Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 31, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
GST
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Goods detained for wrong destination in documents. No mens rea found for tax evasion. Human error in e-way bill. Proceedings quashed.
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Vehicle detained for expired E-Way bill, mismatch details. Proceedings initiated u/s 129 TSGST Act. Opportunity for hearing. :
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Doctrine of mutuality - GST on services by association to members - Provisions valid, but retrospective effect impermissible. Prospective from 01.01.2022. Case-by-case examination required.
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Recipient liable for reverse charge eligible for Advance Ruling despite definition - Section 95 contextual interpretation
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Petition maintainable despite alternative remedy. Transitional credit allowed. Filing GST return in Telangana permitted for PAN-linked centralized registration. Credit transfer u/s 140(8) proviso valid.
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Error in filing led to ITC denial. Court allowed rectification despite time lapse, considering company's survival at stake.
Income Tax
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Reassessment validity hinges on initial reasons; AO can't deviate. Explanation 3 doesn't allow changing original grounds.
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Offences u/s 279-A IT Act non-cognizable, triable by Magistrate. Appeals against conviction lie before Sessions Judge. Avoid conflicting judgments.
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Reopening assessment allowed despite ex post facto approval from Principal Chief Commissioner for issuing notice u/s 148(A)(b).
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Reduced royalty rate of 0.75% on FOB value upheld. 19% growth rate for share valuation. Deductions allowed on scrap sale receipts.
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Liquidated damages disallowed. Warranty provision upheld. TPO's income enhancement void. AE services not stewardship. Re-notification due.
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Reopening valid if income escaped assessment or mistake, not change of opinion. Interest on loans for new company not exempt.
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AO conducted enquiries on demonetization cash deposits, accepted assessee's submissions after replies. CIT set aside for reassessment without examining details.
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Exemption u/s 10(35) disallowed due to unchallenged CPC order. Exemption u/s 10(23FB) rejected, attaining finality. Exemption u/s 10(38) allowed for LTCG on share sale.
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Rigorous assessment with due diligence, proper inquiry & verification. AO applied mind. PCIT order exceeded jurisdiction, irregular exercise of revisionary power.
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Mauritian entity's long-term gains from share sale exempt under India-Mauritius tax treaty. Withholding tax deducted, refund granted.
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CIT(Appeals) erred in dismissing appeal without considering merits despite assessee's participation. Order set aside for disposal on merits.
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Incorrect section code selection during 80G(5) registration acknowledged. Clarifications on religious expenses, vegan food, non-audit, animal welfare & donations overlooked. Fresh adjudication ordered.
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Assessee argued limited scrutiny, but mutuality principle examination was necessary for deduction evaluation. Court ruled breach of contributor-beneficiary identity commercializes transactions, taxing surplus.
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Unexplained money & cash credit additions deleted as source explained. Capital contribution by partners through banking channels accepted.
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Loss from trading penny shares allowed. Transactions genuine despite neutralizing gains. High trading volumes ignored. Market rigging unproven.
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Unexplained cash credit deleted if genuineness, creditworthiness of investors established. Taxing authorities can claim dues during IBC resolution/liquidation.
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Assessee complied with queries in original assessment; AO didn't dispose objection for reopening. CIT(A) rightly quashed reassessment order.
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153C notice to 'other person' - block period starts from notice date, not search. For AY 2012-13, relevant is AY 2007-08 to 2012-13. Can't reopen AY 2006-07.
Customs
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Complaint quashed, petitioner exonerated as not beneficial owner of foreign currency. Tribunal's decision on merits, not technicalities. No abuse of process.
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Tribunal dismissed Revenue appeals on interest refund for excess customs duty, citing CBIC instructions & precedent order.
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ICs for mobile phones classified under CTH 8542, not 8517. Entitled to duty exemption as not standalone apparatus.
FEMA
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Reasonable opportunity of being heard extends beyond show cause notice. Grave consequences mandate full natural justice compliance.
Indian Laws
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Royalty isn't tax but contractual pay for mineral rights. States can tax mineral lands via Entry 50, but Entry 50 subtracts from Entry 49's scope.
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Jurisdiction of civil court u/s 34 of SARFAESI Act challenged. Suit rejected under Order VII, Rule 11 CPC. mandatory. barred, has purview. insufficient. Appeal dismissed.
IBC
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CIRP against debtor & guarantor. Creditor loan secured by guarantee. Guarantor CIRP, haircut. Creditor filed Sec 7 for remaining dues against debtor.
PMLA
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Acquittal of predicate offence nullifies money laundering case under PMLA, rules courts in kidney racket case.
Service Tax
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Mandatory requirements for invoking proviso to Section 73(1) stated in show cause notice. Statutory appeal remedy available u/s 85. No grounds for extended limitation period. Petition dismissed.
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Services by licensed insurance agents = taxable insurance auxiliary services. Unlicensed = business support services, not RCM.
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Statutory body's regulatory fees for architectural education & promotion exempted from service tax under mega exemption notification.
Central Excise
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Change of opinion can't void provisional assessments. Abatement eligibility requires CENVAT credit findings. Purchase price verification not needed.
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Tribunal dismissed appeal on assessable value of goods sold to related party u/s 4(1)(b) of Central Excise Act r/w Valuation Rules 2000.
VAT
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Revisional order challenged on limitation grounds u/s 33 TVAT Act. Assessment based on presumptuous audit reports. Penalty sans show cause notice u/s 45(6). HC set aside reassessment order, remanded for fresh assessment.
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Tribunal can't decide appeal ex parte sans appellant, violates natural justice. Dismiss for non-prosecution if appellant absent, not decide merits.
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (7) TMI 1450
Detention of goods on its onward journey - detention on the ground that the goods were being dispatched on a place different than mentioned in the documents - levy of penalty u/s 129 of the UPGST Act - existence of mens rea or not - HELD THAT:- It is not in dispute that the purchaser was of Chandpur, but the goods were to be consigned to M/s Udit Engineers, Aligarh. When the goods were onward journey, the same were intercepted as in the e-way bill, the place of delivery was mentioned as Chandpur (UP), instead of Aligarh. This error can occur due to human error while filling up the form/e-way bill. Further, there is no finding recorded by any of the authorities below that there was a mens rea for evading payment of tax. Even before this Court, there is no pleading on behalf of the Sate that there was any intention to evade tax. This Court in Nancy Trading Company [ 2024 (7) TMI 1303 - ALLAHABAD HIGH COURT ] has held that ' The error committed by the petitioner for not generating E Tax Invoice before movement of goods is a human error. It is also not in dispute that prior to 1st August, 2022 the dealers who were having annual turn over of more than Rs. 20 crores was required to issue E Waybill. The said limit has now been reduced with effect from 1st August, 2022 to Rs. 10 crores, hence there was bona fide mistake on the part of the petitioner for not generating E Tax Invoice but in absence of any specific finding with regard to mens rea for evasion of tax, the proceeding under section 129 (3) of the Act should not have been initiated. ' The impugned order dated 30.09.2020 passed by the respondent no. 3 as well as the impugned order dated 21.08.2019 passed by the respondent no. 2 cannot be sustained in the eyes of law - petition allowed.
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2024 (7) TMI 1449
Initiation of proceedings under Section 129 of the TSGST Act - detention of vehicle with goods - movement of taxable goods without E-Way bill - HELD THAT:- The proceedings for violation of the provisions of Section 129 of the TSGST Act have been initiated by respondent No.6 during inspection and detention of the vehicle bearing No. TR-01-AH-1562 on 09.07.2024 allegedly loaded for delivery of consignment from the warehouse of the petitioner at Bypass Road, Dukli, West Tripura to Udaipur, Gomati Tripura after the E-Way bill had expired on 07.07.2024. This fact does not appear to be in dispute even as per the reply submitted by the petitioner at Annexure-13. The relevant MOV-01, MOV-02 and MOV-07 also indicate that there was a mismatch in the number of the vehicle with the vehicle number mentioned in the E-Way bill which had expired. This Court is not required to interfere in the matter since the proceedings are inchoate. Needless to say, the authorized officer/respondent No.6-Inspector of State Taxes has to conclude the proceedings in accordance with law upon giving opportunity of physical hearing to the petitioner and/or the driver of the conveyance within the stipulated time - Petition disposed off.
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2024 (7) TMI 1448
Doctrine of mutuality - Levy of GST on services in carrying out the activities by the petitioner association - Constitutional Validity of Section 2 (17) (e) and Section 7 (1) (aa) and explanation thereto of the Central Goods and Service Tax Act, 2017 and corresponding provisions of Kerala Goods and Services Act 2017 - vired of Article 246A read with Article 366 (12A) and violative of Articles 14, 19(1) (g), Articles 265 and 300A of the Constitution of India or not - constitutional validity of retrospective effect from 01.07.2017 of Section 7 (1) (aa) - violative of Articles 14, 19 (1) (g) Articles 265 and 300A of the Constitution of India or not. Interpretation of statute - Whether an amendment is clarificatory or it is a substantive change and mere legislature assertion that the amendment is clarificatory is not conclusive? HELD THAT:- The Supreme Court in its judgment in the case of Karnataka Bank Ltd v. State of Andra Pradesh [ 2008 (1) TMI 605 - SUPREME COURT] deals with the levy of professional tax under Article 276 of the Constitution of India held that the Constitution empowers the State Legislatures to impose professional tax on any person subject to the maximum cap of Rs. 2500/- per person. The Andra Pradesh State Legislature defines the term person under Section 2 (j) of the Act and explanation to Section 2 (j) of the Act provided that every branch of a firm, company, corporation or other Corporation Body, any Society, Club or Association shall be deemed to be a person. The Supreme Court held that the Legislature should be given the widest power to define the term Person who is to be taxed and a different meaning that the definition in the General Clauses Act can be given for the purposes of taxation and the Legislature in its wisdom can create an artificial unit to define a person for the purposes of levy of tax, and hence, the definition that every branch of a corporate entity would be deemed to be a person and each such branch would be liable for tax independently was upheld. In the case of State of Madya Pradesh v. Rakesh Kohli [ 2012 (5) TMI 262 - SUPREME COURT] the Supreme Court held that the Legislature enjoys a greater latitude for classification, and it is open to the Legislature to identify areas of evasion of tax and bring in provisions to plug the loopholes even by deeming fiction or artificial definitions. The Parliament / State Legislature has amended Section 7 (a) by inserting Section 7(aa) by the Finance Act, 2021. The amendment, as held, is neither beyond legislative competence nor offends any of the fundamental rights guaranteed under Part III of the Constitution of India nor is manifestly arbitrary or capricious. Therefore, the amendment brought in Section 7 (a) by inserting Section 7 (aa) is well within the legislative competence and not ultra-virus. Whether the petitioner can be asked to pay tax retrospective, i.e., w.e.f 01.07.2017 when the principal of mutuality was in vogue, and GST authorities never issued a notice to the petitioner for payment of GST by them? - HELD THAT:- Before the amendment was brought in inserting Section 7 (aa) by the Finance Act, 2021, the law of mutuality was well established in the principle of taxation in case of supply of goods and services by clubs/associations to its members. The GST is an indirect tax to be paid by the recipient of goods and services. When the law of mutuality, as held in the Calcutta club case, was understood by the authorities as well as the petitioner, the petitioner did not collect the GST. However, once the amendment has been brought into statute by inserting Section 7 (aa) by the Finance Act 2021, the petitioners have become liable to pay the GST on the supply of goods and services to their members. Section 7 (aa) in my view, therefore, should not be given retrospective operation w.e.f 01.07.2017 but it should be given effect from the date when it was notified ie., 01.01.2022. Whether all the activities undertaken by the petitioner involve the supply of goods and services to its members? - HELD THAT:- The various activities undertaken by the petitioner association have been mentioned in previous paragraphs of the judgment. Therefore, the assessing authority is required to examine each activity independently to arrive at a conclusion as to whether such an activity involves the supply of goods and services so that the tax may or may not be imposed on such activity. However, this court would not like to comment on this aspect, and it is left open to the petitioner to satisfy the assessing authority that the particular activity is not involved in any supply of goods and services. The present writ petitions so far as the challenge to the constitutionality of Section 7(aa) is concerned are dismissed - However, it is held that the provisions of Section 7(aa) will have prospective operation with effect from 01.01.2022.
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2024 (7) TMI 1447
Cancellation of the petitioner's GST registration - failure to file returns in time on account of ill-health - HELD THAT:- The appellate authority cannot be faulted for rejecting the appeal in view of the language of Section 107 of the Central Goods and Services Tax Act, 2017. At the same time, the petitioner should not be left without remedy. In Suguna Cutpiece v. The Appellate Deputy Commissioner (ST)(GST) and others, [ 2022 (2) TMI 933 - MADRAS HIGH COURT ], this Court directed restoration of registration subject to certain conditions. In the over all facts and circumstances, the petitioner is entitled to an order on similar lines. The petitioner is directed to file returns for the period prior to the cancellation of registration, together with tax dues along with interest thereon and the fee fixed for belated filing of returns within a period of forty five (45) days from the date of receipt of a copy of this order - petition disposed off.
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2024 (7) TMI 1446
Seeking reimbursement of GST payment from Municipal Council - grievance of the petitioner as echoed in this petition is that the said order has not been complied with by the Municipal Council, Bhind in letter and spirit and reimbursement is yet to be made to the petitioner - HELD THAT:- Reliance placed upon the judgment of the Coordinate Bench in M/S M.K. ENGINEERS VERSUS THE STATE OF MADHYA PRADESH, PROJECT ENGINEER JABALPUR, MANAGING DIRECTOR M.P. POLICE HOUSING AND INFRASTRUCTURE DEVELOPMENT CORPORATION LTD., SUPERINTENDING ENGINEER OFFICER OF CHIEF COMMISSIONER CUSTOMS [ 2023 (10) TMI 1419 - MADHYA PRADESH HIGH COURT] in which it was held that 'In case the amount so claimed by petitioner is undisputed and due then the same shall be released or else if there is any legal impediment in releasing the same, then a speaking order shall be passed assigning reason for declining the claim within an outer limits of 30 days from the date of receipt of representation. and petitioner seeks parity with that order.' On going through the documents annexed with the petition as well as order of the Coordinate Bench dated 06th October, 2023 this writ petition is disposed of with the direction that respondent/ Municipal Council, Bhind shall comply the directions as contained in the above case, mutatis mutandis. The petition is disposed off.
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2024 (7) TMI 1445
Scope of Advance Ruling application - Liability of recipient of good or services to pay tax on reverse charge basis - exemption under Serial No.18 of N/N.12/2007 Central Tax (Rate) - HELD THAT:- Section 98 provides the procedure to be adopted on receipt of an application for advance ruling. Under sub section 2, the Authority after examining the application, record and providing opportunity of hearing to the applicant and the officer concerned, has to pass an order either admitting or rejecting the application. Proviso to Sub-Section 2 provides that the application for advance ruling shall not be admitted on the question raised, pending or decided in the case of the applicant under any of the provisions of the CGST Act. The petitioner, if not exempted by the notification is liable to pay tax on reverse charge basis. In other words, the liability to pay tax is of petitioner, inspite of being the recipient. The definition of advance ruling relied upon to oust the petitioner from making application, needs to be analyzed in the backdrop that the petitioner being liable to pay tax on reverse charge basis shall be covered under the definition of taxable person - A registered person or a person desirous of obtaining registration under the Act falls within ambit of the applicant in Section 95. It is compulsory for the petitioner to get registered, under Section 24 of CGST Act, being liable to pay tax on reverse charge basis. It cannot be lost sight that Section 95 starts with in this chapter, unless the context otherwise requires thereby leaving leverage for an interpretation to be given to the defined word in context it is being used. The matter needs consideration from another angle. Under Section 9(3) of the CGST Act, the Government on recommendation of the Council notifies the categories of goods or services or both, for payment of tax on reverse charge basis. It is stipulated that all provisions of the Act shall apply to the recipient of the goods or services or both, deeming to be the person liable to pay tax - the fiction under Section 9(3) of the CGST Act has to be given full play, by bringing the dealer liable to pay tax on reverse charge basis within the ambit of Chapter XVII for seeking Advance Ruling. The appeal against the Advance Ruling is provided under Section 100 of the CGST Act. The concerned Officer, the Jurisdictional Officer or the applicant can prefer an appeal against the ruling given under Section 98(4). No appeal is provided against rejection of the application under Section 98(2) of the CGST Act. The application of the petitioner was ousted at threshold under Section 98(2), as not maintainable. Section is unambiguous that appeal can be filed only against the orders pronounced under Section 98(4) of the CGST Act. The matter is remitted back to AAR for deciding the application afresh under Section 98(4) of the CGST Act - the impugned order is set aside - petition allowed by way of remand.
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2024 (7) TMI 1444
Maintainibility of petition - availability of alternative remedy - Challenge to Order-in-Original (OIO) - HELD THAT:- The impugned OIO, at best, can be said to be an erroneous order. No amount of argument is advanced to show that it suffers from any patent lack of jurisdiction. It is trite that despite availability of statutory alternative remedy, interference under Article 226 of the Constitution can be made in certain circumstances. However, this is discretion of the Court and not a compulsion. In M/s Godrej Sara Lee Ltd. [ 2023 (2) TMI 64 - SUPREME COURT ], the reason for entertaining a petition was point was confined to interpretation of law and there were no disputed questions of fact. The Apex Court recently passed a detailed order against the judgment of this Court in PHR Invent Educational Society Vs. UCO Bank and Others [ 2024 (4) TMI 466 - SUPREME COURT (LB) ] disapproving the action of entertaining the writ petition despite availability of alternative remedy. In this view of the matter, since the petitioner has a statutory efficacious alternative remedy, it is not required to entertain this petition because the petitioner has not shown any of those ingredients on which interference can be made by bypassing the statutory remedy. Petitioner has not shown that the impugned OIO suffers from jurisdictional error or constitutionality of any provision etc., is under challenge. Mere violation of principles of natural justice etc., cannot always be a reason for interference in a writ petition. The petitioner is unable to show any such flaw which can form basis for interference in the impugned OIO by this Court. It also could not be established as to what palpable injustice would be caused to the petitioner if he is relegated to avail alternative remedy. Petition disposed off.
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2024 (7) TMI 1443
Maintainability of petition - availability of alternative remedy - transitional credit - whether in the teeth of Section 140 of the GST Act, was there any bar or prohibition for filing return in the GST portal of Telangana where the petitioner s branch admittedly exists? - HELD THAT:- Since it is a pure question of law, in view of judgment of the Supreme Court in M/s. Godrej Sara Lee Ltd. [ 2023 (2) TMI 64 - SUPREME COURT ] the petitioner is not relegated to avail the statutory alternative remedy. Justice Dipankar Datta in M/s. Godrej Sara Lee Ltd. [ 2023 (2) TMI 64 - SUPREME COURT ], speaking for the Bench, poignantly held ' What follows from the said decisions is that where the controversy is a purely legal one and it does not involve disputed questions of fact but only questions of law, then it should be decided by the high court instead of dismissing the writ petition on the ground of an alternative remedy being available.' - it is deemed proper to entertain this petition and not throw the petition overboard for availing the alternative remedy. Section 140 (1) of the Act envisages that a registered person other than a person opting to pay taxes under Section 10 shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit. Undisputedly, the registration number/Permanent Account Number of the petitioner is same nationwide. Thus, sub-section (1) of Section 140 does not permit the respondents to arrive at a conclusion that the petitioner was obliged to file return electronically only in the GST portal of Maharashtra. Admittedly, the petitioner had registration under the existing law i.e., Service Tax Law and also got himself registered under the Act. The last proviso to sub-section (8) of Section 140 of the Act leaves no room for any doubt that the credit may be transferred to any of the registered person having same Permanent Account Number for which the centralised registration was obtained under the existing law. The filing of return in the GST portal of Telangana and transfer of credit is squarely covered and permissible under the last proviso to sub-section (8) of Section 140. The very foundation of show cause notice itself is bad in law and the assumption of respondent No. 2 that return could not have been filed in the GST portal of Telangana is not flowing from Section 140 of the Act. Therefore, the impugned action founded upon such notion is bad in law and deserves interference - Petition allowed.
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2024 (7) TMI 1442
Correction of inadvertent human error while filing a return - denial of ITC - time limitation - digital platform on which returns, applications of refund etc., are filed, by reason of sheer passage of time, having foreclosed the remedy to rectify the error occasioned - HELD THAT:- Admittedly, the denial of input tax claim was only due to the wrong mentioning of GSTIN number; which has been established to be a bonafide mistake arising out of human error. The IDA who was the awarder and who deducted the tax and paid it to the department is also made a party, though subsequently, as the 8th respondent - There would be no loss caused to the State and if the refund is not effected there is every chance of the petitioner s company closing down, considering the huge refund which would not be granted to the petitioner, putting the very business in doldrums. This is a peculiar and special circumstance in which, even if there can be no facilitation of an online rectification, it should be done physically and the amounts eligible for refund disbursed. The quantum of input tax credit not specified, nor does it go by the admission of the 8th respondent that deductions as pointed out by the petitioner were made from the proceeds of the contract and paid up to the State Government. The assessing officer would be entitled to look into the specific deductions claimed and verify it with the returns filed by the 8th respondent; specifically the tax deductions made at the source and enable the claim of refund which is possible under law. The petitioner is directed to make a representation to the respondent authorities upon which, as directed by the High Court of Jharkhand at Ranchi, the respondent authority shall facilitate opening of the portal for a limited period, with due intimation given to the petitioner and if that is not possible allow the petitioner to make rectification on manual mode. Petition allowed.
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Income Tax
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2024 (7) TMI 1441
Reopening of reassessment u/s 147 - reference to the reasons as recorded in the Section 148 (2) notice - submission of the petitioner that a perusal and comparative reading of the Section 148A (b) notice and Section 148A(d) order would establish that the respondents have clearly changed their stance and now seek to base the proposed reassessment on reasoning which was neither constructed nor alluded to in the original notice. HELD THAT:- The validity of the proceedings initiated upon a notice under Section 148 of the Act would have to be adjudged from the stand point of the reasons which formed the basis for the formation of opinion with respect to escapement of income. That opinion cannot be one of changing hues or sought to be shored upon fresh reasoning or a felt need to make further enquiries or undertake an exercise of verification. Ultimately, the Court would be primarily concerned with whether the reasons which formed the bedrock for formation of the requisite opinion are tenable and sufficient to warrant invocation of Section 148 of the Act. Import of Explanation 3 as well as the language in which Section 147 of the Act stands couched, we find no justification to differ from the legal position which had been enunciated in Ranbaxy Laboratories Ltd. [ 2011 (6) TMI 4 - DELHI HIGH COURT ] We also bear in consideration the said decision having been affirmed and approved subsequently in Commissioner of Income-tax (Exemption) vs. Monarch Educational Society [ 2016 (2) TMI 971 - DELHI HIGH COURT ] and Commissioner of Income-tax vs. Software Consultants [ 2012 (2) TMI 18 - DELHI HIGH COURT ] We thus, come to the conclusion that the enunciation with respect to the indelible connection between Section 148A (b) and Section 148 A(d) of the Act are clearly not impacted by Explanation 3. As we read Sections 147 and 148 of the Act, we come to the firm conclusion that the subject of validity of initiation of reassessment would have to be independently evaluated and cannot be confused with the power that could ultimately be available in the hands of the AO and which could be invoked once an assessment has been validly reopened. Explanation 3, or for that matter, the Explanation which presently forms part of Section 147, would come into play only once it is found that the power to reassess had been validly invoked and the formation of opinion entitled to be upheld in light of principles which are well settled. The Explanations would be applicable to issues which may come to the notice of the AO in the course of proceedings of reassessment subject to the supervening requirement of the reassessment action itself having been validly initiated. Explanation 3, cannot consequently be read as enabling the AO to attempt to either deviate from the reasons originally recorded for initiating action under Section 147/148 of the Act nor can those Explanations be read as empowering the AO to improve upon, supplement or supplant the reasons which formed the bedrock for initiation of action under the aforenoted provisions. The writ petitions are accordingly allowed and the impugned notices and orders in each of the above-captioned writ petitions are quashed. The impugned orders under Section 148A(d) as well as the notices under Section 148 - Decided in favour of assessee.
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2024 (7) TMI 1440
Maintainability of appeals u/s 377 of Cr.P.C. against the sentence on the ground of its inadequacy - judgment of conviction and order on sentence has been passed by the Special Court for Economic Offences, Bengaluru, Special Court established under Section 280-A of the Income Tax Act, 1961 - HELD THAT:- As per the first schedule of Cr.P.C. classification of offence against other laws if offence is punishable for imprisonment for less than 3 years or with fine only, it is classified as non-cognizable, bailable and triable by any Magistrate. As the offences stated in Section 279-A of the I.T. Act, 1961 are non-cognizable within the meaning of Cr.P.C., they are triable by a Magistrate. Offences registered by or against elected representatives are now tried by Special Courts established and it is presided over by a Sessions Judge. That Special Court which is presided over by a Sessions Judge can be said to come under clause (b) - any other Court . The Special Court for economic offences, Bangalore, is presided over by an officer of the rank of Magistrate and does not come under clause (b) - any other Court . The appeal against convictions for offence under Chapter XXII of I.T. Act, 1961 lie to the Sessions Judge u/s 374 of Cr.P.C. Learned counsel for respondent submitted that the respondent accused has challenged the judgment of conviction passed by the Special Court and the said criminal appeal is pending before the Sessions Court. If the appeal has been tried against the judgment of conviction by the Sessions Court and if the appeal is dealt by the High Court against inadequacy of sentence it may lead to passing of conflicting judgments. In case in an appeal against conviction if the Sessions Court reverses the judgment of conviction and acquits the accused and the High Court allows the appeal filed against inadequacy of sentence then the said judgments are conflicting judgments against the same judgment of conviction passed by the Special Court. In order to avoid such conflicting judgments the appeal against conviction and appeal against inadequacy of the sentence are to be dealt with by the same Court. As in the case of Ammannamma and others Vs. State of Karnataka [ 2005 (1) TMI 755 - KARNATAKA HIGH COURT] has held that in cases where appeal against conviction is filed and appeal against enhancement is also filed, the Bench considering the same is required to dispose of the same simultaneously and together and not separately i.e. not in any other manner. Appeal filed against the sentence on the ground of inadequacy u/s 377 of Cr.P.C. the accused may plead for his acquittal or for reduction of sentence as provided under sub-section (3) of Section 377 of Cr.P.C - The right of appeal is provided to the accused to challenge the judgment of conviction and order on sentence under sub-section (3) of Section 374 of Cr.P.C. So also sub-section (3) of Section 377 of Cr.P.C. provides for the accused to plead for his acquittal or for reduction of sentence. The accused who has been convicted need not wait till the State files an appeal under Section 377 of Cr.P.C. to plead for his acquittal or for reduction of sentence. The accused has a statutory right under sub-section (3) of Section 374 of Cr.P.C. to challenge the judgment of conviction and order on sentence passed by the Special Court. If the accused has not challenged the judgment of conviction and order on sentence by filing an appeal under sub-section (3) of Section 374 of Cr.P.C., then in the appeal filed under Section 377 of Cr.P.C. he can plead for his acquittal or reduction of sentence under sub-section (3) of Section 377 of Cr.P.C. The appeals preferred by the Income Tax Department under Section 377 of Cr.P.C. are not maintainable and accordingly all the appeals are dismissed.
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2024 (7) TMI 1439
Reopening of assessment u/s 147 - order u/s 148 (A) (d) of the Act was passed by respondent no. 3, without obtaining prior approval of the specified authority, i.e. Principal Chief Commissioner of Income Tax, and ex post facto approval was obtained after passing the order under clause (d) of Section 148(A) - HELD THAT:-From perusal of record, it is revealed that Principal Chief Commissioner of Income Tax had granted approval on 19.04.2024 and the order under clause (d) of Section 148(A) was passed by respondent no. 3, the same day. Thus, the Statutory requirement of prior approval is also met, and the order passed by respondent no. 3 cannot be faulted on this count. Since this Court does not find any illegality or infirmity in the notice issued to the petitioner u/s 148 (A) (b) and the order passed u/s 148 (A) (d), therefore, any interference in the matter would be unwarranted. WP Dismissed.
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2024 (7) TMI 1438
Royalty payable - rate of royalty - ITAT justification in adjudicating that royalty was payable by Dabur International Ltd. UAE at a reduced rate of 0.75 percent on FOB Value to the respondent as against the royalty chargeable at the rate of 4 percent on FOB sale value as worked out by the TPO/AO? - HELD THAT:- Although the assessment on the regular basis was proposed on a total income of approximately INR 52,00,00,000/- the book profits were ultimately worked out in terms of Section 115JB and the income subjected to tax was quantified at INR 211,42,99,386/-. - Thus, we find that there would be no justification to entertain these appeals on the aforesaid proposed questions of law. Valuation of shares - ITAT directing for the valuation of shares AO be required to adopt the figure of projected growth as taken by the respondent i.e. average of growth figure at 19% instead of 25% as previously directed by the CIT(A) 89% adopted by the AO - As correctly held by ITAT in the present case, the ld. CIT(A) although directed the AO to adopt average of growth figure available for three years which came to 25% but ignored the growth rate based on actual figures for the future years. In the instant case, it is not pointed out as to how and in what manner the average growth figure taken by the assessee at 19% for succeeding years, on the basis of valuation report of an independent valuer was wrong. Therefore, we are of the view that the Ld. CIT(A) was not justified in adopting the figure of average growth at 25% instead of 19% adopted by the assessee. Accordingly, we modify the order of the ld. CIT(A) to this extent that the AO for the valuation of shares of M/s Dabur Overseas Ltd., shall adopt the figure of projected growth by taking average of growth figure at 19% instead of 25% directed by the ld. CIT(A). Accordingly, this issue is decided in favour of the assessee and against the department. Deduction u/s 80-IB and 80-IC - receipts of sale of scrap - whether the said claim was legally justified and correct? - Revenue could not question or doubt the legal position as enunciated in CIT v. Sadhu Forging Ltd. [ 2011 (6) TMI 9 - DELHI HIGH COURT ] in view the activities of the assessee in giving heat treatment for which it had earned labour charges and job works charges, it can thus be said that the appellant had done a process on the raw material which was nothing but a part and parcel of the manufacturing process of the industrial undertaking. These receipts cannot be said to be independent income of the manufacturing activities of the undertakings of the assessee and thus could not be excluded from the profits and gains derived from the industrial undertaking for the purpose of computing deduction under section 80-IB. These were gains derived from industrial undertakings and so entitled for the purpose of computing deduction under section 80-IB. There cannot be any two opinions that manufacturing activity of the type of material being undertaken by the assessee would also generate scrap in the process of manufacturing. The receipts of sale of scrap being part and parcel of the activity and being proximate thereto would also be within the ambit of gains derived from the industrial undertaking for the purpose of computing deduction u/s 80-IB. here is no infirmity in the order of the ITAT. No substantial question of law arises
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2024 (7) TMI 1437
Disallowance of Provision of Liquidated Damages - said amount was on account of unascertained liability for which there did not exist a probability of outflow of resources - ITAT deleted addition - HELD THAT:- There is a concurrent finding which has come to be recorded by both CIT(A) as well as the ITAT that the liquidated damages upon being waived were written off after the same had been waived in the subsequent year. As correctly held by ITAT provision is arising out of a contractual obligation and the basis of providing the provision is based on past experience and such a reasonable basis of estimation has been regularly followed by the assessee in the past, then ostensibly it cannot be held that the basis of estimation of working of the provision is not correct. - once it is brought on record that assssee on the year of reversal has paid taxes on excess provision and similar feature appeared in the earlier years and assesee had payments for liquidated damages on delay of deliverables, then no adverse view can be taken, because it is not the charge of the AO that assessee has made some kind of excessive provision in this year in relation to past. Decided against revenue. Provisioning for warranty - To give an example of product warranties, a company dealing in computers gives warranty for a period of 36 months from the date of supply. The said company considers following options: (a) account for warranty expense in the year in which it is incurred; (b) it makes a provision for warranty only when the customer makes a claim; and (c) it provides for warranty at 2 per cent of turnover of the company based on past experience (historical trend). The first option is unsustainable since it would tantamount to accounting for warranty expenses on cash basis, which is prohibited both under the Companies Act as well as by the Accounting Standards which require accrual concept to be followed. In the present case, the Department is insisting on the first option which, as stated above, is erroneous as it rules out the accrual concept. The second option is also inappropriate since it does not reflect the expected warranty costs in respect of revenue already recognized (accrued). It is not based on matching concept. Under the matching concept, if revenue is recognized the cost incurred to earn that revenue including warranty costs has to be fully provided for. When value actuators are sold and the warranty costs are an integral part of that sale price then the appellant has to provide for such warranty costs in its account for the relevant year, otherwise the matching concept fails. In such a case the second option is also inappropriate - Thus third option is most appropriate because it fulfils accrual concepts as well as the matching concept. Validity of rectification order by TPO - TP Adjustment - ITAT concluded services provided by the AE were not stewardship services - HELD THAT:- ITAT has essentially taken into consideration, the undisputed fact that there was a failure on the part of the Transfer Pricing Officer [ TPO ] to provide an opportunity to the assessee of being heard before enhancing income. As per Section 154(3) of the Act amendment/rectification which has the effect of enhancement of an assessment or reducing a refund or otherwise increasing the liability of the assessee shall not be made unless the authority concerned gives notice to the assessee of its intention to do so. Therefore, it is obligatory under the statute to issue notice by the tax authority to give a reasonable opportunity of being heard to the Assessee. This is clearly set out u/s 154 of the Income Tax Act and it has to be followed by the tax authorities at the initial stages. If this procedure of issuing the notice and giving reasonable opportunity of being heard is not followed, any further exercise will be non est. Therefore, the order itself becomes void ab initio. In the circumstances, we have no other option to set aside the impugned rectification order as being void ab initio. No justification to take a view contrary to what was expressed by the ITAT. Question nos. 2.5 and 2.6 are concerned, Appellant has sought time to address submissions in that respect. Consequently, re-notify on 07.03.2024.
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2024 (7) TMI 1436
Validity of order of assessment made in the name of company not in existence - order of assessment in the name of the amalgamating company - HELD THAT:- The case on hand stands covered by the decision of Maruti Suzuki [ 2019 (7) TMI 1449 - SUPREME COURT] and thus the impugned order of assessment in the name of the amalgamating company i.e. , Pharmazell Vizag Pvt. Ltd. which was not in existence on the date of passing the impugned order canot be sustained and thus the impugned order is quashed. The respondents are however at liberty to proceed in accordance with law.
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2024 (7) TMI 1435
Validity of reopening of assessment - Non providing the reasons to assessee though requested - respondents, submits that the petitioner did not request for reasons through the ITBA portal, therefore, the request for reasons did not come to the notice of the AO - HELD THAT:- As prior to the amended regime being put it place with regard to re-assessment proceedings, by virtue of the order of the Hon'ble Supreme Court in GKN Driveshafts [ 2002 (11) TMI 7 - SUPREME COURT] the Income-tax Department was under an obligation to provide reasons if requested for by the assessee concerned after filing the return of income pursuant to receiving notice under Section 148. In the case at hand, admittedly, the petitioner filed the return of income and, thereafter, requested for reasons for reopening the assessment by e-mail of 21.04.2021. On examining the impugned assessment order, it is evident that the e-mail address from which the petitioner requested for reasons for reopening the assessment is the same as the registered e-mail ID of the assessee. In these circumstances, the failure to provide reasons for reopening the assessment is fatal. Therefore, WP is allowed and the impugned assessment order is quashed by leaving it open to the respondents to initiate de novo proceedings in accordance with law.
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2024 (7) TMI 1434
Reopening of assessment u/s 147 - Addition u/s 14A r.w.r. 8D - HELD THAT:- The expression reason to believe in Section 147 of the Act would mean some cause or justification of the competent authority. If the competent authority has a ground or some justification that the income had escaped assessment or that there was a mistake in making assessment, the competent authority would be empowered to re-open the assessment after four years with prior approval of the jurisdictional Commissioner, as provided under Section 151. Rule 8D of the Income Tax Rules, 1962, prescribing the methodology for determining the amount of the expenditure in addition to income not includible in total income, was inserted with effect from 24.3.2008 to implement sub-Sections (2) and (3) of Section 14A. It is a clear indicator that a new method for computing the expenditure was brought in by the Rules, which was to be utilised for computing the expenditure for the assessment years 2007-08 and onwards, as held in CIT v. Essar Teleholdings Ltd. [ 2018 (2) TMI 115 - SUPREME COURT ] An assessee has the obligation to provide full material disclosures at the time of filing of the return. The nexus between expenditure disallowed and earning of exempt income is required to be established. In the present cases, the petitioner had obtained loans and invested in his new Company and earned income and claimed the interest paid by him on the said loans obtained as expenditure. Such expenditure is not exempt under the provisions of Section 14A read with Rule 8D. If the assessments concluded are not in accordance with the law, it is not change of opinion, but it is a valid reason for reopening the assessments. The assessing officer has ignored the mandatory provision of Section 14A and Circular No.5/14 while completing the assessments, which got re-opened. We, do not find that the assessing officer has committed any error of law or jurisdiction, which requires this Court to interfere with the present writ petitions. Therefore, these writ petitions are hereby dismissed. If the re-assessment proceedings are already complete and if the petitioner has any grievance, he may resort to the statutory remedy of appeal, if so advised. If the petitioner files appeal, the time expended in prosecuting these writ petitions before this Court would be condoned and the appellate authority should proceed with the appeal on merits.
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2024 (7) TMI 1433
Revision u/s 263 - cash deposited during demonetization period - HELD THAT:- AO has conducted due enquiries by calling for various details from the assessee to substantiate the source of cash deposits in Specified Bank Notes during the demonetization period and therefore, it cannot be said that the AO has not applied his mind and has accepted the submissions made by the assessee. Therefore, it can be safely concluded that the present case is not a case of no enquiry or lack of enquiry. AO in the instant case has made due enquiries which is expected of him and after receiving the replies from the assessee from time to time, has accepted the source of such cash deposits in the bank account during the demonetization period. The order passed by the AO in the instant case may be prejudicial to the interest of the Revenue but cannot be termed as erroneous in view of the various notices issued by him calling for various details from the assessee to substantiate the source of such huge cash deposits during the demonetization period. CIT in the instant case, despite having all the material, has not examined the details himself and came to a definite conclusion but has merely set-aside the matter to the file of the AO for afresh assessment. The various decisions relied on by the ld. Counsel for the assessee in the case law compilation support his case to the proposition that where the AO had conducted enquiries regarding the source of cash deposits made during the demonetization period and has taken a possible view, the Pr.CIT was not justified in invoking the revision powers u/s. 263 of the Act by merely directing the AO to carry out enquiries afresh without himself conducting further enquiries. Since the AO in the instant case has made detailed enquiries regarding the source of cash deposits made during the demonetization period and after being satisfied has taken a possible view, therefore, we are of the considered opinion that the ld. Pr.CIT is not justified in invoking the provisions of section 263. We, therefore, set aside the same. The grounds raised by the assessee are accordingly allowed.
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2024 (7) TMI 1432
Exemption of dividend income u/s 10(35) - claim was rejected by the CPC while processing the return of income u/s 143(1)(a) - HELD THAT:- Assessee has fairly admitted that it did not challenge the above disallowance made by the CPC before Ld CIT(A), meaning thereby, the disallowance so made by CPC has attained finality. In the impugned assessment order passed u/s 143(3) of the Act, the AO has only repeated the disallowance already made while processing the return of income u/s 143(1)(a) of the Act. Hence, the cause of action in respect of denial of exemption u/s 10(35) of the Act would lie only in challenging the intimation issued u/s 143(1)(a) of the Act. Admittedly, the assessee has failed to challenge the same. Hence the Ld CIT(A) could not have granted relief in the appeal filed against the assessment order passed u/s 143(3) of the Act, when the addition made u/s 143(1)(a) remained unchallenged. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the addition made by the AO on this issue. Exemption u/s 10(23FB) claiming itself to be a Venture Capital Undertaking - As the said claim has been rejected by the AO and Ld CIT(A). We notice that the assessee has not challenged the rejection of exemption u/s 10(23FB) of the Act confirmed by Ld CIT(A). Hence, this issue has attained finality for this year. Alternative/fresh claim made by the assessee without filing return of income - Exemption u/s 10(38) - Long term capital gains earned by the assessee on sale of shares of venture capital - HELD THAT:- We notice that the assessee has put forth the alternative claim before the assessing officer itself - assessee had already claimed exemption u/s 10(23FB) in the return of income and since the AO expressed the view that the assessee is not entitled to claim said exemption, the assessee has made alternative claim before him. Hence, in our view, it is only a case of change of section under which the exemption has been claimed by the assessee and it may not fall under the category of Fresh claim . Accordingly, we reject the grounds no.1 to 4 raised by the revenue. Exemption u/s 10(38) been allowed by the Ld CIT(A) without considering the fact that the assessee has acquired shares from the off market without paying Securities Transaction Tax (STT) - Conditions prescribed in clause (a) and (b) of sec. 10(38) of the Act are fulfilled in the instant case. The contentions urged by the revenue is related to the third proviso, which is highlighted above and which prescribes one more condition that the transaction of acquisition of shares should have also suffered the Securities Transaction Tax. The third proviso to sec. 10(38) of the Act empowers the Central Government to issue notification and the acquisition of shares falling under the said notification need not have suffered STT for the purpose of availing exemption u/s 10(38) of the Act. Hence sale of such kinds of shares are eligible for exemption u/s 10(38) of the Act. The clauses (a) and (b) of the Notification deal with existing listed equity shares . Clause (c) deals with the case of acquisition of shares of a company which has been delisted from a recognized stock exchange. Hence all the three clauses, viz., clause (a), Clause (b) and Clause (c) are not applicable to the facts of the present case, since the assessee herein has purchased unlisted shares. Accordingly, the Ld A.R was right in mentioning that the main part of the Notification will only be applicable to the facts of the present case. Hence the shares acquired by the assessee would be covered by the main part of the notification and hence, even if the STT was not paid at the time of acquisition, the assessee would be entitled to claim exemption of LTCG u/s 10(38) of the Act. Accordingly, we confirm the final decision taken by Ld CIT(A) on the above said reasoning. Assessee, being a Venture Capital Fund, is a pass through entity and hence the exemption u/s 10(38) could be claimed only by the investors as per sec. 115U of the Act and not by the assessee - A.R submitted that a Venture Capital Fund will acquire the character of Pass through entity , only if it is granted exemption in terms of sec. 10(23FB) - HELD THAT:- As per the provisions of sec. 10(23FB) of the Act, the income earned by VCF on the investments made in the Venture Capital Undertaking is exempt and if the said exemption is given, then the income is liable to be assessed in the hands of investors in terms of sec. 115U of the Act. However, in the instant case, the assessee s claim for exemption u/s 10(23FB) has been rejected by the tax authorities, meaning thereby, the status of the assessee as a pass through entity has not been accepted by the tax authorities in this year. Hence the question of applying the provisions of sec. 115U will not arise in this year. As noticed earlier, the assessee, being a trust is legal entity and would fall under the definition of person under the Income tax Act. Hence it is assessable under the Act for the income earned by it and consequently, it is entitled to avail all types of eligible exemption provided under the Act. Accordingly, the assessee would be entitled to claim exemption of long term capital gain u/s 10(38) of the Act. In the preceding paragraphs, we have upheld the decision of Ld CIT(A) in holding that the assessee is eligible for exemption u/s 10(38) of the Act.
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2024 (7) TMI 1431
Unexplained credits in the books of account - AO and the CIT(A) have frivolously alleged that the amount received by the assessee does not pertain to be sale consideration - HELD THAT:- In the present case, although it was not the responsibility of the assessee to prove the sources of such funds even then the assessee has filed the bank statement of the buyer starting from 01.04.2015 to 31.03.2016, and the said bank statement clearly reflects that the buyer was a man of means and having regularly deposits in crores were being received by the said buyer in the earlier years also, and therefore it cannot be alleged that the buyer has no funds. Meaning thereby that the assessee has duly furnished evidence to prove the identity and creditworthiness of the buyer and the genuineness of the transaction, and even then, if the Ld. AO or department has any apprehension in respect of the same, then they are free to open the case of the buyer. Thus, we hold that the requirement of law is not to prove the source of source of cash credit. Accordingly, we hold that the alleged credit stands explained and as such, the addition is deleted. Assessee appeal allowed.
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2024 (7) TMI 1430
Penalty u/s 271D - violation of the provisions of section 269SS penalty was levied for accepting interest free loan - as contended that the assessee obtained cash as gift from his father-in-law - CIT(A) did not accept the submissions of the assessee as the cash obtained in order to purchase of property from his father-in-law as gift, warranting no violation of provisions of section 269SS - HELD THAT:- We find that similar identical issue came up in the case of Mani Sundaram [ 2024 (2) TMI 534 - ITAT CHENNAI] wherein, the Tribunal, while deciding the issue by placing reliance in the case of Ms. Nanda Kumari [ 2019 (1) TMI 413 - MADRAS HIGH COURT] held that no penalty u/s 271D of the Act is attracted if the cash obtained from family members as gift. The order of the ld. CIT(A) in confirming the penalty levied under section 271D of the Act is not maintainable. Accordingly, we direct the Assessing Officer to delete the penalty levied under section 271D - Decided in favour of assessee.
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2024 (7) TMI 1429
Validity of Revision u/s 263 - distinction between lack of inquiry and inadequate inquiry - nature and character of the one time regulatory fee paid by it as well as the bank and stamp duty charges - assessee has gone through the rigours of the proceedings u/s 143(3),147/ 148 by playing two innings as there are two separate independent assessment orders one u/s143 (3) and another u/s 147/148 r.w.s 144 r.w.s. 144B - HELD THAT:- Assessment order dt. 12/06/2020 basis which revisionary proceedings were initiated u/s 263 culminating into the impugned order has accepted the return of income. The said acceptance of returned income is arrived after a proper inquiry and verification because prior to thereto notices u/s 143(2) and 142(1) were duly served to the assessee firm and that they were suitably replied with all material information so that computation of income is done in just and proper way for purpose of levy of tax on it. We have minutely perused the notices and replies which are more than two to three and it contains and answers all query of AO. We also hold that notice u/s 142(1) is appropriately answered with relevant enclosure by the assessee firm. As seen both the notice and reply from pape book volume II. Further we notice that vide notice u/s. 142(1) dt. 17/02/2020 the Ld. AO raised few more query and that the same were replied by the assessee. We have perused the further query and reply from paper book Volume II. Vide notice u/s 142(1) AO raised few more query and that the same were replied by the assessee. We have perused such further more query and reply from paper book Vol. III. AO has applied his mind and have enquired and verified the state of affairs of the assessee firm and has passed the assessment order dt. 12/06/2020 in a manner know to law. Raising query after query periodically while the assessment proceedings are going on shows proper application of mind coupled with due inquiry and verification. The Ld. AO has examined all the papers and proceedings of the case and has accepted the return u/s 143(3) after due diligence. The assessee thus has gone through rigor s of law; during the scrutiny proceedings. We hold that it is only after the proper inquiry and verification that the AO has accepted the returned income. The documents on record speaks for it as query s were raised and answered according to law. We also hold that under Income Tax Act besides being practice that whenever any addition / disallowances are made an opportunity is given to the assessee to show cause why addition / disallowance should not be made. In so far as income and its components are concerned which are untainted are normally accepted as it is. See Hari Iron Trading Company [ 2003 (5) TMI 48 - PUNJAB AND HARYANA HIGH COURT ] as held Commissioner can exercise powers under subsection (1) of section 263 of the Act only after examining the record of any proceedings under the Act . The expression record has also been defined in clause (b) of the Explanation so as to include all records relating to any proceedings available at the time of examination by the Commissioner. Thus, it is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to whether the Assessing Officer had examined any issue or not. The assessee has no control over the way an assessment order is drafted. The assessee on its part had produced enough material on record to show that the matter had been discussed in detail by the AO. We further hold that by virtue of Government of India, Ministry of Finance, Department of Revenue (CBDT) Instructin NO. 8/2017 dt. 23/09/2017 at para 5.1 - Enquiry before assessment in electronic mode a particular methodology is prescribed which has been followed. The assessee has rightly relied upon it to demonstrate that due enquiry before assessment was done. AO has made enquiries on all the matters from notices issued under section 142(1) and that the assessee has filed submission on the questions in the notices issued by AO from time to time. The assessee therefore has rightly submitted that the enquiries has been made as per provision of Section 142(iii) of the Income Tax Act, 1961 and that AO framed the assessment after considering the replies submitted by assessee during the course of assessment proceedings. We further hold that AO has applied his mind irrespective of the fact that issues were not discussed in the assessment order. We also hold that by virtue of Section 263 it is incumbent upon the Ld. PCIT while exercising supervisory / Revisionary jurisdiction to at least carry out a bare minimum inquiry himself before terming the order of AO as erroneous and prejudicial to the interest of Revenue. In the instant case that has not happened. See Delhi Airport Metro Express Pvt. Ltd. [ 2017 (9) TMI 529 - DELHI HIGH COURT ] Impugned order of PCIT is not proper just and fair and in accordance with law as Ld. PCIT has not made any minimal inquiry before holding that Ld. AO has not made any inquiry and therefore order is erroneous and prejudicial to the interest of the Revenue. We hold that the Ld. PCIT ought not to have passed the impugned order. We also hold enough inquiries as the AO deemed fit and proper had been made on more than one occasion supra. It is not a case of no inquiry the impugned order is therefore without jurisdiction and / or in excess of jurisdiction and / or in irregular exercise of jurisdiction and is null and void. It is illegal and not proper. It is in irregular exercise of supervisory / revisionary jurisdiction u/s 263 of the Act and therefore bad in law. Decided in favour of assessee.
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2024 (7) TMI 1428
Addition on account of LTCG on sale of shares u/s 112 - assessee is registered in Mauritius and is holding tax residency certificate of Mauritius - assessee had claimed long term capital gains arising from sale of shares as exempt from tax in light of Article 13(4) of India-Mauritius DTAA - LEI Singapore Holdings Pte. Ltd. deducted tax at source on the payments made to the assessee. Now, the assessee is seeking refund of withholding tax deducted on the aforesaid transaction. HELD THAT:- We find that similar transaction of transfer of shares of Pearl Retail Solutions Pvt. Ltd. was undertaken by the assessee in AY 2018-19. The assessee claimed refund of TDS deducted on sale of shares. The matter travelled to the Tribunal, the Coordinate Bench after considering the facts of the case, provisions of Article 13(4) of the India-Mauritius DTAA and placing reliance on the decision rendered in the case of Bid Services Division (Mauritius) Ltd. vs. Authority of Advance Ruling (Income Tax) [ 2023 (3) TMI 563 - BOMBAY HIGH COURT] and the decision of Vodafone International Holding BV vs. UOI [ 2012 (1) TMI 52 - SUPREME COURT] held that long term capital gain on sale of shares in the case of assessee is not liable to be taxed in India. Decided in favour of assessee.
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2024 (7) TMI 1427
Interest u/s. 244A - refund of advance tax paid - contention of the assessee is that the CIT(A) has allowed interest on refund of advance tax paid by the assessee for AY 2004-05, per contra stand of the department is that the CIT(A) has erred in allowing interest on MAT credit allowed by the AO in proceedings u/s. 154 - HELD THAT:-CIT(A) following the decisions rendered in the case of CIT vs. Tulsyan NEC [ 2010 (12) TMI 23 - SUPREME COURT] the decision of Hon ble Bombay High Court in the case of CIT vs. Apar Industries [ 2010 (4) TMI 151 - BOMBAY HIGH COURT] and Bharat Aluminum [ 2011 (5) TMI 565 - DELHI HIGH COURT] has directed AO to allow interest u/s. 244A of the Act on the refund arising from advanced tax paid by the assessee. However, in the last line of the order it appears that the CIT(A) inadvertently mentioned refund arising on account of MAT credit . It is settled position that the department is liable to pay interest u/s. 244A of the Act on the refund arising from advance payment of tax by the assessee. Since, in the instant case there is some ambiguity in the findings of the CIT(A) in allowing interest. We deem it appropriate to restore this issue back to the file of AO for the limited purpose of verification. If refund has accrued to the assessee from advance payment of tax, the AO shall allow interest to the assessee on such refund u/s. 244A - However, if it is a case of refund on account of MAT credit no interest shall be allowable. Appeal of the department is partly allowed for statistical purpose.
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2024 (7) TMI 1426
Addition u/s 69A - unexplained source of cash in hand - non rejection of books of accounts - HELD THAT:- As we observe that the AO has not adversely commented on the details of sales, purchases and stocks both in terms of quantity and amount and the party-wise sales/purchase etc. AO has also accepted the sales declared by the assessee. As a sequel to such undisputed facts, we are compelled to think that cash in hand declared in the books is backed by documentary evidences. The assessee being in Kiryana business where large cash transactions are generally involved, the source of cash in hand draws considerable strength. The purchases made are stated to be through banking channel which further strengthens the audited financial accounts. Besides, we see no semblance in the view taken by the AO that only average balance of cash in hand needs to be given credit. For doing so the cash book necessarily has to be discarded. The books of account are admittedly not rejected. The sales, purchases and stocks have been accepted. Thus, the prerequisites of Section 69A do not appear to have been fulfilled. Several judgments have been quoted on behalf of the assessee to contend that rejection of books is necessary to indulge in such addition. The action of the AO in our view, as rightly contended on behalf of the assessee has resulted in double additions which is not permissible in law. We thus see no rationale in confirming the additions towards unexplained cash under Section 69A in the facts of the case by granting credit only towards average cash balance rather than actual cash in hand at the relevant point of time. We note that as against the sale of Rs. 7,46,90,131/-, the assessee has declared a net profit ratio of 0.9% as against the immediately previous F.Y. 2017-18 where against the turnover of Rs. 2,02,83,095/-, the net profit ratio stands at 3.43%. Thus, there is a drastic fall in the net profit ratio vis- -vis earlier year. Hence, in the balance of things, additional business income @2.53% being difference in net profit ratio of turnover of 7.46 crore which stands at Rs. 18,89,660/- calls for addition attributable to cash sales in question. Thus, the additions to the extent of Rs. 18,89,660/- is retained and the remaining amount of Rs. 1,13,77,807/- is deleted. Appeal of the assessee is partly allowed.
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2024 (7) TMI 1425
CIT(Appeals) disposed off the appeal for non-prosecution - assessee despite having been afforded four opportunities had failed to participate in the proceedings before him, therefore, he was constrained to dismiss the appeal for want of prosecution - HELD THAT:- No infirmity in the view taken by the CIT(Appeals) in dismissing the appeal of the assessee who had adopted an evasive and lackadaisical approach in the course of the proceedings before him, but at the same time, unable to persuade to subscribe to the manner in which he had disposed off the appeal without dealing with the issue which was specifically raised before him. CIT(Appeals) had disposed off the appeal for non-prosecution and had failed to apply his mind to the issue which did arise from the impugned order and was assailed by the assessee before him. We are unable to persuade myself to accept the manner in which the appeal of the assessee has been disposed off by the CIT(Appeals). Once an appeal is preferred before the CIT(Appeals), it becomes obligatory on his part to dispose off the same on merit and it is not open for him to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. In fact, a perusal of Sec.251(1)(a) and (b), as well as the Explanation to Sec.251(2) of the Act reveals that the CIT(A) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. As per mandate of law the CIT(Appeals) is not vested with any power to summarily dismiss the appeal for non-prosecution. The aforesaid view is fortified by the judgment of Premkumar Arjundas Luthra (HUF) [ 2016 (5) TMI 290 - BOMBAY HIGH COURT ] Thus, not being able to persuade to subscribe to the dismissal of the appeal by the CIT(Appeals) for non-prosecution, therefore, set-aside his order with a direction to dispose off the same on merits. CIT(Appeals) shall in the course of the de-novo appellate proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at liberty to substantiate his claim on the basis of documentary evidence, if any. Appeal filed by the assessee is allowed for statistical purposes.
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2024 (7) TMI 1424
Rejection of application for registration u/s 80G(5) - section code is wrongly mentioned - assessee accepted its mistake of wrongly selecting section code 13-Clause (ii) of first proviso to sub-section (5) of section 80G instead of selecting section code 14-Clause (iii) of first proviso to sub-section (5) of section 80G in letter dated 11.03.2023 and offered to resubmit the application - HELD THAT:- As submitted that though the objects of the trust may be religious but the same is not bar for applying for 80G registration as section 80G(5B) itself provides allowance of 5% for religious expenditure. It was also explained that expenditure of temple etc. were not carried out by the trust but by the trustees in their individual capacity. Thus, the same did not appear in the financial statement of the trust. The position regarding vegan food center was also clarified. Likewise, explanation for non-audit of financial statements, work done by the trust for animal welfare, donation received by the assessee was furnished. Necessary evidence in support including the copy of the decision in Santshreshtha Gajajan Maharaj Sevabhavi Sanstha [ 2022 (12) TMI 338 - ITAT PUNE ] accompanied the said reply. But nothing was considered by the Ld. CIT(E) in his impugned order. The matter deserves to be set aside and restored back to the file of the Ld. CIT(E) for decision afresh on merits taking into account all the material available in the records and after allowing adequate opportunity of being heard to the assessee to present its case. Appeal of the assessee is treated as allowed for statistical purposes.
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2024 (7) TMI 1423
Levy of penalty u/s 271(1)(c) - Defective notice u/s 274 - non striking off irrelevant clause - HELD THAT:- Even though, the AO had clearly mentioned in the assessment order that the assessee had furnished inaccurate particulars of income but at the time of issuing he did not strike off the irrelevant clause. As such, the notice issued by the Ld. AO was vague. There are various decisions on this issue on the decision of Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) ] mere defect in the notice by not striking off the irrelevant matter vitiate the penalty proceedings. A penalty proceeding is a corollary, nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. Thus we direct the deletion of the penalty levied in this case. Decided in favour of assessee.
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2024 (7) TMI 1422
Scope of limited scrutiny - assessee argued that the case is selected only for limited scrutiny, and therefore, it should only limit to verifying Deduction against Income which are covered u/s 57 - Applicability of the principle of mutuality to the assessee's income and expenditures - conflict with the mutuality principle by enforcing contributions from nonbeneficiary advocates - whether the statutory provision allowing benefits only to members while extracting contributions from non-members could invoke the principle of mutuality ? - process of raising contributions to the Andhra Pradesh Advocates' Welfare Fund is comprehensively delineated in the State Act - HELD THAT:- The interconnected nature of deductions and the principle of mutuality means that the learned Assessing Officer shall examine the issue of mutuality since directly impacts the evaluation of the deductions claimed. In this case, the requirement to verify the deduction against Income, is the implicit requirement that the learned Assessing Officer shall touch upon the mutuality issue to ensure accurate assessment of deductions. Since it is not possible to evaluate the deductions claimed, without examining the mutuality, and violation of mutuality principle is apparent on the face of provisions of Sections 15A and Section 15(1) of The State Act, learned Assessing Officer is justified in examining such an incidental issue also. Since the issue relating to the principal of mutuality is sine qua non for determining the issue of deductions claimed by the assessee, and such an issue does not require any in-depth examination, question of obtaining the permission of higher authorities does not arise. . On this score, we reject the contention of the assessee. Principle of mutuality - The argument advanced by the learned AR that a statute's provisions override this requirement and allow benefits only to members is not convincing. Hon ble Supreme Court s rulings in Chelmsford Club [ 2000 (3) TMI 4 - SUPREME COURT ] made it clear that any breach of the identity between contributors and beneficiaries transforms the transactions into commercial ones, subjecting the surplus to taxation. Thus, the statutory mandate allowing benefits only to members while compelling contributions from non-members would not suffice to invoke the principle of mutuality and exempt the surplus from tax. The doctrine of mutuality, which suggests that no person can trade with themselves, is breached when contributors to a common fund do not receive proportional benefits or when an entity operates with a profit motive. The Andhra Pradesh Advocates' Welfare Fund Act, 1987, inherently breaches mutuality by creating two classes of contributors: members and non-members. Members, who apply and are admitted to the Fund, are entitled to various benefits, while non-members are excluded. This differentiation disrupts the principle of mutuality, as not all contributors to the welfare mechanism receive reciprocal benefits. No doubt, the Welfare Fund's structure does not align with typical commercial entities, as it is intended for the welfare of advocates rather than profit generation, but, at the same time, the differential treatment of advocates and the Fund's independent financial operations suggest a quasi-commercial character. Under Section 10, the Fund engages in activities like borrowing and investment, which are characteristic of commercial enterprises. Although these activities are for welfare purposes, the financial autonomy and the ability to generate income from various sources, namely, donations, investments etc., impart a commercial aspect to the Fund's operations. Despite the statutory mandate and however high the primacy of statutory objectives and legislative intent in determining the character and legality of an entity s operations, given the patent breach of mutuality, in the light of various decisions of Hon'ble apex court referred to above, the Fund is not entitled to the exemption on the ground of mutuality. The doctrine of repugnance, as outlined in Article 254 of the Indian Constitution, addresses conflicts between laws passed by both the Central and State legislatures. This doctrine is typically invoked when a State law is repugnant to a Central law, necessitating the determination of which law prevails. According to Article 254(1), if a State law is repugnant to a Central law, the Central law prevails, and the State law becomes void to the extent of the repugnancy. However, Article 254(2) allows a State law to prevail in that State if it has received the President s assent, although Parliament can subsequently override such State law. When a Central Act explicitly states its non-application in areas where there is State legislation on the same subject, the invocation of the doctrine of repugnance is unnecessary. The Central Act's provision for its own non-application in the presence of State law avoids any conflict, thus negating the need for Article 254 to be applied. We, therefore, hold that the doctrine of repugnance does not apply when a Central Act contains a clause that excludes its application where State legislation exists on the same subject. This clause demonstrates a clear legislative intent to defer to State law, effectively resolving potential conflicts and making the invocation of the doctrine of repugnance superfluous. The scheme and framework of The State Act reinforces that expenditures are application of received funds, conducted in a structured and regulated manner, but does not grant an overriding title to any authority to spend the funds without leaving any discretion to the Committee. On the other hand, it mandates the collection, management, and application of receipts through a structured process governed by the Welfare Fund Committee, ensuring that all actions are within the framework of The State Act. We, therefore, hold that The State Act does not provide an overriding title for spending funds for the objectives of the Fund, but rather outlines the application of receipts after they are received. In the framework of Income Tax Act, exemption provisions specifically Section 23, are conditional upon adherence to the mutuality principle and fulfilment of requirements set forth in Sections 11 and 12A. Conversely, Section 23 of the Andhra Pradesh Advocates Welfare Fund Act, 1987, also claims exemption from income tax, which poses a conflict due to the violation of the mutuality principle. Because of glaring breach of mutuality principle, despite the statutory objectives and legislative intent of the Andhra Pradesh Act, it cannot override or encroach upon the domain of central legislation concerning taxation. We accordingly find it difficult to accept the contention of the assessee. For the reasons recorded in the foregoing paragraphs, we are of the considered opinion that the impugned orders do not suffer any illegality or irregularity, and therefore, we uphold the same. Consequently, the appeal is found devoid of any merits and dismissed. Appeals of the assessee are dismissed.
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2024 (7) TMI 1421
Unexplained cash credit u/s 68 - opening balance in respect of unsecured loans taken by the assessee in earlier financial years - HELD THAT:- It is well settled law that addition u/s. 68 of the Act can be made only during the year in which such credits has been received and if the credit balances appearing in the account of the assessee is not pertaining to the year under consideration, the AO cannot make addition u/s. 68 of the Act in the subsequent assessment year. This view is supported by the decision of the ITAT Ahmedabad Benches in the case of Samir J Shah [ 2023 (4) TMI 96 - ITAT AHMEDABAD ] Accordingly, so far as the addition u/s. 68 of the Act on account of opening balances b/f are concerned, we are restoring this issue to the file of AO to verify/examine that out of the closing balances of Unsecured Loans as on 31/03/2017 how much were brought forward from the earlier years and accordingly delete the additions on Account of Opening Balances added u/s. 68 of the Act. Balance of unsecured loans taken/accepted during the year under consideration - We also restoring this issue to the file of AO for fresh consideration with a direction to examine/verify the identities of the parties more particularly having sent their reply u/s 133(6) of the Act from the same Address as that of the Assessee in respect of the transactions entered in the year under consideration, genuineness of the Transactions creditworthiness of the parties and to decide this issue in accordance with Law after giving reasonable opportunity of being heard. Appeal filed by the assessee is partly allowed for statistical purposes.
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2024 (7) TMI 1420
Addition u/s 69A - unexplained money - HELD THAT:- As following the decision of Kesharwani Sheetalaya Sahsaon [ 2020 (4) TMI 765 - ALLAHABAD HIGH COURT ] we are of the considered view that once the assessee explained the source for purchase of property out of capital contribution from Partners, then the AO cannot make addition towards investment in purchase of property in the hands of the appellant firm as unexplained money u/s 69A - CIT (A) without appreciating the relevant facts and without any valid reasons enhanced the assessment and made addition towards the amount for purchase of property as unexplained money for the impugned asst. year. Thus, we reverse the findings of CIT (A) and delete the enhancement in the case of the assessee u/s 69A. Addition u/s 68 - consideration paid for purchase of property by cheque and towards stamp duty and registration charges for registration of the property - As we are of the considered view that when the entire contribution has been received from the Partners as a capital contribution and since the identity of the Partners are established and also the investment has been routed through proper banking channels, the question of making addition towards the consideration paid by cheque u/s 68 and amount paid for stamp duty and other registration charges by cheque u/s 69A does not arise. Therefore, we reverse the findings of CIT (A) on this addition and direct the AO to delete the addition made u/s 68 and 69A of the I.T. Act, 1961.
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2024 (7) TMI 1419
Revision u/s 263 - Character of income - rental income as business income or house property income - assessee has claimed deduction under section 24 of the Income Tax Act towards repairs and maintenance of such house property income - CIT was of the opinion that this issue has not been examined by the ld. Assessing Officer in the assessment order - HELD THAT:- There is a major shift in recognition of his income from house property. It is not ascertainable as to how the assessee has given different treatments to the same agreement. He has shown such rental income as a business income and then all of a sudden, he has a house property income. The income could be a house property income, but the shift made by the assessee has not been examined by the AO in the impugned assessment order. Therefore, an apparent error has been committed by the AO which has caused a prejudice to the interest of revenue. As far as the judgment which has been upheld in the case of Shambhu Investment (P) Ltd. [ 2001 (3) TMI 77 - CALCUTTA HIGH COURT ] is concerned, in this judgment, Hon ble Courts are unanimous to propound that whether rental income is to be treated as a business income or house property income, it would depend upon the nature of agreement and user of the premises. In that case, the assessee had let out portion of the said property to various occupants by giving them additional right of using furniture and fixtures and other common facilities. The rental income was assessed as a business income. How this exercise has not been done by the AO in the present case in A.Y. 2015-16. It is also pertinent to note that prior to A.Y. 2015-16, the assessee himself was showing rental income under the head business income . In this year, there is a change in the methodology, therefore, before accepting that change, AO ought to have enquired as to how the same agreement can give rise to income as a house property income. Therefore, ld. Commissioner has not committed any error while exercising the powers u/s 263. Decided against assessee.
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2024 (7) TMI 1418
Disallowance of loss arising out of trading in shares - bogus transaction - AO has given a finding that he was of the considered opinion that the trading loss arising on account of dealing in penny shares, that too at the fag end of the financial year, could not be understood from any prudent commercial point of view - HELD THAT:- Considering the finding given in the order of Namokar Builders Pvt. Ltd. [ 2024 (5) TMI 1454 - ITAT KOLKATA] and the fact that the ld. AO has not been able to prove that the impugned transactions were bogus and merely intended to neutralize the gain in trading of shares of M/s. Eros International Media Ltd, we are not inclined to agree with the findings of authorities below. We are also considerably persuaded by the argument that whereas the AO has adversely viewed the incurring of loss, he has taken the transaction leading to gain as being genuine. In our view this is a selective interpretation of the facts before him in as much as the ld. AO has cherry picked whatever is convenient to him and ignored what is not. Also, the very graphs reproduced in the body of the AO s order show that millions of shares are being transacted in the three companies in which loss has occurred, with the assessee trading in those shares in the thousands only. Therefore, any allegation of rigging the markets to suit a particular convenience is not borne out by the facts before us. Considering the totality of facts and circumstances and following the order in the case of NBL [ 2024 (5) TMI 1454 - ITAT KOLKATA] we hold that the impugned addition deserves to be deleted, with consequential relief to the assessee.
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2024 (7) TMI 1417
Addition w.r.t. increase in proprietor's capital - addition u/s. 68 w.r.t. increase in proprietor's capital considering the same as unexplained - HELD THAT:- As submitted by the assessee before us alongwith relevant ledgers of the above mentioned parties and demonstrated that the parties and amounts mentioned above are in the nature of trade capitals i.e. purchases were made in the previous years, but as the liability is no longer enforceable against the assessee, hence the same are written back and instead of routing the same through profit and loss account, directly credited to the capital account of the assessee. This fact is not under challenge by either of the parties; hence the same is taxable undoubtedly. The orders of the lower authorities are confirmed with a variation that being trade creditors written off, same is taxable u/s. 41(1) of the Act instead of charging the same u/s. 68 - With this observation, there is a partial relief to the assessee in terms of charging section, but amount of addition is confirmed. In the result, ground no. 1 raised by the assessee is partly allowed. Unsecured loans - Assessee submitted before us the ITR carrying details like name of the party, PAN No., Aadhaar No. and Bank a/c details, etc - HELD THAT:- As observed that all the above parties declared ample figures of income and have sufficient funds in their balance sheets furnished alongwith return which confirms the identity, genuineness and creditworthiness of the parties concerned. Assessee looks to be fair in his treatment of various accounting entries may be the trade creditors or otherwise. While adjudicating ground no.1 wherein assessee suo moto declared an amount as trade liability no longer exists and the same is chargeable to tax u/s. 41(1) of the Act. Documents pertaining to the above mentioned unsecured loan were submitted before us and there was no challenge on the same by the other side. Based on above, we found that addition is not justified and the overall behaviour of the assessee and documents produced before us confirms the ingredients of section 68 of the Act, hence ground no. 2 raised by the assessee is allowed. Bogus purchases u/s 69C - HELD THAT:- As department was not able to substantiate the findings of the AO and also not able to controvert the findings of Ld. CIT (A). We have gone through the submissions of the assessee alongwith the orders of the authorities below and found that although the name of the party was there amongst the high risk billers, but there is no action was ever taken by the GST department against the party, moreover the AO simply relied on a red flag shown by the Central Board of Indirect Taxes and Customs (CBIC), there was no objective investigation or observation was there against the party which confirms this addition / disallowance. Based on above, we do not see any perversity in the order of Ld. CIT (A), hence the same is confirmed and grounds raised by the revenue are dismissed.
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2024 (7) TMI 1416
Unexplained cash credit u/s. 68 - AO was not satisfied with the justification regarding share premium for want of evidence in respect of identity, creditworthiness and genuineness of the parties from whom share premium was received - HELD THAT:- Admitted under rule 46A of the rules and the final remand report submitted before learned CIT(A), the identity, genuineness of the transaction and the creditworthiness of the investor were unambiguously established in respect of the share capital and premium raised by the appellant by issue of preferential shares. We find that learned CIT(A) has left no stone unturned in taking out the grains from chaff. CIT(A) has rightly deleted the aforesaid addition as share capital premium raised by the assessee on the basis of cogent and convincing evidence as stated hereinabove. No interference is warranted in the impugned order to this effect. The first point in respect of ground 1, is determined in negative against the revenue. Addition on account of section 14A - A Careful reading of the assessment order shows that learned AO found that the assessee company was in receipt of dividend which was claimed exempt u/s. 10(34) of the Act, however assessee did not apportion any expenditure attributable to the exempt income. AO thus computed interest expenditure by resorting to the computation as provided under rule 8D(2)(ii) of the Rules and worked out such interest expenditure. CIT(A), on examination of assessee s balance sheet found that as on 31.03.2012, appellant assessee had paid up share capital of Rs. 14.48 Crores and reserve and surplus of Rs. 151.97 Crores. The investment, yielding exempt income, were shown at Rs. 48.70 Crores as on 31.03.2012 as against 1.13 Crores as on 31.03.2011. It was noted that assessee s own fund aggregating to Rs. 166.45 Crores were much higher than the investments of Rs. 48.70 Crores that yield exempt income. Relying on HDFC Bank Limited [ 2014 (8) TMI 119 - BOMBAY HIGH COURT ] CIT(A) deleted the aforesaid addition on the principle that if there are funds available, both interest free and interest bearing loans, than a presumption would arise that investments would be out of interest free funds, generated or available with company provided that said funds are sufficient to meet investments. On the basis of assessee s balance sheet, the reserves and surplus funds are in multiple times than the share capital of the assessee company. CIT(A), has thus rightly deleted the aforesaid addition. Determination of tax dues for a corporate debtor under liquidation, referencing the Insolvency and Bankruptcy Code (IBC) - In view of law laid down by Hon ble Apex Court in Sundaresh Bhatt [ 2022 (8) TMI 1161 - SUPREME COURT ] there is no shadow of any doubt that when the defaulter/corporate debtor goes either into corporate insolvency resolution process or under liquidation, the taxing authorities can stake their claims of tax dues either before the resolution professional or before liquidator or before the adjudicatory authority, as the case may be, within the time-limit for completion of insolvency resolution process provided under IBC. Proactive approach of the taxing authorities to stake the claim of dues as creditor, immediately after determination of tax dues subject, of course to the outcome of any pending appeal, may substantiate the claim to a larger extent as the claim has to go through the waterfall mechanism provided u/s. 53 of the IBC as explained by Hon ble Apex Court in Rajendra Prasad Tak [ 2023 (11) TMI 626 - SC ORDER ] The copy of this order be sent to CBDT with a request to issue necessary directions to the concerned taxing authorities to avoid any possibility of extinction of such public dues, whenever the corporate debtor goes either into the corporate insolvency resolution process or under liquidation.
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2024 (7) TMI 1415
Validity of reopening of assessment - non-disposal of the objection filed by the assessee - exemption u/s 10(38) of long term capital gain on sale of shares be treated as unexplained cash credit u/s 68 by treating the same as a sham transaction - HELD THAT:- During the course of original assessment proceedings the assessee has made compliance with all the queries and detail called by the assessing officer on the issue of long term capital gain claimed on the sale of shares. Also undisputed fact that assessing officer has not disposed off the objection filed by the assessee in respect of reopening of the case as directed in the case of GKN Driveshaft [ 2002 (11) TMI 7 - SUPREME COURT] . Therefore, we don t find error in the decision of ld. CIT(A) in holding that reassessment order in the case of the assessee was passed by the assessing officer without justification on account of non-disposal of the objection filed by the assessee. Assessee has demonstrated from the copies of various material as discussed supra in this order and in the finding of ld. CIT(A) that in the original assessment proceedings, the AO has specifically raised issue regarding information received from DIT(Investigation) Kolkata relating to claim of long term capital gains from operators and the AO has obtained the various explanation of the assessee and did not make any addition after raising the issue in the show cause notice issued. During the course of assessment proceedings before us the assessee has also referred the decision of Kalpataru Land P. Ltd. [ 2022 (10) TMI 365 - SUPREME COURT] and case of TechSpan India (P) Ltd. [ 2018 (4) TMI 1376 - SUPREME COURT] on the proposition that when the assessing officer finalised the assessment and passed assessment order subsequent reopening can be said to be change of opinion on the similar information. CIT(A) held that reopening of the assessment for the assessment year 2014-15 is bad in law as the conditions precedent for invoking the provision for reopening of the assessment are not complied, therefore, the assessment order passed u/s 143(3) r.w.s 147 of the Act was quashed. No infirmity in the decision of ld. CIT(A) and the ld. CIT(A) has rightly quashed the assessment order, therefore, all the grounds of the revenue stand dismissed.
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2024 (7) TMI 1414
Validity of assessment u/s 153C - said provisions are not applicable on the facts of the case - notice is issued to the 'other person' under Section 153C - difference to the computation of the block of six years preceding the AY relevant 'to the previous year /in which the search was conducted - HELD THAT:- We have taken into consideration the aforesaid findings of the CIT(A) and the relevant dates of search, recording of satisfaction and transmission of record are as such not disputed, then CIT(A) was not in error to rely the judgment of RRJ Securities Ltd. [ 2015 (11) TMI 19 - DELHI HIGH COURT ]. In the present case since in the case of the 'other person' the AO issues notice only subsequent to the notices issued under Section 153 A to the searched person, the starting point for computation of the block period would be the date on which, based on the seized documents, notice is issued to the 'other person' under Section 153 C of the Act. Thus in the present case, the six year period prior to AY 2012-13 i.e. AY 2007-08 to AY 2012-13. Thus no notice could be issued under Section 153 C of the Act to reopen the Assessee's assessment for A Y 2006-07 In fact, the manner in which ground No. 1 to 3 are raised, without relying any contrary judicial decision, makes the grounds, superfluous. We have no reason to differ from the conclusion drawn by CIT(A). Accordingly, ground No. 1 to 3, of the appeal of revenue, which go to the root of the exercise of jurisdiction, cannot be sustained. Consequently, the appeal of the Revenue is dismissed.
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Customs
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2024 (7) TMI 1413
Seeking quashing of complaint case as well as the summoning order - owner and beneficial owner of the foreign currency - whether the exoneration of the petitioner was on technical grounds or based upon merits? - HELD THAT:- The refusal of the Supreme Court as well as by Division Bench of this Court to interfere in the order passed by the CESTAT was after due consideration of the facts. A plain reading of the order passed by CESTAT leads to an irresistible conclusion that the decision by CESTAT, thereby exonerating the petitioner, is not on technical grounds but a conclusion based upon merits. The entire proceedings clearly show that the aforesaid adjudication had attained finality, and it had been determined that the petitioner was not the beneficial owner of the foreign currency/exchange and could not be held liable. Further, insofar as the aspect of the petitioner being considered a beneficial owner is concerned, it must be noted that HMC (of which the petitioner was the Executive Chairman) and SEMPL are two distinct entities, and as recorded in the order passed by the Additional Commissioner of Customs, SEMPL was one of the independent, specialist third party service provider which provided certain services and raised invoices qua the same, which were duly paid by HMC. There existed no agent-principal or master-servant relation between SEMPL HMC, and all transactions between them were on arms-length basis, duly audited by the statutory auditors of HMC. Considering the aforesaid aspect as well as the categorical admission by the petitioner that he was unaware that Mr. Bali was carrying such foreign exchange and that he used to manage the personal expense from his own cards, it cannot be said that the said foreign exchange was being carried on his behalf. Thus, the conditions as regards being a beneficial owner have not been satisfied qua the petitioner in the present case. The petitioner not being the beneficial owner as well as the fact that the subject complaint has been filed based upon the same facts as have been conclusively determined by the learned CESTAT, this Court finds that the continuation of the subject complaint would be nothing but an abuse of the process of law. The complaint case as well as summoning order is quashed - petition allowed.
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2024 (7) TMI 1412
Refund of SAD - Applicability of Circular No. 18/2013-Cus dated 29.04.2013 - it is contended that appellant was not aware of the new Circular issued by the Director General of Foreign Trade - HELD THAT:- While it may be a fact that, based on the subsequent Circular issued by the Central Board of Excise and Customs (which has since been annulled by the Delhi High Court in the decision in Allen Diesels India Pvt. Ltd. [ 2016 (2) TMI 247 - DELHI HIGH COURT ], the appellant did not satisfy a pre-condition for claiming refund, the fact remains that the payment of 4% SAD effected by the appellant at the time of import of the goods, albeit by debiting the DEPB scrips, was accepted by the Customs Authorities, who recognised the said payment as in the discharge of the appellant's liability in respect of the import duties at the time of import of the goods. If that be the case, then notwithstanding the Circular dated 29.04.2013 aforementioned, the respondents cannot take a stand that there was no payment of the 4% SAD by the appellant at the time of import of the goods. At any rate, since the Delhi High Court has already annulled the Circular dated 29.04.2013, the respondents are now legally obliged to consider the refund application preferred by the appellant independently, on its merits, to see whether the conditions specified in Notification 102/2007-Cus dated 14.09.2007 have been satisfied by the appellant. The Writ Appeal is allowed by setting aside the impugned judgment of the learned Single Judge and by directing the respondents to process the application for refund preferred by the appellant within a period of one month from the date of receipt of a copy of this judgment, after hearing the appellant. Appeal allowed.
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2024 (7) TMI 1411
Refund of excess paid customs duty with interest at applicable rate from the date of deposit till the date of refund - rejection on the ground that NIC has not confirmed integration of payments of duties of customs - HELD THAT:- The issue involved in the present case is of grant of interest by the learned Commissioner (Appeals) from the date of deposit till the date of refund paid at the prescribed rate. As per the respondent, the amount of interest, if calculated @12%, comes to Rs.7,89,678/- in Appeal No. C/60381/2022 and Rs.13,590/- in Appeal No. C/60382/2022 respectively. The decision of this Tribunal in the case of COMMISSIONER OF CUSTOMS ICD PATPARGANJ OTHER ICDS VERSUS VSM IMPEX PVT. LTD. [ 2024 (5) TMI 1404 - CESTAT CHANDIGARH] is gone through wherein Division Bench of this Tribunal vide Final Order No. 60260-60285/2024 dt. 22.05.2024 has rejected 26 appeals filed by the Revenue under the National Litigation Policy by holding that the appeals filed by the Revenue are not maintainable in view of the instructions dated 02.11.2023 issued by the CBIC. The present two appeals are also not maintainable in view of the instructions dated 02.11.2023 issued by the CBIC - both the appeals of the Revenue dismissed without going into the merits of the case.
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2024 (7) TMI 1410
Levy of Customs Duty - oil contained in the tanks in the ship imported for breaking purposes - HELD THAT:- In the instant case the Order-In-Original speaks only about the tank contained within the engine room and there is no specific finding about any tank outside the engine room. In this context, the Tribunal in the case of Navyug Ship Breaking Co. [ 2022 (12) TMI 100 - CESTAT AHMEDABAD ] becomes relevant where it was held that ' the Oil contained in Bunker Tanks outside the engine room of vessel, despite duty was paid under protest, there is , however, no speaking order passed as regards the same, It can be seen that if the tank containing oils are connected with pipeline with the engine or machinery of the vessel, there may be no reason why the same cannot be treated as integral part of the engine or machinery of the vessel. However, since there is not speaking order on that part of issue, we direct the adjudicating authority to pass speaking order in respect of duty pertaining to oil contained in Bunker Tacks outside the engine room of vessel.' The impugned orders are set aside and matter is remanded to the adjudicating authority to decide in terms of order in the case of Navyug Ship Breaking Co - Appeal allowed by way of remand.
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2024 (7) TMI 1409
Classification of the imported goods - IC-Codecs - To be classified under Customs Tariff Item [CTI] 8542 39 00 of the Customs Tariff Act 1975 or under CTI 8517 62 90? - onus to prove - whether the imported goods are apparatus or machines ? - benefit of exemption Notification dated 01.03.2005 - HELD THAT:- The goods imported are electronic integrated circuits used in the process of manufacture of mobile phones and tablets. The items covered under CTH 8517 constitute a complete machinery or apparatus in itself. The goods imported would not satisfy any of the description of goods covered under CTH 8517 as the ICs-Codecs cannot be described either as a machine or as an apparatus. The goods in the present case i.e. ICs are merely electronic integrated circuits. In the present case, the goods are IC chips which are incapable of stand-alone function or connection with any other device. The ICs are only capable of functioning as compressor/decompressor upon connection with external peripherals like power supply and interface. The goods imported only interact with components which are mounted on the PCB. No network like LAN/WAN is established between the impugned goods and other components of PCB. The imported goods are not in the nature of machines or apparatus which are deployed in a network like LAN/WAN. CTH 8542 deals with electronic integrated circuits i.e. ICs. They would, therefore, be specifically covered under CTH 8542 - HSN Explanatory Notes to CTH 8542 provides that monolithic ICs may be in the form of un-diced wafers. The IC-Codecs, as imported by the appellant, are in form of rolls i.e., un-diced wafers - the goods imported by the appellant are IC-Codecs and are classifiable under Customs Heading 8542 and more specifically under CTI 8542 39 90. Benefit of exemption Notification dated 01.03.2005 - HELD THAT:- The appellant is entitled to the benefit of exemption Notification dated 01.03.2005, which exempts whole of the customs duty leviable on the goods imported into India falling under CTH 8542. As the order on merits cannot sustain, the appeal filed by the department deserved to be dismissed - Appeal of assessee allowed.
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Insolvency & Bankruptcy
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2024 (7) TMI 1408
Application u/s 7 of IBC is barred by limitation - maintainability of second Application under Section 7 of IBC, against the Corporate Debtor as for the same debt and default - CIRP has already been taken place against the Corporate Guarantor and the Financial Creditor has accepted the amount in full and final settlement of all its dues - HELD THAT:- There is no dispute that the 1st respondent financial creditor had granted a loan of Rs.100 crores to the 2nd respondent corporate debtor. The loan was secured by the corporate guarantee furnished by ACIL, which is the holding company of the corporate debtor. There is no dispute that the 2nd respondent-corporate debtor committed a default in payment of the loan amount. Therefore, the guarantee was invoked by the 1st respondent-financial creditor, which led to the filing of an application under Section 7 of the IBC against ACIL. The CIRP of ACIL was completed, and the resolution plan was approved. The claim lodged by the 1st respondent-financial creditor was of Rs.241.27 crores. However, as per the resolution plan, the 1st respondent-financial creditor had to accept a haircut as it was provided therein that the 1st respondent-financial creditor would get only a sum of Rs.38.87 crores from the resolution applicant. Liability of Guarantor/surety - HELD THAT:- The law is very well settled. The liability of the surety and the principal debtor is co-extensive. The creditor has remedies available to recover the amount payable by the principal borrower by proceeding against both or any of them. The creditor can proceed against the guarantor first without exhausting its remedies against the principal borrower. Chapter VIII of the Contract Act contains provisions regarding indemnity and guarantee. Section 137 lays down a settled principle that it is not necessary for the creditor to first sue the principal debtor or adopt a remedy against him. If the creditor omits to do that, unless there is a contract to the contrary, it will not amount to discharge of the surety. This means that without proceeding to recover the debt against the principal debtor, the creditor can proceed against the surety unless there is a contract to the contrary. Even if the creditor discharges one surety, it will not amount to the discharge of the other surety. There are two other contingencies provided under Sections 138 and 139 - if there is a compromise or settlement between the creditor and the surety to which the principal borrower is not a consenting party, the liability of the borrower qua the creditor will remain unaffected. The provisions regarding the discharge of the surety discussed above show that involuntary acts of the principal borrower or creditor do not result in the discharge of surety. In the case of Lalit Kumar Jain [ 2021 (5) TMI 743 - SUPREME COURT ], this Court dealt with the legal effect of approving the resolution plan in CIRP of the corporate debtor on the liability of the surety. This is in the context of Section 135 of the Contract Act, which provides that if the creditor compounds with or gives time or agrees not to sue the principal debtor, it amounts to discharge of the surety. In such a loan transaction secured by a guarantee, the guarantor has an obligation to repay the loan amount to the creditor, and there is a separate and distinct obligation on the borrower to pay the amount to the creditor. Such a transaction creates a right in favour of the creditor to proceed against the guarantor and borrower for recovery. However, he has the right to recover the amount only to the extent of the loan amount payable by the borrower. Simultaneous proceedings under the IBC against the Corporate Debtor and Guarantor - HELD THAT:- Sub-section (2) of Section 60 contemplates separate or simultaneous insolvency proceedings against the corporate debtor and guarantor. Therefore, sub-section (3) of Section 60 provides that if CIRP in respect of the corporate guarantor is pending before an adjudicating authority and if the CIRP against the corporate debtor is pending before another adjudicating authority, CIRP proceedings against the corporate guarantor must be transferred to the adjudicating authority before whom CIRP in respect of the corporate debtor is pending. Thus, consistent with the basic principles of the Contract Act that the liability of the principal borrower and surety is co-extensive, the IBC permits separate or simultaneous proceedings to be initiated under Section 7 by a financial creditor against the corporate debtor and the corporate guarantor. Whether the assets of the Corporate Debtor were part of CIRP in respect of ACIL, Corporate Guarantor - HELD THAT:- There is a mandate of clause (d) of sub-section (4) of Section 36 of the IBC that the assets of an Indian subsidiary of the corporate debtor shall not be included in the liquidation estate assets and shall not be used for the recovery in liquidation. Section 18 entrusts several duties to the IRPs concerning the corporate debtor's assets. Consistent with the provisions of Section 36(4)(d), the explanation (b) to Section 18(1) provides that the term assets used in Section 18 shall not include the assets of any Indian subsidiary of the corporate debtor. Perhaps the reason for including these two provisions is that it is well-settled that a shareholder has no interest in the company's assets. A holding company and its subsidiary are always distinct legal entities. The holding company would own shares of the subsidiary company. That does not make the holding company the owner of the subsidiary's assets - the assets of the subsidiary company of the corporate debtor cannot be part of the resolution plan of the corporate debtor. By virtue of the CIRP process of ACIL (corporate guarantor), the 2nd respondent-corporate debtor does not get a discharge, and its liability to repay the loan amount to the extent to which it is not recovered from the corporate guarantor is not extinguished. Subrogation u/s 140 of the Contract Act - HELD THAT:- The words used in Section 140 are upon payment or performance of all that he is liable for . When the principal debtor commits a default and when the liability under the deed of guarantee of the surety is not limited to a particular amount, its liability is in respect of the entire amount repayable by the principal debtor to the creditor. The words all that he is liable used under Section 140 cannot be ignored. The principal borrower must continuously indemnify the surety. Section 140 of the Contract Act may be founded on the said obligation - the surety gets invested with the rights of the creditor to recover from the principal debtor the amount which was paid as per the guarantee. If the surety pays only a part of the amount payable to the creditor, the equitable right the surety gets under Section 140 will be confined to the debt he cleared. Only the liability of ACIL under the corporate guarantee to repay the loan to the 1st respondent-financial creditor has been extinguished on the payment of Rs.38.87 crores. By the involuntary act of the creditor of accepting part of the amount from the surety in the discharge of the entire liability of the surety, even if Section 140 is attracted, it will confer on the guarantor or the appellant the right to recover only the amount mentioned above from the corporate debtor. The subrogation will be only to the extent of the amount recovered by the creditor from the surety. The view taken by NCLAT cannot be faulted. Accordingly, the appeal is hereby dismissed.
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FEMA
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2024 (7) TMI 1407
Non-affording of personal hearing to the petitioner - Suspension of registration under the Foreign Contribution (Regulation) Act, 2010 - allegation that there has been mis-management of funds of foreign contributors - whether the petitioner should have been afforded a personal hearing in terms of sub-section (2) of Section 14 of the Act prior to passing of the order dated 04-09-2023? HELD THAT:- The words reasonable opportunity of being heard cannot be read in isolation. They have to be read along with sub-section (3) of Section 14 of the Act, the consequences of passing of an order of cancellation. Sub-section (2) of Section 14 of the Act permits cancellation of registration. The consequence thereof is found in sub-section (3) which permits no registration under the Act for an entity which suffered cancellation for a period of three years. This is the dire civil and economic consequence that would ensue. Therefore, it cannot be said that sub-(2) of Section 14 of the Act is restricted only to hearing, hearing would mean only issuance of a show cause notice. Therefore, the contention of the learned Central Government Counsel is to be repelled and is accordingly repelled. I am in respectful agreement with what the learned single Judge of the High Court of Madhya Pradesh has held, interpreting sub-section (2) of Section 14 of the Act. Principles of natural justice, is trite cannot be stretched to unlimited extent. But, it is equally trite that when consequences thereof are grave, it should be complied with in its entirety even stretching in a little further. Therefore, the words depicted in the Act reasonable opportunity of being heard cannot be restricted to issuance of a show cause notice but a personal hearing in the peculiar facts of the case owing to the peculiarity of sub-section (3) of Section 14 of the Act must have been afforded to the petitioner. Non-affording of personal hearing to the petitioner has rendered the order unsustainable and the unsustainability of it, would lead to its obliteration. Let there be no confusion that there can always be a fusion between hearing and personal hearing.
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PMLA
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2024 (7) TMI 1406
Money Laundering - predicate offence - involvement of an illegal racket of kidney transplantation and committed various offences including the offence punishable under section 307 IPC and the offences punishable under sections 18/19/20 of TOHO Act which are scheduled offences under PMLA. If in case an accused is acquitted/discharged in a predicate offence, in that eventuality, whether the prosecution initiated by the respondent/ED can be allowed to be continued or is liable to be quashed? HELD THAT:- The above issue was considered by the Supreme Court in case of Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT ] and it was observed that ' The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him.' A Coordinate Bench of this Court in case of Nayati Healthcare [ 2023 (10) TMI 822 - DELHI HIGH COURT ] has also considered the issue whether the prosecution initiated by the respondent/ED can be continued in a case where the accused has already been acquitted/discharged for the predicate offence, where it was held that 'the present complaint filed by the ED and the proceedings arising therefrom cannot survive. Considering that the FIR has been quashed by this court and that it has not been challenged till date, there can be no offence of money laundering under section 3 of the PMLA against the petitioners.' Thus, the present complaint filed by the respondent/ED and the consequential proceedings cannot survive. Considering that the co-accused Dr. Jeevan Kumar has been acquitted by the trial court vide judgment dated 22.03.2013 and that the said judgment has not been challenged till date, there can be no offence of money laundering under section 3 of PMLA against the petitioner. Accordingly, the impugned order is set aside qua the petitioner along with all consequential proceedings arising therefrom stated to be pending before the concerned court. Petition disposed off.
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Service Tax
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2024 (7) TMI 1405
Seeking to quash the impugned order passed by respondent No.2 under section 73 (1) of the erstwhile Finance Act, 1994, by invoking the extended period of limitation - jurisdiction of issuing the show cause notice under section 73 (1) of the Act - HELD THAT:- This Court is of the opinion that to invoke the proviso to Section 73 (1) of the erstwhile Finance Act of 1994, the necessary mandatory requirements are contemplated in the Act of 1994, which is ingrained in the proviso to section 73 (1) of the Act. The same has been stated in the show cause notice with regard to the petitioner being liable to pay the service tax and why penalties should not be imposed except for narrating in detail with regard to the requirements as contemplated under proviso to Section 73 (1) of the Act of 1994. Once the show cause notice is issued under the proviso to Section 73 (1) of the erstwhile Finance Act, invoking the extended period of limitation beyond the 30 months and once an inquiry is conducted, opportunity is given to file reply when adjudication is held the grounds whatever urged by the petitioner herein would have to be challenged by way of an appeal provided under the Act of 1994, rather than challenging the jurisdiction of the revenue for issuance of the show cause notice - As subsequently in the course of the show cause notice and the hearing, the opportunity was provided to the petitioner to substantiate the same by answering the requirement of not registering himself under the service tax registration and payment of service tax. The invocation of the writ jurisdiction under Article 226 of the Constitution of India whether could be entertained when there is an alternative efficacious remedy of appeal available under this statute. It is not in dispute, but in the present case, Section 85 of the Act, 1994 provides for appeal against any orders passed by the authorities. If at all the petitioner is aggrieved by the order of the authorities, he would have to approach the appellate authority rather than invoking the writ jurisdiction. There are no good ground made or cogent reasons of the revenue having not provided sufficient cause and reasons to invoke the proviso to section 73 (1) of the Act, 1994, for the extended period of limitation - petition dismissed.
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2024 (7) TMI 1404
Rejection of refund of unutilized Krishi Kalyan Cess (KKC) u/s 142(9)(b) of the CGST Act, 2017 - HELD THAT:- This Tribunal in the case of Bharat Heavy Electricals Ltd. [ 2019 (4) TMI 1896 - CESTAT NEW DELHI ] has held by relying the judgment in the case of Slovak India Trading Co. Pvt. Ltd. [ 2019 (4) TMI 1896 - CESTAT NEW DELHI ] that assessee is eligible for cash refund of cesses lying as Cenvat credit balance as on 30.06.2017 in their accounts; but this judgment was appealed against by the department before the Hon ble Madhya Pradesh High Court and the Hon ble Madhya Pradesh High Court admitted the appeal - Further, the Hon ble High Court in the meantime has directed that the refund granted by the Tribunal shall remain stayed till the final output of the appeal. The Division Bench of this Tribunal in the case of Lupin Ltd. [ 2023 (3) TMI 741 - CESTAT HYDERABAD ] has decided the issue of refund of KKC accumulated prior to 01.07.2017 holding that ' we reject the amount of refund for KKC RS 5.46,759/-, following the ruling of Larger Bench in the case of Gauri Plasticulture Pvt. Ltd [ 2019 (6) TMI 820 - BOMBAY HIGH COURT ] wherein it was held that a non-utilised portion of Cenvat credit cannot be claimed as refund in cash, distinguishing the ruling in Union of India v. Slovok India Trading Company [ 2006 (7) TMI 9 - KARNATAKA HIGH COURT ], as not a declaration of law under Article 141 of the Constitution.'. Since, the Division Bench of this Tribunal in case of refund of KKC has decided in favour of Revenue, therefore, by following the ratio of the said decisions, it is opined that the appellants are not entitled to the refund of the KKC - appeals dismissed.
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2024 (7) TMI 1403
CENVAT Credit - tower and shelter in terms of Rule 2(k) of the CENVAT Credit Rules, 2004 - input service used for providing telecommunication services/passive infrastructure in terms of Rule 2(l) of the CENVAT Credit Rules, 2004 or not - HELD THAT:- The issue has been settled by this Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX-GURGAON VERSUS BHARTI INFRATEL LIMITED [ 2019 (2) TMI 1736 - CESTAT CHANDIGARH] , wherein this Tribunal has observed ' the assessee-appellant are entitled to avail cenvat credit on items, towers, shelter parts thereof being input used for providing output service.' The CENVAT Credit availed by the appellant, is allowed - impugned order is set aside - Consequently, no demand is sustainable against the appellant - appeal allowed.
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2024 (7) TMI 1402
Levy of service tax - Tour Operator Services on charges received for outbound tours - Business Auxiliary Services on incentives received for use of Amadeus software - extended period of limitation. Whether the appellant is liable to pay service tax under Tour Operator Services on charges received for outbound tours? - HELD THAT:- The Division Bench of the Tribunal, in the case of M/s Weldon Tours Travels Pvt. Ltd. [ 2024 (5) TMI 371 - CESTAT NEW DELHI ] had occasion to consider the demand of service tax raised on outbound tours for the period prior to 01.07.2012. After considering the observations made by the Hon ble Apex Court, in the case of All India Federation of Tax Practitioners [ 2007 (8) TMI 1 - SUPREME COURT ] and also the decision of the Larger Bench dated 19.10.2023. It was observed that since the tour is happening outside India, the charges received for operating and arranging outbound tours is not subject to levy and collection of service tax. The Coordinate Bench of the Tribunal set aside the demand raised on outbound tours. By judicial discipline, following the decision in the case of M/s Weldon Tours Travels Pvt. Ltd. [ 2024 (5) TMI 371 - CESTAT NEW DELHI ], the demand of service tax for the disputed period on outbound tours cannot sustain and requires to be set aside. Whether the appellant is liable to pay service tax under Business Auxiliary Services on incentives received for use of Amadeus software? - HELD THAT:- The said issue is settled by the Lager Bench in the case of M/s. Kafila, Hospitality Travels Pvt. Ltd. [ 2021 (3) TMI 773 - CESTAT NEW DELHI (LB) ] where it was held that ' Consideration, which is taxable under Section 67 of the Finance Act, should be transaction specific. Incentives, on the other hand, are based on general performance of the service provider and are not to be related to any particular transaction of service. It needs to be noted that commission, on the other hand, is dependent on each booking and not on the target. If the air travel agent does not achieve the predetermined target, incentives will not be paid to the travel agents.' The decision in the case of M/s. Kafila, Hospitality Travels Pvt. Ltd., was followed by the Tribunal in the case of Asveen Air Travel (P) Ltd., versus Commissioner of GST CE, Chennai [ 2022 (4) TMI 1035 - CESTAT CHENNAI ]. After appreciating the facts and following the decision of the Larger Bench in the case of M/s. Kafila, Hospitality Travels Pvt. Ltd., it is opined that the demand of service tax on incentives/charges for use of Amadeus Software for booking air tickets cannot sustain under Business Auxiliary Services, and requires to be set aside. The impugned orders are set aside - appeal allowed.
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2024 (7) TMI 1401
Levy of service tax - insurance auxiliary services - insurance agent or not - Reverse Charge Mechanism in terms of rule 2(1)(d)(iii) of the Service Tax Rules, 1994 - CENVAT Credit - input service - group health insurance for the employees - Service tax on short account of insurance premium income - Extended period of Limitation. Levy of service tax - insurance auxiliary services - insurance agent or not - Reverse Charge Mechanism in terms of rule 2(1)(d)(iii) of the Service Tax Rules, 1994 - HELD THAT:- The services rendered by an insurance agent, who is duly licensed under section 42 of the Insurance Act to be so, to an insurance company in relation to general insurance businesses are taxable as insurance auxiliary services . It is not the case of the department that the Bank is a holder of a license under section 42 of the Insurance Act to act as an insurance agent , nor such a finding has been recorded by the Commissioner in the impugned order. In the absence of a license, a person cannot be considered as an insurance agent for treating the activities as insurance auxiliary services . The appellant had correctly discharged service tax on business support services and, therefore, once this service tax stands paid on the transaction, it is not open to the department to seek its recovery again. The reason stated by the appellant for discharging service tax under business support services is that the Bank had provided space to the appellant alongwith ancillary facilities such as chairs and desks and these infrastructural support services provided by the Bank are covered under business support services . This service is not liable to tax under Reverse Charge Mechanism. The demand that has been confirmed by the Commissioner under this head cannot be sustained. CENVAT Credit - input service - group health insurance for the employees - HELD THAT:- This issue has been decided in favour of the appellant by a Larger Bench of the Tribunal in Reliance Industries Ltd. vs. Commissioner of Central Excise and Service Tax, (LTU), Mumbai [ 2022 (4) TMI 1357 - CESTAT MUMBAI (LB) ]. Thus, the demand confirmed under this head cannot also be sustained. Service tax on short account of insurance premium income - HELD THAT:- The appellant has stated that as per the audited trial balance of the Regional Office at Delhi, the total premium is Rs. 253,63,68,125/- and because of an error in the Annexure, the said trial balance has been recorded as 253,72,82,715/-. The appellant has enclosed the audited trial balance from which it is clear that the total premium is Rs. 253,63,68,125/- and, therefore, there is no short accounting of premium. The impugned order confirming the demand of service tax on insurance auxiliary service and short account of insurance premium income cannot be sustained nor can the CENVAT credit of group health insurance policy for the employees be denied to the appellant - It is not necessary to examine the contention raised by the learned counsel for the appellant on invocation of the extended period of limitation under the proviso to section 73(1) of the Finance Act. The order dated 15.05.2017 passed by the Commissioner is, accordingly, set aside - appeal allowed.
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2024 (7) TMI 1400
Non-payment of service tax - appellant registered under Section 12AA of Income Tax Act, 1961 - violation of various Section of Chapter 5 of Finance Act and also of Rule 2A and Rule 3 of point of taxation Rules, 2011 read with Rule 2(1)(d) of Service Tax Rules, 1994 - applicability of mega exemption Notification No.25/2012-ST dated 20.06.2012 or negative list of Section 66D of Finance Act 1994 - HELD THAT:- The activity of the appellant is squarely covered under Entry No. 9 of the above notification. The Mega Exemption Notification No. 25/2012, Entry No. 6 thereof, also exempt the services provided by any person other than a business entity. The word business has not been defined in chapter V of the Finance Act, 1994. In the present case, the appellant is a statutory body carrying out the functions as laid down by the statute. It is collecting all such amounts as mentioned in the show cause notice but as per the statutory mandate of Section 18, 19, 21, 27, 29, 32, 33, 38 and 49 of the Architects Act, 1972 read with Rule 30 and 34 of Council of Architecture Rules. All kinds of the fees are apparently charged for inspection and approval of new institution as well as existing institutions admitting and offering recognised qualifications in the Architecture in India and for meeting out the other statutory objectives including promotion, research and development in architectural education - the impugned prescribed fees are collected by the appellants as a regulatory body for self financing its expenses incurred without motive of carrying out any kind of the commercial and economic activity of profit. The appellant admittedly is registered under Section 12AA of the Income Tax Act. The section provides that nonprofit organisations like charitable trusts, welfare societies, NGOs, religious institutions etc. are entitled to tax exemption. The certificate of appellants registration as a charitable trust is also on Further, there is department s own Circular No. 177/09/2022- TRU dated 03.08.2022 wherein it has been held that all services supplied by an educational institution to its students are exempts from GST. Consideration charged by the educational institutes by way of entrance fee for conduct of entrance examination is also exempt - it is clarified that the amount for fee charged prospective students for entrance or admission, or for issuance of eligibility certificate to them in the process of their entrance/admission as well as the fee charged for issuance of migration certificates by educational institutions to the leaving or ex-students is covered by exemption under Sl. No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. A prior circular also bearing no. 89/7/2006-ST dated 18.12.2006 has clarified that statutory functions performed in terms of specific responsibility assigned to a sovereign/public authority or any authority under law in force does not constitute provision of taxable service to a person and therefore no service tax is leviable on the activities of such authority. CESTAT Mumbai while relying upon this circular in the case of MIDC Vs. CCE [ 2014 (11) TMI 311 - CESTAT MUMBAI] has held that the fee collected by the authority constituted under provisions of law for performing such activity which is in nature of compulsory/statutory levy as per the provisions of relevant statute and that it is deposited in the government treasury, such activity is undertaken as mandatory and statutory function and thus, do not come under the ambit of taxable service. Hence, no service tax is leviable on such activity. The overall quantitative limit prescribed in the proviso to Section 2(15) (as amended from time to time) has to be complied with, if the regulatory body is to be considered as one with 'charitable purpose' eligible for exemption under the IT Act. Like statutory authorities which regulate professions, statutory bodies which certify products (such as seeds) based on standards for qualification, etc. will also be treated similarly. The original adjudicating authority has confirmed the demand holding that the appellants are neither covered under Mega Exemption Notification nor under the negative list, are therefore not sustainable. The orders under challenge are hereby set aside - Appeal allowed.
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Central Excise
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2024 (7) TMI 1399
Challenge to assessment order - Board s Circular No.98/1/2008-Service Tax, dated 04.01.2008, issued vide F.No.345/6/2007-TRU - HELD THAT:- The CESTAT, Bangalore in Golflinks Software s case [ 2018 (8) TMI 331 - CESTAT BANGALORE ] where it was held that 'The Apex Court in the case of Orient Paper Mills Ltd. Vs. UOI [ 1968 (5) TMI 15 - SUPREME COURT ] held that Appellate Authority which exercised quasi-judicial power should not be influenced by departmental clarifications and Board Tariff Ruling while adjudicating the cases.' A plain reading of the question framed leaves no room for any doubt that Board s circular became the subject matter of the substantial question. The High Court gave its stamp of approval to the order of authority below and the appeal was dismissed. There exists no substantial question of law, which needs adjudication - Appeal dismissed.
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2024 (7) TMI 1398
CENVAT Credit - input services - period March 2009 to May 2013 - denial on the ground that those services are not confirming to the definition of input service , contained in Rule 2(l) of the CENVAT Credit Rules, 2004 - HELD THAT:- The disputed services involved in the present appeal were considered as input service by the Tribunal in the case of C.C.E., DELHI-III VERSUS FIAMM MINDA AUTOMOTIVE LTD. [ 2016 (3) TMI 64 - CESTAT NEW DELHI ], SECURE METERS LTD VERSUS CE ST-UDAIPUR [ 2018 (8) TMI 950 - CESTAT NEW DELHI ], ACCENTURE SERVICES PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI-II [ 2015 (3) TMI 1114 - CESTAT MUMBAI ], M/S RELIANCE INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, LTU, MUMBAI [ 2016 (8) TMI 123 - CESTAT MUMBAI ] and RMZ INFOTECH PVT. LTD. VERSUS COMMR. OF CENTRAL TAX, BENGALURU EAST [ 2021 (11) TMI 1108 - CESTAT BANGALORE ]. During the course of the arguments, the appellant submitted fairly that post 01/04/2011, they would not be entitled for CENVAT credit on Rent-a-Cab service and accordingly, he would not press for the same. The appellant would pay up that part of the demand, as it relates to Rent-a-Cab service post 01/04/2011. We accept the contention of the appellant in view of the exceptions provided under the definition of input service w.e.f. 01/04/2011. The impugned order is modified to the extent of confirming the demand of CENVAT credit availed on Rent-a-Cab service w.e.f. 01/04/2011 along with interest. Rest of the demands are however set aside - Appeal allowed in part.
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2024 (7) TMI 1397
Valuation of clearances - undervaluation of goods sold from their depot and consignment agents - period from 2006-07 to 2010-11 - applicability of Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - recovery alongwith interest and penalties - HELD THAT:- The appellant has transferred their goods to their depot at Delhi and six consignment agents located at various places from where the goods were sold to unrelated buyers. The appellant were following Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and discharged duty at the time of clearance from their factory. As per Rule 7 of the Rules, Central Excise Duty was paid at the factory gate at a price prevailing at the depot / consignment agents end at the same time or the time nearest to the time of removal of goods from their factory. The appellant has adopted the method of payment of duty as mentioned above in Rule 7 of the Central Excise Valuation Rules, for the clearances effected to their depot and consignment agents. Once duty has been paid at the time of clearance from their factory as provided under Rule 7, the appellant is not liable to pay any differential duty based on subsequent sale of the same goods from the depot or consignment agents, at a higher price to independent buyers - the ld. adjudicating authority has given a finding stating that the appellant has adopted Rule 7 of the Central Excise Valuation Rules and there is no evidence available on record to establish that the goods were sold at a different price from the depot or consignment agents end at the same time. Interest - HELD THAT:- There is no other evidence available on record to establish that the appellant has not adopted the price prevalent at the depot / consignment agents at the same time or at the nearest time when they paid the duty at the time of clearance from their factory. Accordingly, it is held that the appellant has rightly paid duty as per Rule 7 of the Central Excise Valuation Rules, 2000 and there is no liability to pay any differential duty on account of difference in the value of clearance of the same goods from the depot / consignment agents subsequently to independent buyers - the appellant is liable to the differential duty only to the extent of Rs.23,052/- confirmed in the impugned order along with interest. Penalty - HELD THAT:- The issue involved in this case related to valuation of clearances effected through the depot and consignment agents of the appellant. There is no suppression of fact with intention to evade payment of tax established in this case and hence, no penalty is imposable on account of confirmation of the above said demand. Appeal disposed off.
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2024 (7) TMI 1396
Challenge to provisional assessment - mere change of opinion - Eligibility for abatement on the value of bought-out items in the absence of any findings by the adjudicating authority regarding the availment of CENVAT credit on such brought out items - non-verification of actual purchase price of bought-out items supplied directly to site. Whether the First Appellate Authority is justified in setting aside the provisional assessments? HELD THAT:- The Common/Final order of this Bench in the appellants own case for earlier periods in BHARAT HEAVY ELECTRICALS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TIRUCHIRAPPALLI [ 2019 (3) TMI 1362 - CESTAT CHENNAI] which was relied upon by the appellant and we find that the facts are almost identical - it was held in the said case that ' once the appellants have not been found in breach of Guidelines contained in the Office Order dt. 22.12.2004 the finalization of provisional assessment indeed will naturally be treated to have done only following the said Order. It is also to be noted that certain verifications regarding the value and weight of DTS items and the items supplied by assessee s units for all items covered by commercial invoices are required to be done periodically, to ensure that at the time of finalization of assessment there will not be any need to check even figures with respect to any documents other than the commercial invoice.' There are no change in the facts or the circumstances and that all the objections/contentions urged here by the Ld. Joint commissioner stand answered, that is to say, this Bench has considered all such grievances of the department and has answered such grievances by resting on the office memorandum. The crux of the findings thus appears to be that as long as the revenue does not have any grievance against the Office Memorandum and as long as the assessee is not found to have violated the terms and conditions in the said office memorandum, the same is binding on both the assessee as well as the revenue - thus, setting aside of the assessments by the First Appellate Authority was uncalled for and hence, there are no reasons to sustain the impugned order. The view of the First Appellate Authority is a mere change of opinion and, as long as the view expressed by the Adjudicating Authority after following the guidelines in the Office Memorandum is not found to have resulted in revenue loss, setting aside the finalised assessments on account of change of opinion is clearly impermissible in law and hence, unsustainable. The impugned order is set aside - appeal allowed.
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2024 (7) TMI 1395
Refund of unutilized CENVAT credit lying in their books of accounts under Rule 5 of CENVAT Credit Rules, 2004 - rejection of refund on Erection , Telephone and outward transportation service - period October 2009 to June 2010 - HELD THAT:- The impugned period i.e. October 2009 to June 2010 is prior to the changes brought in by Notification No. 3/2011 dated 1.3.2011, to the definition of Input service' under Rule 2 (l) of the Cenvat Credit Rules, 2004 with effect from 01/04/2011. Prior to the said date the definition of input services had a wide ambit as it included the phrase activities relating to business . Thus, almost all the services were covered within the definition of input services if used for providing the output services. There is nothing to show that the said services were not used for the provision of output service. Further considering the low tax amount involved in these appeals and the appellant being prima facie eligible for the refund it would be in order, to grant such benefits without straining the plain words of the section at this distant date. The impugned order is set aside and the appeals are allowed.
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2024 (7) TMI 1394
Refund claim - clearances made to SEZ units - physical exports or not - refund claim filed beyond time limit of one year prescribed under Section 11B of Central Exercise Act, 1944 - Appeal against confirmation of the recovery of the amount - Confirmation of demand of interest. Appeal against confirmation of the recovery of the amount - HELD THAT:- It is brought out from facts that the appellant has already repaid the amount. The Commissioner (Appeals) in the impugned order has given the liberty to the appellant to avail recredit. The Ld. Counsel has brought to our notice that the appellant has repaid the amount and then availed recredit on 23.03.2014. In such circumstances, appeals have become infructuous. These appeals are dismissed as infructuous. Confirmation of demand of interest - HELD THAT:- The credit availed by the appellant is eligible. Rule 5 provides for an assessee to get refund of the unutilized cenvat credit in case of exports. This is a beneficial provision to facilitate exports. By filing the claim belatedly, the appellant has lost the benefit of refund. The department has not adduced any evidence to establish that there is suppression of facts on the part of the appellant. There are no ingredients for invoking the extended period for demand of interest. The demand of interest is time barred and requires to be set aside. Appeals disposed off.
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2024 (7) TMI 1393
Recovery of Central Excise Duty alongwith interest and penalty - determination of assessable value of goods sold or cleared to the related party - section 4(1)(b) of the Central Excise Act read with rules 8,9,10 11 of the Central Excise Valuation Rules 2000 - HELD THAT:- It is not in dispute that the facts pertaining to the present appeal and to the aforesaid decided appeal in M/s Khyati Ispat Private Limited (Rolling Mill Division) vs. Principal Commissioner, Central Tax Central Excise [ 2022 (3) TMI 399 - CESTAT, NEW DELHI ] in the matter of the appellant are identical. Infact, the period involved in the appeal decided by the Tribunal is from April, 2010 to March, 2014, while the period involved in the present appeal is from April, 2014 to March, 2015. The decision of the Tribunal which has been relied upon by the Commissioner (Appeals) would, therefore, govern the issues raised in this appeal. It cannot be doubted that the dispute in the present appeal is identical to the dispute raised in the appeal decided by the Tribunal. In view of the decision of the Tribunal in the matter of the appellant itself, the present appeal filed by the department deserves to be dismissed and is dismissed.
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CST, VAT & Sales Tax
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2024 (7) TMI 1392
Challenge to revisional order - assessment proceedings for the financial year 2006-07, barred on grounds of limitation in view of Section 33 of the TVAT Act having been undertaken on 15/18.11.2012 i.e. after five years - assessment order and reassessment order are based upon audit reports which are presumptuous in nature or not - formation of independent opinion or not - levy of penalty without a proper show cause notice in terms of Section 45 (6) of the TVAT Act, 2004. HELD THAT:- The reassessment order dated 14.05.2019 passed on a previous remand by the revisional authority vide order dated 16.08.2016 has once again been set aside taking into account all the grounds urged by the petitioner by the impugned order dated 06.02.2024 and once again the matter has been remanded for reassessment. As such, the issues being canvassed before this Court are not open in that sense. The Assessing Authority has to apply its mind to all the grounds both of law and facts being raised by the petitioner in respect of each of the financial years in question. Since a ground of limitation has been taken so far as the assessment proceedings of the financial year 2006-07 is concerned, the Assessing Authority shall determine the question of limitation first upon hearing the assessee and only if he is satisfied that the assessment exercise carried out for the financial year 2006-07 is not barred by limitation in terms of Section 33 of the TVAT Act, he would proceed to determine other grounds raised on merits so far as that financial year is concerned. It is deemed proper to direct the Assessing Authority to conclude the exercise within a period of three months from the date of receipt of copy of this order - petition disposed off.
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2024 (7) TMI 1391
Decision of appeal ex-parte - whether in absence of counsel of the revisionist/appellant, the Commercial Tax Tribunal can proceed to consider and decide the appeal 'ex parte' in absence of the revisionist/appellant? - violation of principles of natural justice - HELD THAT:- This Court is of the considered view that where the appellant does not appear before the Tribunal, the appeal should be dismissed for want of prosecution rather than deciding the same on merits. Proviso to Rule 63 (4) of the U.P. Value Added Tax Rules, 2008 provides that if despite proper service of the notice either party is not present, the appeal may be heard and decided ex parte. The aforesaid proviso though on the face of it provides that in absence of a party to the proceedings, the appeal can be decided by the Tribunal on merits, but the word 'ex parte' used in the proviso can be interpreted as want of appearance on behalf of the opposite party/defendant and not the appellant/plaintiff - the word 'ex parte' can be given its natural meaning as appearing in the Code of Civil Procedure and certainly the Tribunal can proceed to consider and decide the case ex parte in a situation where only the appellant appears, but the respondent/State does not appear, while in a case, where the appellant does not appear, the only consequence of such a situation would be to dismiss the appeal for want of prosecution and not to enter and decide the case on merits of the controversy. The other concern raised was that there is no provision for setting aside the ex parte order in such a situation where the Tribunal proceeds to allow the appeal ex parte in absence of the defendant. In this regard, reliance was placed upon a judgement of a Coordinate Bench of this Court passed in M/s Ram Sewak Coal Depot, Deori, Mirzapur Vs. The Commissioner of Trade Tax, U.P, Lucknow [ 2003 (2) TMI 457 - ALLAHABAD HIGH COURT ], wherein interpreting the provisions of Section 22 of the U.P. Value Added Tax Act, 2008, which is pari materia with provision of Section 31 of the U.P. Value Added Tax Act, 2008, which provides for rectification, this Court has held that wherein an appeal is decided ex parte, it shall be open for moving an application for rectification of such a situation. Accordingly, adequate reasons are given for the defendant for non appearance and judgement is rendered ex parte, but recall of order, exercise of rectification has been provided under Section 31 of the U.P. Value Added Tax Act, 2008. The impugned order dated 07.09.2017, whereby the Tribunal has proceeded to decide the appeal preferred by the revisionist in his absence, is held to be illegal and arbitrary and accordingly set aside and the matter is remitted back to the Tribunal to decide the matter afresh after affording an opportunity of hearing to the parties - Revision disposed off.
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Indian Laws
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2024 (7) TMI 1390
Nature of Royalty - Distribution of legislative powers between the Union and the States on the taxation of mineral rights - true nature of royalty determined under Section 9 read with Section 15(1) of the MMDR Act - royalty is in the nature of tax or not - scope of Entry 50 of List II of the Seventh Schedule - ambit of the limitations imposable by Parliament in exercise of its legislative powers under Entry 54 of List I - Does Section 9, or any other provision of the MMDR Act, contain any limitation with respect to the field in Entry 50 of List II? - expression subject to any limitations imposed by Parliament by law relating to mineral development in Entry 50 of List II pro tanto subjects the entry to Entry 54 of List I, which is a non-taxing general entry - any departure from the general scheme of distribution of legislative powers as enunciated in M P V Sundararamier [ 1958 (3) TMI 40 - SUPREME COURT] or not - scope of Entry 49 of List II and whether it covers a tax which involves a measure based on the value of the produce of land - constitutional position be any different qua mining land on account of Entry 50 of List II read with Entry 54 of List I or not - Entry 50 of List II is a specific entry in relation to Entry 49 of List II, and would consequently subtract mining land from the scope of Entry 49 of List II. What is the true nature of royalty determined under Section 9 read with Section 15(1) of the MMDR Act? Whether royalty is in the nature of tax? As per Dr Dhananjaya Y Chandrachud, CJI (majority view) - Royalty is not a tax. Royalty is a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights. The liability to pay royalty arises out of the contractual conditions of the mining lease. The payments made to the Government cannot be deemed to be a tax merely because the statute provides for their recovery as arrears. As per NAGARATHNA, J. (dissenting view) - The true nature of royalty determined under Section 9 read with Section 15(1) of the MMDR Act, 1957 is that it is in the nature of a tax coming within the scope and ambit of Article 366(28) of the Constitution which defines taxation to include the imposition of any tax or impost, whether general or local or special and the word tax is to be construed accordingly. What is the scope of Entry 50 of List II of the Seventh Schedule? What is the ambit of the limitations imposable by Parliament in exercise of its legislative powers under Entry 54 of List I? - Does Section 9, or any other provision of the MMDR Act, contain any limitation with respect to the field in Entry 50 of List II? - Whether the expression subject to any limitations imposed by Parliament by law relating to mineral development in Entry 50 of List II pro tanto subjects the entry to Entry 54 of List I, which is a non-taxing general entry? Consequently, is there any departure from the general scheme of distribution of legislative powers as enunciated in M P V Sundararamier [ 1958 (3) TMI 40 - SUPREME COURT] ? As per Dr Dhananjaya Y Chandrachud, CJI (majority view) - Entry 50 of List II does not constitute an exception to the position of law laid down in M P V Sundararamier (supra). The legislative power to tax mineral rights vests with the State legislatures. Parliament does not have legislative competence to tax mineral rights under Entry 54 of List I, it being a general entry. Since the power to tax mineral rights is enumerated in Entry 50 of List II, Parliament cannot use its residuary powers with respect to that subject-matter. Entry 50 of List II envisages that Parliament can impose any limitations on the legislative field created by that entry under a law relating to mineral development. The MMDR Act as it stands has not imposed any limitations as envisaged in Entry 50 of List II - The scope of the expression any limitations under Entry 50 of List II is wide enough to include the imposition of restrictions, conditions, principles, as well as a prohibition. As per NAGARATHNA, J. (dissenting view) - Entry 50 - List II of the Seventh Schedule is, no doubt, a taxation Entry which deals with taxes on mineral rights. But this Entry is subject to any limitations imposed by Parliament by law relating to mineral development. The use of the word any means the limitation could be in any form which can be imposed only by the Parliament by law relating to mineral development. In view of the use of the expression any limitations , it must be given the widest possible meaning to include a limitation in the form of Sections 9 and 9A, 25 or any other provision of the MMDR Act, 1957 and Rules made thereunder which act as a limitation to Entry 50 - List II. The expression subject to any limitations imposed by Parliament by law relating to mineral development in Entry 50 - List II pro tanto subjects the Entry to Entry 54 - List I. The use of the expression any limitations would mean that the taxing Entry would be subject to a nontaxing or general Entry such as in Entry 54 - List I which could also be termed as a regulatory Entry. Consequently, there is a departure from the general scheme of distribution of legislative powers as enumerated in MPV Sundararamier insofar as Entry 50 - List II read with Entry 54 - List I is concerned which is unique to Entry 50 List II. This is having regard to the significance of Entry 54 List I which also overrides Entry 23 List II. What is the scope of Entry 49 of List II and whether it covers a tax which involves a measure based on the value of the produce of land? Would the constitutional position be any different qua mining land on account of Entry 50 of List II read with Entry 54 of List I? - Whether Entry 50 of List II is a specific entry in relation to Entry 49 of List II, and would consequently subtract mining land from the scope of Entry 49 of List II? As per Dr Dhananjaya Y Chandrachud, CJI (majority view) - The State legislatures have legislative competence under Article 246 read with Entry 49 of List II to tax lands which comprise of mines and quarries. Mineralbearing land falls within the description of lands under Entry 49 of List II - The yield of mineral bearing land, in terms of the quantity of mineral produced or the royalty, can be used as a measure to tax the land under Entry 49 of List II. The decision in Goodricke [ 1994 (11) TMI 353 - SUPREME COURT] is clarified to this extent. Entries 49 and 50 of List II deal with distinct subject matters and operate in different fields. Mineral value or mineral produce can be used as a measure to impose a tax on lands under Entry 49 of List II - The limitations imposed by Parliament in a law relating to mineral development with respect to Entry 50 of List II do not operate on Entry 49 of List II because there is no specific stipulation under the Constitution to that effect. The decisions in INDIA CEMENT LIMITED VERSUS STATE OF TAMIL NADU [ 1989 (10) TMI 53 - SUPREME COURT] , Orissa Cement [ 1991 (4) TMI 436 - SUPREME COURT] , Federation of Mining Associations of Rajasthan [ 1991 (8) TMI 350 - SUPREME COURT] , Mahalaxmi Fabric Mills [ 1995 (2) TMI 435 - SUPREME COURT] , Saurashtra Cement [ 2000 (10) TMI 954 - SUPREME COURT] , Mahanadi Coalfields [ 1995 (4) TMI 285 - SUPREME COURT] , and P Kannadasan [ 1996 (7) TMI 554 - SUPREME COURT] are overruled to the extent of the observations made in the present case. As per NAGARATHNA, J. (dissenting view) - Entry 49 - List II deals with taxation of lands and buildings. It does not cover taxes on mineral bearing lands. The constitutional position is different qua mineral bearing lands on account of Entry 50 - List II read with Entry 54 - List I and Section 2 of the MMDR Act, 1957. Consequently, any imposition on the basis of royalty by a State Legislature or involving royalty as a measure of the value of the minerals extracted from the land is impermissible. Entry 50 - List II is a specific Entry in relation to Entry 49 - List II and would consequently subtract mining lands from the scope of Entry 49 - List II. This is particularly so having regard to Entry 50 - List II to be read with Entry 54 - List I and Section 2 of the MMDR Act, 1957.
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2024 (7) TMI 1389
Jurisdiction of the Civil Court u/s 34 of SARFAESI Act - suit for declaration and permanent prohibitory injunction - Order VII, Rule 11 read with Section 151 of the CPC - whether there is any substantial question of law involved in this second appeal? - HELD THAT:- It is a settled law that the existence of substantial question of law is the sine qua non for the exercise of jurisdiction under Section 100 of the Code. Section 100 provides that the second appeal would lie to the High Court from a decree passed in appeal by any court subordinate to the High Court if the High Court is satisfied that the case involves a substantial question of law . It further provides that the memorandum of appeal shall precisely state the substantial question of law involved in the appeal and the High Court on being satisfied that the substantial question of law is involved in a case formulate the said question. Subsection (5) provides that the appeal shall be heard on the question so formulated - It is abundantly clear from the analysis of Section 100 that if the appeal is entertained without framing the substantial questions of law, then it would be illegal and would amount to failure or abdication of the duty cast on the court. In Santosh Hazari vs. PurushottamTiwari [ 2001 (2) TMI 131 - SUPREME COURT ], the Hon ble Supreme Court has held that ' To be a question of law involving in the case there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter.' The perusal of the aforesaid section shows that no civil court shall have any jurisdiction to entertain any suit or proceeding in respect of any matter, which the Debt Recovery Tribunal is empowered by or under SARFESI Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the aforesaid Act. It is clear that no civil court can exercise jurisdiction to entertain any suit or proceeding in respect of any matter which Debt Recovery Tribunal or Appellate Tribunal is empowered to determine and no injunction can be granted by any court taken in pursuance of any power conferred by or under the SARFESI Act or under the Recovery of Debts Due to Banks and Financial Institutions Act. In the instant case, except for the use of the word fraud , no particulars of the allegations of fraud have been specifically pleaded as mandated by the provisions of Order 6 Rule 4 of the Civil Procedure Code,1908. Thus, the plea of jurisdiction of the Civil Court based on the allegations of fraud cannot be countenanced. Hence in view of provisions of Section 34 of the SARFESI Act, both the learned Courts below have rightly rejected the plaint. Thus, no question of law, what to say of a substantial question of law is involved in the instant case. Accordingly, it is found that no illegality or perversity in the judgments passed by both the Courts below in rejecting the plaint under Order 7 Rule 11 CPC - appeal dismissed.
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