned in the seized material of 15 L pd to V.S . AO decoded 15LRs. Paid to Vishwanath Shetty in his statement. However, Dilip Kumar has not mentioned to the question No. 14 to sworn statement dated 11.8.2021 that Rs.15 lakhs was paid to Vishwanath Shetty. As noted that nowhere he has mentioned in his answer that Rs.15 lakhs was paid to Vishwanath Shetty and he also said in his answer to next question that he has not paid any attention of whatsapp message of Uday Shetty, father of Utsav Shetty. However, it is to be noted that the amount of Rs.15 lakhs is not encircled in the seized material. Being so, it cannot be said that the said amount of Rs.15 lakhs has been paid. Collection of unaccounted fees - addition made by the AO is based on unsubstantiated loose sheets and jottings or Excel sheets - Statements recorded u/s 132 (4) solely cannot constitute as incriminating material so as to make these additions. Addition made by the AO is based on unsubstantiated loose sheets and jottings or Excel sheets - As it cannot be stated as full-proof of material evidence to substantiate the addition. In our opinion seized documents do not support the AO s contention that assessee has received unaccounted fees for admission of the students to the college. Going through the entire facts of the case it creates only a suspicion in the minds of the revenue authorities that the assessee has collected unaccounted fees. The suspicion not enough to hold that the assessee has collected unaccounted fees in absence of concrete evidence bought on record by the authorities concerned. The suspicion cannot replace the material evidence brought on record by the authorities. The rough noting in the loose papers are not full-proof evidence without proving the correctness of the same. Nothing was recorded in the orders of lower authorities that assessee has deviated from its objects for which approval u/s. 12A was granted and not applied its funds towards its objects. No evidence was brought out to show that the amount of unaccounted fees alleged to have been collected resulted in creation of any unaccounted assets by the trust or trustees or by any interested person. On this count also the addition cannot be sustained. No assets commensurate with the alleged estimated collection of fees were found by the revenue authorities. The unbounded loose sheets having jottings are not speaking either by itself or in the company of others and not corroborated by enquiry, cannot be the basis of any inference that unaccounted fees was collected not entered in the accounts so as to sustain the addition. We are of the opinion that the evidence collected by the authority is not sufficient to establish that the assessee has collected unaccounted fees for admission of students to various courses in the assessee s college. Entire evidence has to be appreciated in a wholesome manner and even where there is documentary evidence in favour of an assessee, the same can be overlooked if there are surrounding circumstances to show that the claim of assessee is opposed to normal course of human thinking, conduct and human probability. Even applying this principle to the present case, we have difficulty in rejecting the assessee s plea as opposed to normal course of human conduct. The circumstances surrounding the case are also not enough to reject the assessee s explanation. We have considered all the material on record and also the statement of the parties as discussed in the earlier paragraphs. We are of the opinion that the department cannot rely on those statements, more so when it was confronted to the assessee s employees during cross-examination, they have denied the collection of unaccounted fees. The department failed to collect proper information from any source corroborating collection of unaccounted fees, except un-corroborating entries in the loose sheets. All attempts for corroboration failed. There is nothing to suggest that the trust has deviated from the objects for which registration was granted and not applied the funds for its objects. No evidence was brought on record to show that amount of alleged unaccounted fees which have been collected and misused by the assessee or by any interested persons. There is no instance of recovery of any assets commensurate with the alleged estimated unaccounted collection of unaccounted fees as found by the AO. The activities of the trust are genuine. There is no allegation by the lower authorities that activities of the trust are not genuine. Also there was no allegation that the activities of the trust are not carried on in accordance with the objects of the trust. There is no allegation that the assessee is not imparting education and it is an admitted fact that thousands of students are studying in the college and assessee has been carrying on educational activities imparting medical education. It fulfilled the requirement of imparting education which are not doubted or challenged by the authorities. Being so, the impugned collection of unaccounted fees cannot be determined and brought to tax. As seen from the seized material and Excel sheets that these are handwritten loose documents and undisclosed income of the assessee cannot be determined on the basis of these documents. There is no direct evidence or conclusive evidence to prove the collection of the unaccounted fees. The statements of parties of whosoever is relied upon are evasive replies given to the revenue authorities on the basis of which the AO made an estimate of collection of fees. This is only based on conjectures and surmises and only on circumstantial evidence. AO failed to established the live link between the seized material and the unaccounted fees which resulted in creation of any unaccounted assets in the form of possession of money, bullion, jewellery or other articles or any immovable properties in the name of the trust or the trustees. In our opinion, the unsubstantiated and uncorroborated seized material alone cannot be considered as conclusive evidence to frame these assessments. The words may be presumed in section 132 (4) of the Act given an option to the AO concerned to presume these things, but it is rebuttable and it does not give a definite authority and conclusive evidence. The assessee is having every right to rebut the same. The entire case depends upon the rule of evidence. There is no conclusive presumption with regard to unsubstantiated seized material to come to the conclusion that that assessee has collected unaccounted fees. In the present case, the assessee categorically denied collection of unaccounted fees. If it was collected, it was unauthorized collection by the person who is looking after the admission and that it is why it is unauthorized by the trust. Further, there is no confirmation from the students who get admitted into various courses and even there was statements recorded from two students/parents which were not confronted to the assessee for cross-examination. The revenue authorities cannot draw inference on the basis of suspicion, conjectures and surmises. Suspicion, however strong, cannot take place the material in place of evidence of the AO. AO should act in a judicial manner, proceed in a judicial spirit and come to the judicial conclusions. AO is required to act fairly as a reasonable person, not arbitrarily and capriciously. The assessment u/s. 153A of the Act should have been supported by adequate material and it should stand on its own leg. The AO without examining the students / parents who have paid the unaccounted fees cannot come to the conclusion that the assessee has received unaccounted fees. The basis for donation is notebook / loose sheet. This notebook or loose sheets found during the course of search is only circumstantial evidence and not full proof evidence to sustain the addition. No addition can be made in the absence of any corroborative material. If it is circumstantial evidence in the form of loose sheets and notebook, it is not sufficient to come to the conclusion that there is conclusive evidence to hold that assessee has collected unaccounted fees. The notes in the diary/loose sheets are required to be supported by corroborative material. Since there was no examination or cross-examination of persons concerned, the entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search cannot be sustained. The evidence on record is not sufficient to uphold the stand of revenue that assessee is collecting huge unaccounted fees in the guise of carrying on educational activities. In our opinion the seized material relied by the assessing officer for sustaining addition is not speaking one in itself and also not speaking in conjunction with some other evidence with authorities found during the course of search or post search investigation. Thus, the well settled legal position is that a non-speaking document without any corroborative material, evidence on record and finding that such document has not materialised into transactions giving rise to income of the assessee which had not been disclosed in the regular books of accounts of the assessee has to be disregarded for the purpose of assessment to be framed pursuant to search and seizure action. In these cases, moreover these documents are relied upon by the AO without confronting them for cross examination. In our opinion, these documents cannot bring assessee into tax net by merely pressing to service the provision of Sec 132(4A) r.w.s Sec 292C of the IT act, which creates deeming fiction on the assessee subject to search wherein it may be presumed that any such document found during the course of search from the possession and control of such document are true. What has to be noted here is that deemed presumption cannot bring such a document in the tax net and the presumption is rebuttable one and the deemed provisions have no help to the department. In our opinion, in these cases addition is made by AO on arbitrary basis relying on the loose papers, containing scribbling, rough and vague noting s in the absence of any corroborative material and these materials cannot be considered as transacted into collection of unaccounted fees by assessee giving rise to income which are not disclosed in the regular books of accounts by assessee. There is no documentary evidence either to support the statements of employees or of the parents of the students; and The seized material are in the form of various loose sheets, scribblings, jottings and Excel sheets taken from the computer having no signature or authorization from the assessee s side. These are unsubstantiated documents and there is nothing to suggest any undisclosed assets of assessee found during the course of search. More so, search action not resulted in recovery of any undisclosed assets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets. As also noted that on cross examination of the employees, they have denied the receipt of the unaccounted fees. Further, out of 43 students alleged to have been paid unaccounted fees, 35 students denied the same in affidavit, 5 denied in their sworn statement and whereabouts of 3 students were not known. No efforts has been done to find out their whereabouts. Some of the statements have been recorded under section 131 by the authorized officer subsequent to completion of search and these statements cannot be considered as conclusive evidence in view of the below mentioned CBDT Circular. AO has made the addition only on the basis of sworn statements of the various parties backed by unsubstantiated loose slips/excel sheets, which cannot be basis for addition on that reason that it is uncorroborated as discussed above. On the date of search action on 6.8.2015, the search party found physical cash - This has been compared with the books of account on the date of search and it was observed by AO that this has been tallied with the same. Being so, it cannot be said any unaccounted cash was unearthed during the course of search action. This also supports the assessee s argument that there were no unaccounted fees collected by the assessee in the assessment year under consideration as in the earlier assessment years. It is to be accepted that the discount has been given by assessee to its students for payment of full fees only in this assessment year due to Covid Pandemic which has been given to them on their request on need basis considering the hardship faced by their parents during this Covid period. On this count, it is not possible disbelieve it and to hold that assessee is involving in collection fees in the guise of discount by not accounting the same, more so, the beneficiaries confirmed the getting of discount in fees payment during the Covid period. Thus, we are agreeing with the contention of ld. AR that placing reliance on the seized material is not proper and all the additions on the basis of the above are deleted. These grounds of appeal of the assessee are allowed. Claim of the appellant is that an amount is the accumulated interest on various fixed deposits and is actually not received by it and therefore is to be reduced from the gross receipts. In this regard, the appellant has to file Form 9A as prescribed in the Income Tax Rules with the concerned PCIT - In our opinion, it is appropriate to remit this issue to the file of AO to examine the same in the light of Form No.9A before PCIT, if any filed by the assessee. Assessee is partly allowed for statistical purpose
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2024 (7) TMI 1327
Validity of the reopening by AO u/s 147 - Addition u/s 68 - reasons recorded by AO need to be examined to see whether he had satisfied the conditions precedent necessary for doing so, as prescribed u/s 147 - HELD THAT:- We find that the foundation on the basis of which the AO has formed the belief is itself incorrect, in other words the AO has reopened the assessment based on the wrong assumption of fact. We note that the assessee had already undergone scrutiny assessment u/s 143(3) wherein some addition was made in the assessment proceedings. And the assessee had duly disclosed in its return to have received share application by account payee cheques from M/s Suryadeep Salt Refinery Chemical Works Ltd and pursuant thereto, they were allotted shares of assessee as per the Companies Act and details of which were produced before the AO in the original assessment proceedings and accepted by him. In such a back drop, where the AO received adverse information from office of the CIT(A)-37, Mumbai vide letter he ought to have made preliminary enquiry and noted the correct facts in respect of the issue, rather than forming his belief of escapement of income on incorrect assumption of facts as noted which action of AO cannot be countenanced. In this context, it should be borne in mind that adverse information made trigger reason to suspect and not reason to believe which is necessary condition precedents for reopening the assessment. When the AO receives adverse information about the assessee he should carry a preliminary enquiry and collect material and thereafter, he should have recorded reasons to believe escapement of income, which exercise AO has not done in this case. Consequently, the notice issued by the AO u/s 148 is vitiated and held to be bad in law and quashed. Appeal filed by the assessee is allowed.
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Customs
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2024 (7) TMI 1326
Second SCN issued, pending adjudication of first SCN, withdrawn subsequently - jurisdiction of first SCN - It is contended that the second show cause notice was issued on the same cause of action and after dropping of the first show cause notice, based on the second show cause notice proceedings could not be initiated - HELD THAT:- The withdrawal of the first show cause notice was after issuance of the second show cause notice. The question, if Section 28 (4) of the Act with respect to the period of limitation of 5 years, is attracted or not, at this stage, depends on the contents in the notice, which contains the averment of suppression of facts. Whether there was suppression of fact or not cannot be determined at this stage by this Court in the exercise of review jurisdiction, or even in the exercise of the writ jurisdiction under Article 226 of the Constitution of India, it being a question of fact and requiring evidence/material to establish or negative the same. On the face of the second show cause notice, the submission is not acceptable, that Section 28 (4) of the Act is not attracted. By the judgment under review the petitioner has the opportunity to submit reply and before the authority it can be demonstrated that there was no suppression of fact. In the present case, the dropping of the first show cause notice vide letter dated 17.05.2023 is after issuance of the second show cause notice for demand of differential amount, not identical amount, and clearly stating in the withdrawal letter about the second show cause notice dated 10.04.2023 also mentioning for the said purpose, the first show cause notice, was thereby withdrawn. Here, the second show cause notice is not after withdrawal of the first show cause notice nor for identical amount. The second show cause notice is within 5 years limitation under Section 28 (4) of the Act. In Swatch Group India Pvt. Ltd. [ 2023 (8) TMI 864 - DELHI HIGH COURT] , the show cause notice under Sections 28 and 124 of the Customs Act, was dated 14.02.2018 and the corrigendum was dated 28.02.2018. Section 28 (9) of the Customs Act was amended on 29.03.2018. The notice and corrigendum as issued in the said case was prior to the amendment. The Delhi High Court considered the explanation to the Section 28 (9) of the Customs Act which specifically provided that in cases where the notice had been issued after the 14th day of May, 2015 but before the date on which the Finance Bill, 2018 received the assent of the President, the said notice shall continue to be governed by the provisions of Section 28 of the Customs Act as it stood immediately prior to the amendment - In the present case, the show cause notices are after the amendment and consequently, the same shall not be governed by the unamended provision of Section 28 of the Act. The judgment in the case of Swatch Group India Pvt. Ltd. of the Delhi High Court is therefore not on the point as raised in the present review petition. Under the guise of review the petitioner cannot be permitted to reagitate and reargue the questions which have already been addressed and considered. The review petitioner is also not permitted to raise new grounds, new arguments, which were not taken or not argued by the writ petitioner s counsel, after engaging a new counsel in the review petition - In Vadde Pavan Kumar [ 2024 (5) TMI 1451 - ANDHRA PRADESH HIGH COURT] , on the scope of review jurisdiction, a coordinate Bench of this Court, after referring to various pronouncements of the Hon ble the Apex Court, reiterated that under the grab of filing a review petition, a party cannot be permitted to repeat old and overruled arguments for reopening the conclusions arrived at in a judgment. In Smt. Krishna Pathak v. Vinod Shankar Tiwari [ 2005 (2) TMI 914 - ALLAHABAD HIGH COURT] the Allahabad High Court held that if a counsel has argued a case to his satisfaction and he had not raised the particular point for any reason whatsoever, it cannot be a ground of review for the reason that he was the master of his case and might not have considered it proper to press the same or could have thought that arguing that point would not serve any purpose. If a case has been decided after full consideration of arguments made by a counsel, he cannot be permitted, even under the garb of doing justice or substantial justice, to engage the Court again to decide the controversy already decided. There are no error apparent in the judgment under review - By the judgment under review, the petitioner has the opportunity to file response to the show cause notice, which we have not restricted. It is open for the review petitioner to raise such objection, as may be open under law and as may be advised, including the objection of jurisdiction - No case for review is made out to reopen the proceedings of the writ petition. The Review Petition is dismissed.
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2024 (7) TMI 1325
Maintainability of the application before the Advance Ruling Authority - Classification of imported goods - components / parts/ sub-assemblies - to be classified as motor vehicle under Tariff Heading 87.03 or as Completely Knocked Down (CKD) kit under Sr. No. 437 of Notification No. 12/2012-Cus., dated 17.3.2012, as amended - If the import of components/parts/sub-assemblies by the applicant will not be classified as motor vehicle or as CKD kits, whether the applicants imports will be classified under their respective headings/sub-headings of the Customs Tariff Act, 1975 or under Tariff Heading 87.08 of the Customs Tariff Act, 1975? Maintainability of the application before the Advance Ruling Authority - appellant raised a preliminary objection as to the maintainability of the application before the 1st Respondent, on the premise that the jurisdiction of the Advance Ruling Authority under Section 28E(b) of the Customs Act, 1962 is to determine a question of law or fact specified in the application regarding the liability to pay duty in relation to an activity which is proposed to be undertaken by the applicant - HELD THAT:- The object of Advance ruling is avoidance of litigation and promoting better relationship. In the era of globalisation of business, the purpose for creating the Authority is for expeditious disposal and determination of question of law or fact specified in the application regarding the liability to pay tax in relation to a transaction proposed by the applicant for which the Authority is required to give advance ruling. The Authority has been created to promote better compliance inter alia with the provisions of the Customs Act, 1962, on the lines of a similar Authority constituted under the Income-tax Act, 1961. The advance ruling would enable an importer to obtain in advance, a binding view from the Authority under the Act on issues which could arise in determining his tax liability A reading of the above provision would show that an advance ruling would be binding only unless there is a change in law or fact. In other words, if there is a change in fact which has a material bearing on the question raised for ruling by the authority, the Advance Ruling Authority would no longer be binding. This is indicative of the legislative intent that the expression business employed in Section 28E(a) of the Customs Act must be given a wide meaning so as to include business qua models / modus operandi and not business qua product. On reading of Sections 28 E and 28 I of the Customs Act conjointly, if there is a change in fact or law which substantially alters the position, the same would constitute activity for the purpose of Section 28 E of the Act. In the present case, AAR has found that there is change in facts and in our view, the change in modus adopted is extensive and would thus constitute business activity for the purpose of Section 28E of the Act. Thus, the challenge to the maintainability premised on construction by the Revenue in giving a narrow / restricted meaning to business is liable to be rejected. A reading of Section 28 I(2) of the Act would show that mere obtaining of an Advance Ruling in respect of a product does not bar an applicant from approaching the Advance Ruling Authority if there is a change in fact or law. Admittedly, there is change in business model. The 1st Respondent has on examination admitted the application which remains unchallenged. It is trite law that when an order resulting in adverse consequences is not challenged immediately / at the earliest / within the prescribed period (if limitation is prescribed) the same must be treated as having attained finality and then ought not to be disturbed lightly - the challenge to the maintainability raised as a preliminary issue by the appellant not agreed upon. Classification of imported goods - HELD THAT:- It has been repeatedly held that until all the components of the complete article are presented together for assessment at the same point of time, Rule 2(a) cannot be invoked to classify the parts as complete article. It has also been held that consignments removed / presented at different points of time from different factories cannot be clubbed together to classify the parts as complete article. The sine qua non for the application of this Rule is that any imported article, which is as presented , must have the essential character of the complete or finished article . It is also a settled position in law that the goods would have to be assessed in the form in which they are imported and presented on import and not on the basis of the finished goods manufactured after subjecting them to some process after the import is made. Rule 2 (a) if applied to the facts considered by the 1st Respondent, the import cannot be understood as that of motor vehicles. Six essential components viz., Engine along - with Transmission Unit, Door Panel, HVAC and Cooling Module, Exhaust System and Axle are being procured from vendors in India. There are no reason to interfere with the impugned order - this Writ Petition stands dismissed.
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2024 (7) TMI 1324
Classification of imported goods - Roasted Area Nut/Beetle Nut and Roasted Area Nut/Beetle Nut Cut - classifiable under CTH 080280 or not - HELD THAT:- In Commissioner of Customs, Chennai-II vs. Shahnaz Commodities International Pvt Ltd. [ 2023 (8) TMI 492 - MADRAS HIGH COURT ], this Court considered the similar issue and held that roasted betel/areca nut having been specifically classified under CTH 2008 19 20, the attempt to classify under CTH 08 02 80 would fall foul of the settled rule of construction that specific entry would prevail over general entry. The said judgment is squarely applicable to the facts of this case - appeal dismissed.
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2024 (7) TMI 1323
Request for provisional release of the goods pending investigation - use of the tyres imported by the appellants - whether this imported tyres can be released provisionally to the appellants pending investigation? - HELD THAT:- It is the case of the appellants that the tyres are of a kind used in mining and other off-road purposes whereas it is apprehended by the department that the tyres are being misused as truck and bus tyres. It is found that the impugned goods are not subjected to any tests/analysis by any authority having technical competence. The apprehension of the department is on the basis of a statement, of Shri Pannalal Choudhary, who looks after maintenance of trucks belonging to M/s Vikas Road Carriers Ltd, stating that these tyres are being used for trucks and buses. It is found that no corelation has been made to identify the tyres imported by the appellants and the subsequent mis-use, if any, thereof. It is settled principle of law that the classification of the goods is to be made with reference to the technical parameters of the goods in the condition in which they are imported and end-use or subsequent possible mis-use cannot be a criteria for the classification of the goods. The Learned Commissioner (Appeals) and the lower authority have relied upon the CBEC circular 35/2017-Cus dated 16/08/2017 stating inter alia that goods prohibited, under the Customs Act, 1962 or any other Act for the time being in force, may not be released provisionally - the impugned orders have not appreciated the circular in a correct manner. Whereas the circular advices that prohibited goods may not be released provisionally, the nature of the impugned goods being prohibited is yet to be established. No test report whatsoever, has been placed on record. There are force in the argument of the appellants that in case of any such misuse the competent authority, i.e. the road transport authority can take necessary action in public interest. The customs cannot assume the cause of such authority. In view of the discussion, the department has made no case for rejection of provisional release of the impugned goods. However, since the investigation is pending it will be in the interest of justice to accord provisional release subject to some conditions and restrictions. The impugned goods shall be provisionally released, within two weeks of receipt of this order subject to the fulfilment of conditions imposed - the impugned order is set aside and the appeals are partly allowed.
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Corporate Laws
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2024 (7) TMI 1322
Maintainability of the writ petition - petitioner s account has been declared as Non-Performing Asset - NCLAT observed that since the NCLT had reserved the proceedings filed by the Bank under Section 7 of the Code for passing orders, it was not inclined to entertain the appeal - HELD THAT:- The petitioner having filed the interlocutory application, the interest of justice demands that this application be considered prior to passing any order on the Company Petition preferred by the Bank. This is for the reason that in the interlocutory application, the petitioner has prayed that various subsequent events be taken note of and pronouncement of the order in the Company Petition be deferred. If the interlocutory application as well as the Company Petition are decided together, the apprehension of the petitioner of prejudice being caused to it cannot be brushed aside as unfounded - The interlocutory application now filed before the NCLT seeks consideration of these aspects before adjudicating the Company Petition. This request made by the petitioner ought to be considered by the NCLT before deciding the Company Petition. The interest of justice demands that the interlocutory application preferred by the petitioner being Interim Application No. 3623 of 2024 be first decided before proceeding to pronounce final order on the Company Petition - Petition dispsoed off.
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2024 (7) TMI 1321
Seeking dissolution of the company (in liquidation) - Prayer that the Official Liquidator be discharged as its Liquidator - Section 481 of the Companies Act, 1956 - HELD THAT:- In view of the prevailing facts and circumstances, it would be expedient to refer to the decision in Meghal Homes (P) Ltd. v. Shree Niwas Girni K.K. Samiti Ors. [ 2007 (8) TMI 447 - SUPREME COURT ] whereby the Supreme Court inter alia held that ' When the affairs of the Company have been completely wound up or the court finds that the Official Liquidator cannot proceed with the winding up of the Company for want of funds or for any other reason, the court can make an order dissolving the Company from the date of that order. This puts an end to the winding up process.' In keeping with the decision of the Supreme Court in Meghal Homes as also the import of Section 481 (1) of the Act, besides the facts and circumstances of the present case, these liquidation proceedings warrant to be brought to an end. Therefore, the present application is allowed. The company (in liquidation) M/s. Dream City Builders P. Ltd., stands dissolved and the Official Liquidator is hereby discharged as its Liquidator. The Official Liquidator is permitted to transfer the available balance, if any, to the Common Pool Fund and thereafter, to close the books of accounts of the company (in liquidation) - application allowed.
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Insolvency & Bankruptcy
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2024 (7) TMI 1320
Rejection of application u/s 10 of IBC - Seeking to initiate Corporate Insolvency Resolution Proceedings (CIRP) - It is the case of the Appellant that the Section 10 application was complete in all respect and all statutory prescriptions to file Section 10 application had been met - whether the Adjudicating Authority committed any error in rejecting the Section 10 application? - HELD THAT:- It is noticed that much before the Section 10 application was filed by the Appellant, the Respondent Bank had issued notices to the Appellant for personal hearing before declaring the Appellant to be a wilful defaulter. It is also found that the Adjudicating Authority took notice of the fact that the Appellant Company failed to appear before the Respondent Bank in spite of notices having been issued to them twice and gave a slip to the proceedings initiated by the Wilful Defaulter Identification Committee of the Respondent Bank. Even after being declared a defaulter, the Appellant continued not to respond to the notices issued by the Respondent Bank. The Appellant Company was selectively approaching the Bank requesting for some reprieve but was deliberately avoiding the Bank in the proceedings being conducted for being a wilful defaulter. This glaring duplicity in the conduct of the Appellant as pointed out by the Respondent Bank has also been taken cognisance of by the Adjudicating Authority in concluding that the Appellant has come before it with unclean hands. It does not escape notice that the Appellant was trying to embroil the Respondent Bank in multiple layers of litigation. It is an undisputed fact that the Appellant had filed securitization application SA-365 of 2019 before the DRT, Lucknow for stay on the auction of its properties by the Respondent Bank. Apart from moving the securitization application before the DRT, the Appellant had also knocked at the doors of the Hon ble Allahabad High Court by filing a Writ petition - the Appellant made incessant efforts to put a spanner in the recovery proceedings initiated by the Respondent Bank and finally resorted to filing the Section 10 application. There is no quarrel over the fact that Section 10 vests rights on the Corporate Debtor to resolve their insolvency. However, one cannot lose sight of the fact that this protective umbrella over the assets of the Corporate Debtor is not misused or abused in a manner so as to become a tool for deriving undue advantage at the cost of insolvency resolution which objective unequivocally resonates in the preambular aspirations of the IBC - the Adjudicating Authority rightly deprecated the Appellant Company for having filed the application under Section 10 of IBC after unsuccessfully trying at pre-empting recovery proceedings undertaken by the Respondent Bank. The Adjudicating Authority agreed upon that the bonafide of the Appellant in filing of the Section 10 application was doubtful and that the filing was done for reasons other than insolvency resolution and therefore deserves to be dismissed. There are no good reasons which warrants any interference in the impugned order - appeal dismissed.
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FEMA
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2024 (7) TMI 1319
Violations committed under FEMA Act - Personal hearing notice issued by the Assistant Director (SRO), directing the petitioner to appear before the adjudicating authority, i.e., the Additional Director, Directorate of Enforcement - Jurisdictional authority of the Additional Director of Enforcement - enhancement of pecuniary jurisdiction by way of notification dated 27.09.2018 to obstruct the proceedings already instituted by the Special Director (adjudicating authority) under the FEMA - HELD THAT:- Once the power to appoint an adjudicating authority is conferred on the Central Government and the Central Government, in exercise of power, issued a notification, no doubt the said notification is to be effected with prospective effect. While giving prospective effect, the cases which all are pending before the other authorities must be transferred to the appropriate authority with prospective effect for the purpose of continuance of further adjudication in the manner known to law. In the present case, such a transfer was effected from the file of the Special Director to the Additional Director of Enforcement. The present case has been transferred from Special Director to the Additional Director in view of the enhancement of pecuniary jurisdiction by the Ministry of Finance, Department of Revenue, vide notification dated 27.09.2018. Thus, this Court do not find any jurisdictional error or otherwise in the matter of continuation of further proceedings under the FEMA Act, by the Additional Director of Enforcement who is empowered to deal with the cases involving amount up to Rupees Twenty Five Crores, but not less than Rupees Ten Crores. In the case of the petitioner, the allegation is for a sum of Rs.11.27 Crores (Rupees Eleven Crores Twenty Sevel Lakhs) and therefore, the transfer of the case from the Special Director to the Additional Director of Enforcement is well within the provisions of the FEMA Act and the grounds raised by the petitioner fails. No writ against a Show Cause Notice is entertainable. A writ against a Show Cause Notice can be entertained only if the notice has been issued by an incompetent authority having no jurisdiction or allegations of malafides are raised. In the present case, the learned Senior Counsel made an attempt to establish that there is a jurisdictional error which would disentitle the Additional Director (adjudicating authority) to continue the adjudication. This Court is of the opinion that the ground raised is untenable and respondents have transferred the case to the Additional Director of Enforcement in view of the notification issued by the Government of India in exercise of the powers under Section 16(1) of the FEMA Act and thus, this Court has come to an irresistible conclusion that the petitioners are not entitled to the relief as such sought for in the present writ petitions. Writ petitions stand dismissed.
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PMLA
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2024 (7) TMI 1318
Seeking grant of regular bail - Money Laundering - scheduled offences - criminal conspiracy - huge amount of money was paid as kickbacks in advance to the public servants involved in the commission of alleged offences and in exchange of undue pecuniary benefits to the conspirators involved in the liquor trade - reasons to believe - mandatory twin condition of section 45 of PMLA satisfied or not - HELD THAT:- Section 45(1) of PMLA lists the twin conditions that must be satisfied before an accused can be enlarged on bail in a case of money laundering. In this context, it will be relevant to take note of the observations of Hon‟ble Apex Court in case of Vijay Madanlal Choudhary v. Union of India [ 2022 (7) TMI 1316 - SUPREME COURT ], on the satisfaction of mandatory twin conditions under Section 45 of PMLA, which held that ' The Court while dealing with the application for grant of bail need not delve deep into the merits of the case and only a view of the Court based on available material on record is required. The Court will not weigh the evidence to find the guilt of the accused which is, of course, the work of Trial Court. The Court is only required to place its view based on probability on the basis of reasonable material collected during investigation and the said view will not be taken into consideration by the Trial Court in recording its finding of the guilt or acquittal during trial which is based on the evidence adduced during the trial'. Thus, at the stage of consideration of bail of a person who is accused of commission of offence of money laundering under PMLA, the Court is not required to conduct a mini trial for the purpose of returning a finding of guilt, rather the material on record is to be examined to reach a conclusion as to whether there are reasonable grounds to believe that the accused is guilty of offence under PMLA. It is clear that the present applicant was part of preparation of the old excise policy and thereafter, the new excise policy was made to suit the co-accused(s) who were to pay kickbacks to the present applicant and co-accused(s) and the party concerned, from the profit so generated due to excise policy drafted to suit them and there are specific statements that Rs. 2 crores were paid to Sarvesh Mishra for Sh. Sanjay Singh at his official residence in lieu of the new excise policy made to suit them and generate profit for them, the role at this stage of the applicant cannot completely be ruled out. The specific allegations with time, place and manner when the meetings and conversations took place between Dinesh Arora, Vivek Tyagi, Sarvesh Mishra, Vijay Nair, Sh. Sisodia, Sh, Sanjay Singh etc. cannot be disregarded at this stage. Whether the applicant is entitled to bail on the ground that he is not an accused in the scheduled offence? - HELD THAT:- Recently, in case of Pavana Dibbur v. Enforcement Directorate [ 2023 (12) TMI 49 - SUPREME COURT] , the Hon‟ble Apex Court has held that it is not necessary that a person against whom the offence under Section 3 of the PMLA is alleged must have been shown as the accused in the scheduled offence. During the course of arguments, learned ASG representing the respondent had pointed out that the Directorate of Enforcement had already communicated and shared, via a letter dated 13.11.2023, under Section 66(2) of PMLA, information about the investigation regarding the facts of this case with the CBI. Further, the CBI had also written a letter dated 22.12.2023 to the ED, stating that the information shared by them has been taken on record for further investigation in the predicate offence case - this Court finds no merit in the argument that applicant herein has not been made an accused in the scheduled offence. Admissibility and an evidentiary value of statements recorded u/s 50 of PMLA - HELD THAT:- At the present stage of deciding the bail application of the accused, when the trial has yet not commenced, this Court would be required to take into consideration the material collected by the investigating agency including statements of witnesses recorded under Section 50 of PMLA, statements under Section 50 of PMLA can make out a formidable case of money laundering against an accused. The approver has not come forward to any Court of law to state that the statements so recorded were made under any stress or pressure or threat. The approver and his statements will be put to test of cross-examination and the evidentiary value of the statement will be adjudged on the touchstone of the cross-examination itself. Therefore, a statement recorded by a Magistrate as per law of a person who has now turned approver, was earlier an accomplice or accused, cannot be disregarded at this stage on the ground that his statement is unworthy of credence or there are reasons or motives to falsely implicate the present applicant - This Court, therefore, notes that the sanctity attached to a statement recorded under Section 164 of Cr.P.C., now termed as a statement of the approver, cannot be thrown at the threshold or disregarded for the purpose of consideration as to whether there is material on record, which within the parameters of PMLA, will disentitle the accused to grant of bail when tested on the anvil of Section 45 of PMLA to pass the test of twin conditions for grant of bail. The law regarding such admissibility and the stage when such admissibility can be examined and adjudicated has not been carved out by this Court, but by the enactment of the provisions of Code of Criminal Procedure and Indian Evidence Act and catena of judgments of the Hon‟ble Apex Court in this regard. The court is bound by law and cannot be influenced by the position of any petitioner - HELD THAT:- In the eyes of the law, it is of paramount importance to maintain impartiality and treat all individuals equally, regardless of their status as public figures or private citizens. While public figures may wield influence or hold positions of authority, their legal rights and obligations are subject to the same standards and principles as those of any other individual in society - The principle of equality before the law is based on the notion that justice should be blind to factors such as fame, wealth, or social standing. At the same time, orders are not passed only at the asking of the State but through legal proceedings and outcomes are determined solely based on the merits of the case and the application of relevant laws, without favouritism or discrimination. Thus, no ground for grant of bail is made out, at this stage - application disposed off.
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Service Tax
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2024 (7) TMI 1317
Interpretation of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) for service tax demand - Whether petitioner has actually paid the amount as indicated by petitioner in Form 1? - HELD THAT:- If petitioner is given an opportunity to produce the challans/receipt of the payments made to enable respondent to verify whether the payment was actually made against the tax liability pertaining to the concerned Show Cause Notice, the matter could be put to rest. Once petitioner satisfies the consequence thereof will be to consider the same as payment under the SVLDRS. The Committee constituted under Section 126 of the SVLDRS will give hearing to petitioner within six weeks from today and the notice of hearing shall be communicated atleast five working days in advance - If petitioner is unable to satisfy the Committee that the payment made was against the tax liability pertaining to the impugned Show Cause Notice then respondent may take further steps based on the Impugned Order dated 25th February 2021. Petition disposed off.
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2024 (7) TMI 1316
Suppression of facts or not - invocation of extended period of limitation - Non-payment of due amount of service tax on manpower recruitment and supply service - gross receipts indicated by the appellant in their ST-3 returns were substantially lower that the amounts shown in 26AS statement - appellant had collected the service tax amount from their clients and did not deposit the same in the Government exchequer - penalty. HELD THAT:- As per the legal provisions prior to 1.7.2012, it is noted that the liability to pay the entire service tax was on the service provider. However, vide notification No. 30/2012 dated 20.06.2012, the service tax liability was shared (25%/75%) in case if any individual or HUF or partnership firm is providing supply of manpower service for any purpose to business entity registered as a body corporate. The adjudicating authority has held that the Form 26 AS/Balance Sheets of the appellant, as obtained from the Income Tax department indicate that during the period 2011-12 to 2014-2015, the appellant was engaged in providing the said taxable services. There is no contrary evidence that has been submitted by the appellant to hold otherwise - the Department has relied on the 26AS statement which is a statement that provides details of any amount deducted as Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) from various sources of income of a taxpayer. This statement gives a consolidated record of every tax-related information associated with a PAN. Therefore, the veracity of the statement cannot be doubted. It is observed that it has been mostly contended by the ld. counsel to the appellant that the demand for the extended period is not sustainable as there was no intent to evade tax. At the outset, the contention of the ld. counsel that the show cause notice refers to suppression and not mis-statement of facts cannot be accepted - the appellant was aware of his tax liability and chose not to pay his tax correctly. In the instant case, the appellant did not cooperate with the investigations, failed to submit any documents to substantiate his claim and did not disclose the actual value of taxable services provided by him in the ST-3 returns filed by him. This clearly establishes his intent to evade his liability to pay service tax. Thereafter to appeal to this forum alleging that the demand was time barred, and the finding of suppression of facts was erroneous cannot be accepted. Extended period of limitation - HELD THAT:- It has been held in the impugned order that as per the chronology of events, during the period in question, the appellant had failed to discharge his liability correctly, as well as suppressed the value of the taxable services realized by them in the ST-3 returns filed by them - the Apex Court in the case of M/S. USHA RECTIFIER CORPN. (I) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2011 (1) TMI 12 - SUPREME COURT] held that extended period is invokable for notices where the information has been taken by the Department from the Balance Sheet - there are no hesitation in holding that the extended period was rightly upheld by the adjudicating authority. Penalties - HELD THAT:- The penalties imposed under Section 77(1)(c)(ii), 77(1)(c)(iii) and Section 78 of the Act upheld. There are no infirmity in the impugned order - appeal dismissed.
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2024 (7) TMI 1315
Levy of service tax on reverse charge mechanism - availing goods transport agency services by a manufacturer of ice-cream - HELD THAT:- It is to be placed on the record that negative list introduced under Section 66D w.e.f. 01.07.2012 has clearly excluded under Sub-Clause (p) services by way of transportation of goods by road but not services of a Goods Transport Agency . Therefore, if such services are provided by Goods Transport Agency then the same is subjected to Service Tax. Goods Transport Agency itself is defined under Section 65(50b) of the Finance Act, 1994, which means service in relation to transport of goods by road by any person and issue of consignment note, by whatever name called and Rule, 4B of the Service Tax Rules provides for mandatory issue of consignment notes by Goods Transport Agency while providing service in relation to transportation of goods by road in a goods carriage except when wholly exempted under Section 93 of the Act. It is found that no consignment note was issued by the goods transporter to the Appellant as per the description mentioned above, neither in the invoices raised by the transporter as provided in the second proviso to Rule 4A nor by way of separate consignment note in the form of a document as described in the explanation reproduced and those provisions have not undergone any change in the second amendment of 2012 made to Service Tax Rules, 1994 effective from 01.07.2012. Thus, procurement of vehicle or hiring of vehicle on kilometre basis without any connection with the destination or quantity cannot bring the nature of service offered through contractual engagement of the vehicles by its owners into the purview of Goods Transport Agency service, so as to impose Service Tax on reverse charge mechanism on the service recipient. The impugned order is set aside - appeal allowed.
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2024 (7) TMI 1314
Classification of services - Business Auxiliary Service or not - amount realized by the appellant was commission received in the course of providing such taxable service - extended period of limitation - penalty. HELD THAT:- The appellant has been engaged by their clients for procurement of goods on behalf of them. The goods procured by the appellant were sold to their clients on 'High Sea Basis' on receipt of an amount as determined in the agreement - the appellant has been engaged for the import of goods on behalf of their customers and the appellant is getting a fixed component as their consideration. The consideration is pre-determined in the agreement itself. Thus, it is observed that the contention of the appellant that they sell the goods procured by them to their customers and earn trading profits, is not supported by any evidence - the remuneration received from the customers is pre-determined and hence, it is equivalent to the 'commission' fixed for rendering a service. The service tax has been confirmed in this case under the category of business auxiliary service . Procurement of goods or services, which are inputs for the client, is specifically covered under sub-clause (iv) of the definition of 'business auxiliary service'. Also, 'undertaking any activity relating to sale or purchase of goods on receipt of commission' is also specifically covered under the definition of business auxiliary service - the services rendered by the appellant in connection with procurement of goods on behalf of their clients are specifically covered within the definition of business auxiliary service - the appellant is liable to pay Service Tax under the category of business auxiliary service . The appellant being a canalizing agency, the service charges collected by them have nothing to do with the transaction value of the goods. This view has been held by the Tribunal in the case of Gupta Chemicals Ltd. v. Commissioner of Customs, Jaipur [ 1999 (1) TMI 429 - CEGAT, NEW DELHI] , which has been affirmed by the Hon ble Apex Court in [ 1999 (10) TMI 752 - SUPREME COURT] . Extended period of Limitation - penalty - HELD THAT:- The appellant is a Government of India undertaking and there is merit in the submission of the appellant that they have no intention to evade payment of tax. Thus we observe that suppression of facts with intention to evade payment of tax has not been established in this case. Hence, the demand confirmed in the impugned order by invoking the extended period of limitation is not sustainable. It is observed that the demand in this case has been confirmed for the period 2005-06 and 2006-07 and the Notice was issued on 22.12.2009, which is beyond the normal period of limitation of one year. Thus, the entire demand confirmed in the impugned order is barred by limitation and hence not sustainable. For the same reason, no penalty is imposable on the appellant. The impugned order is set aside on the ground of limitation - appeal allowed.
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2024 (7) TMI 1313
Classification of service - mining services or site formation and clearance, excavation and earth moving and demolition services? - works for drilling operations of wells in oil fields in the state of Assam and Arunachal Pradesh - non-imposition of penalty - HELD THAT:- The respondent has entered into agreements with M/s. OIL and M/s. ONGC to carry out works for drilling operations of wells in oil fields in the state of Assam and Arunachal Pradesh. A perusal of the Work Orders executed by the Respondent reveals that all the activities undertaken by them are in relation to mining service, which was brought into the net of taxable services with effect from 01.06.2007 - the ld. adjudicating authority has examined the work orders and given his findings at paragraph 2.2 and 2.3 of the impugned order wherein it has been categorically recorded that the activities undertaken by the respondent under the 12 work orders were not liable for Service Tax under the category of site formation and clearance, excavation and earth moving and demolition services . The ld. adjudicating authority has given a well-reasoned finding to arrive at the conclusion that the Respondent is not liable for payment of service tax under the category of site formation and clearance, excavation and earth moving and demolition services , for the period prior to 01.06.2007. Accordingly, there are no infirmity in the impugned order passed by the ld. adjudicating authority in dropping the demand of service tax for the period prior to 01.06.2007 - the ld. adjudicating authority has rightly dropped the demand of Service Tax under the category of site formation and clearance, excavation and earth moving and demolition services for the period prior to 01.06.2007. Non-imposition of penalty - HELD THAT:- It is observed that the appellant had discharged their entire service tax liability before issuance of the Show Cause Notice. They had also discharged major part of interest liability before issuance of the Show Cause Notice. In view of the above fact, the ld. adjudicating authority has extended the benefit of Section 80 of the Finance Act, 1994 and not imposed penalties under Sections 76, 77 and 78 of the Act - there is no suppression of fact with intention to evade tax established in this case - the ld. adjudicating authority has rightly extended the benefit of Section 80 of the Finance Act, 1994 and not imposed penalties under Sections 76, 77 and 78 of the Finance Act, 1994. The dropping of the demand of service tax and non-imposition of penalties in the impugned order by the ld. adjudicating authority is upheld - the appeal filed by the Department is rejected.
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Central Excise
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2024 (7) TMI 1312
Levy of Excise Duty - Process amounting to manufacture or not - activity of filling and marketing hydrogen gas cylinders - HELD THAT:- In the instant case, the process involved is that the gas received by the appellant through the pipeline has some accumulation of moisture and in order to remove the same from the gas, the compressor has an inbuilt system of drying the moisture. The treatment employed by the respondent-herein is oil filtration for the removal of moisture from gas by drying the inbuilt system of compressing gas into the cylinders. The said process does not amount to a manufacturing process. There are no merit in the appeal. Hence, the appeal is dismissed.
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2024 (7) TMI 1311
Denial of CENVAT Credit - ISD invoices issued to the appellant did not contain the particulars prescribed under Rule 4A of the Service Tax Rules, 1994 - appellant had availed credit by splitting the credit as service tax, education cess, secondary higher education cess and utilized the same - entitlement to avail the credit based on the ISD invoices as the appellant unit had not received the input services covered under the said invoices. Splitting the credit as service tax, education cess, secondary higher education cess and utilising the same - HELD THAT:- It is found that Secondary and Higher Education Cess , has been made Cenvatable by suitably amending the Cenvat Credit Rules, 2004 vide Budgetary Notification No. 10/2007-CE (NT), whereby the credit of the education cess on excisable goods and the secondary and higher education cess on excisable goods and education cess on taxable services can be utilized, either for payment of the education cess on excisable goods or secondary and higher education cess on excisable goods or for the payment of education cess on taxable services. Hence there was no bar on service tax credit being split and utilized for paying education cess liability. Availment of credit based on such ISD invoices as the appellant unit had not received the input services covered under the said invoices - HELD THAT:- The issue has been considered by the Hon'ble Karnataka High Court in the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE-I COMMISSIONERATE VERSUS ECOF INDUSTRIES (P.) LTD. [ 2011 (4) TMI 560 - KARNATAKA HIGH COURT] wherein it was held that 'the assessee is entitled to distribute the Cenvat credit on the input services on its manufacturing unit or other units providing the output services. The view taken in the order in appeal that the distribution of credit is for the advertisement of the product, which is not at all manufactured at Malur Unit, therefore, cannot be accepted. The finding recorded by the Appellate Authority that the assessee is entitled to take credit only in the unit where the product is manufactured is therefore not the mandate of Rule 7 of the Cenvat Credit Rules.' The appellant was eligible for availing the credit and the demand for duty and imposition of penalty in the impugned order cannot be sustained. The impugned order hence merits to be set aside and is so ordered - Appeal allowed.
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2024 (7) TMI 1310
CENVAT credit on molasses used for the manufacture of rectified spirit and undenatured alcohol - department was of the view that undenatured ethyl alcohol in the form of rectified spirit, extra neutral alcohol and neutral alcohol etc. which is also manufactured in the distillery are not specified in the First Schedule to the Central Excise Tariff Act, 1985 as excisable goods - exemption of Notification No. 67/1995-CE dated 16.3.1995 on molasses used for captive consumption for manufacture of rectified spirit, undenatured alcohol. HELD THAT:- The reason for denying the credit as well as the eligibility of exemption notification No. 67/95 is that the finished products rectified spirit, undenatured alcohol are non-excisable goods and that these cannot be treated as exempted goods as contended by the appellant. This issue stands covered by the judgment of the Hon'ble Supreme Court as reported in COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S. DHARANI SUGARS AND CHEMICALS LTD. [ 2022 (3) TMI 274 - SC ORDER ] where it was held ' We do not find any merit in the present appeal, as the respondent/assessee has enjoyed the benefit of the exemption Notification No. 67/95-C.E., dated 16-3-1995 till financial year 2005-06. The appellant-Revenue has predicated their case on the addition of the item other in Heading No. 22.04 made vide sub-heading 2204.90 with effect from 1-3-2005. In our opinion the aforesaid addition is not a substantive change or modification.' The Tribunal in the case of M/S. DHARANI SUGARS CHEMICALS LTD. VERSUS THE COMMISSIONER OF CGST CENTRAL EXCISE, TIRUNELVELI. [ 2024 (7) TMI 1163 - CESTAT CHENNAI] has considered the issue in detail. The view of the department as to whether rectified spirit and undenatured alcohol are not non-excisable has been considered by the Tribunal in detail, where it was held that 'The Board Circular No. 808/5/2005-CX dated 25.02.2005 was also relied. It has been clarified by Board that rectified spirit and extra neutral alcohol are covered under subheading 22 07 2000 after restructuring of the Tariff. Thus, it will be covered under Chapter 22.' There are no ground to take a different view since the issue and facts are identical - the demand cannot sustain - appeal allowed.
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CST, VAT & Sales Tax
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2024 (7) TMI 1309
Challenge to attachment orders - Priorty charge over dues - Respondent No. 2 (The Deputy Commissioner of Sales Tax) will have priority charge over the secured assets sold by Petitioner bank (secured creditor) under the SARFAESI Act or not - HELD THAT:- Section 26E of the SARFAESI Act very clearly mentions that the secured creditors shall be paid in priority over all other debts and taxes. In the present proceedings it is Petitioner Bank who has registered its claim against the secured assets with CERSAI earlier i.e. 4/10/2022, in view of the law as laid down by the Full Bench of this Court, in Jalgaon Janta Sahakari Bank Ltd. [ 2024 (5) TMI 188 - BOMBAY HIGH COURT] and as per Section 26E of the SARFAESI Act, the Petitioner Bank (secured creditor) will have priority over the revenues and taxes of the State Government. The present Writ Petition filed by Petitioner Bank (secured creditor) deserves to be allowed - the Respondent No. 2 (the Deputy Commissioner of Sales Tax, Pune) would be free to take such steps as they deem fit against the Respondent No.6 for recovery of Sales Tax dues as per law. Petition allowed.
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Indian Laws
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2024 (7) TMI 1308
Dishonour of Cheque - vicarious liability in criminal law - Whether the signatory of the cheque, authorized by the Company , is the drawer and whether such signatory could be directed to pay interim compensation in terms of section 143A of the Negotiable Instruments Act, 1881 leaving aside the company? - HELD THAT:- The High Court's interpretation of Section 7 of the NI Act accurately identified the drawer as the individual who issues the cheque. This interpretation is fundamental to understanding the obligations and liabilities under Section 138 of the NI Act, which makes it clear that the drawer must ensure sufficient funds in their account at the time the cheque is presented. The appellants' argument that directors or other individuals should also be liable under Section 143A misinterprets the statutory language and intent. The primary liability, as correctly observed by the High Court, rests on the drawer, emphasizing the drawer's responsibility for maintaining sufficient funds. The general rule against vicarious liability in criminal law underscores that individuals are not typically held criminally liable for acts committed by others unless specific statutory provisions extend such liability. Section 141 of the NI Act is one such provision, extending liability to the company's officers for the dishonour of a cheque - The High Court rightly emphasized that liability under Section 141 arises from the conduct or omission of the individual involved, not merely their position within the company. The High Court s decision to interpret 'drawer' strictly as the issuer of the cheque, excluding authorized signatories, is well-founded. This interpretation aligns with the legislative intent, established legal precedents, and principles of statutory interpretation. The primary liability for an offence under Section 138 lies with the company, and the company s management is vicariously liable only under specific conditions provided in Section 141. The appellants' submissions are thus rejected, and the High Court s judgment is upheld. Appeal dismissed.
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2024 (7) TMI 1307
Suit for permanent injunction - outstanding dues and arrears of storage charges - Order VII Rule 11 CPC - HELD THAT:- The case in hand stands on a better footing, inasmuch as, the plaintiff-respondent had specifically reserved its rights in the first suit regarding claim against warehousing charges, damages for illegal use and occupation etc. and further had applied for leave before the Trial Court for filing a separate suit, which leave had been granted. There was neither any relinquishment at any stage, nor omission to claim relief. Both the causes of action being separate, the second suit was clearly maintainable. The appellant, who is facing recovery of more than Rs.8 crores, is unnecessarily trying to delay the progress in the suit, which is pending since 2016. The impugned order does not suffer from any infirmity - Appeal dismissed.
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2024 (7) TMI 1306
Maintainability of petition - availability of efficacious remedies under the SAEFAESI Act, 2002 - issuance of notices issued under Section 13(2) and 13(4) of the SARFAESI Act, 2002 - HELD THAT:- The writ petition was filed on 20th July, 2022 i.e. after issuance of the notice under Section 13(4) of the said Act. It appears from the writ petition that the respondent no. 1 filed the writ petition challenging the issuance of notices issued under Section 13(2) and 13(4) of the SARFAESI Act, 2002, including the illegal and arbitrary action on the part of the appellant bank for alleged non-compliance of the letter of arrangement dated June 28, 2021. The Hon ble Supreme Court in Phoenix ARC Private Limited [ 2022 (1) TMI 503 - SUPREME COURT] , after taking note of the various decisions, held that writ petitions at the instance of borrowers against the proposed action to be taken under Section 13(4) of the SARFAESI Act, 2002 is an abuse of process of the Court in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act. It was further held that under such situation the High Court ought not to have entertained the writ petitions - The Hon ble Supreme Court in Phoenix ARC (supra) held that the remedies available to an aggrieved person against the action taken under Section 13(4) of the SARFAESI Act by way of appeal under Section 17 of the Act is both expeditious and effective and the High Court while exercising its jurisdiction under Article 226 is dutybound to consider whether the petitioner has any alternative or effective remedy for resolution of dispute. The Hon ble Supreme Court in Baghora Polylab (P) Ltd. [ 2008 (9) TMI 864 - SUPREME COURT] held that a contract may be discharged by the parties to the original contract either by entering into a new contract or by acceptance of performance of modified obligations in lieu of the obligations stipulated in the contract. In the case on hand it is evident from the records that the respondent no.1 having executed documents in terms of the letter of arrangement dated 11.10.2021 have entered into a new contract in substitution of the original contract i.e. the restructuring of accounts vide letter dated 28.06.2021. Therefore, the original contract vide restructuring letter dated 28.06.2021 gets discharged by the subsequent act of the parties - The issue of non service of letter of arrangement dated 28.06.2021 which weighed with the learned Single Judge pales into insignificance in view of the aforesaid observations of this Court. This Court is of the considered view that after the respondent no. 1 accepted the letter of arrangement dated 11.11.2021, the cause of action for seeking specific performance of the letter of restructuring dated 28.06.2021 no longer survives. This Court, therefore, holds that the direction passed by the learned Single Judge upon the Bank to give effect to the letter of arrangement dated 28.06.2021 and to give the benefit of the same to the writ petitioner/respondent no. 1 herein calls for interference. The impugned judgment and order dated November 3, 2021 stands set aside and quashed.
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