TMI Tax Updates - e-Newsletter
July 4, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy FEMA PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. PLACE OF SUPPLY OF GOODS TO UNREGISTERED PERSON UNDER SECTION 10(1) OF IGST ACT, 2017

   By: DR.MARIAPPAN GOVINDARAJAN

2. Revenue department cannot vivisect the business agreement to create demand

   By: Bimal jain

News

1. Auction for Sale (re-issue) of (i) ‘7.02% GS 2027’, (ii) ‘7.23% GS 2039’ and (iii) ‘7.30% GS 2053’

2. Government of India and ADB sign $170 million loan to strengthen pandemic preparedness and response

Notifications

SEBI

1. SEBI/LAD-NRO/GN/2024/188 - dated 2-7-2024 - SEBI

Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2024

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/DDHS/DDHS-PoD-1/P/CIR/2024/94 - dated 3-7-2024

Reduction in denomination of debt securities and non-convertible redeemable preference shares

2. SEBI/HO/DDHS/PoD1/P/CIR/2024/54 - dated 22-5-2024

Master Circular for issue and listing of Non-convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper

Highlights / Catch Notes

GST

• High Court rules in favor of delayed appeal due to retrospective tax law change. Appellate authority to reconsider impact.

  Case-Laws - HC : The High Court considered a case involving the effect of a retrospective amendment in Section 50 of the CGST Act, 2017 by the Finance Act, 2021. The petition was dismissed due to the appellants' delay in approaching the court. The court noted that the appellate authority did not address the impact of the retrospective amendment in its previous order. As a legal issue was raised, the court allowed the appeal and writ petition, setting aside the appellate authority's order and remanding the matter for reconsideration in light of the retrospective amendment.
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• High Court: Starting production before approval doesn't deny incentives under Bihar Industrial Incentive Policy. Order set aside, payments due in 3 months.

  Case-Laws - HC : The High Court addressed the issue of reimbursement of VAT/ET/SGST under Bihar Industrial Incentive Policy, 2011. The petitioner's claim was rejected due to starting production before approval by SIPB. The Court held that starting production before approval does not justify denial of incentives. The impugned order was set aside, directing authorities to grant incentives from approval date and make payments within three months. The petition was allowed.
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• AAR: clarified what qualifies as parts of warships/submarines for GST. Engines, gearbox, propellers are considered integral.

  Case-Laws - AAR : The Advance Ruling Authority (ARA) addressed the interpretation of the expression "parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907" in specific notifications. The key issue was whether the goods/spares used were parts of warships/submarines. The ARA held that essential components like engines, gearbox, propeller, etc., are integral parts of a ship/vessel based on definitions of "part." Goods qualifying as parts of specific headings attract GST under the relevant notification. Items listed in Annexure 2A were deemed essential parts of a warship/submarine and subject to specific GST rates, while others in different annexures were not covered under the said notification.
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• Liquidated damages for breach of contract are taxable under GST as a service. Compensation for tolerating non-performance is also subject to GST.

  Case-Laws - AAR : The Advance Ruling Authority determined that the levy of GST on liquidated damages constitutes a supply of service under the Central Goods and Services Tax Act. Liquidated damages received for breach of contract or non-performance are considered income and fall under the definition of consideration for tolerating an act, thereby attracting GST. The imposition of compensation or penalty is governed by the Indian Contract Act to prevent defaulting acts. Compensation for tolerating non-performance constitutes a supply of service, making such payments subject to GST.
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• AAR found sewerage water treated by GVSCCL supplied to industries subject to NIL GST rate as purified water, not potable.

  Case-Laws - AAR : AAR analyzed the issue of GST levy on sewerage water treated by GVSCCL and supplied to industries. Water falls under Chapter heading 2201 of GST Tariff. Two schedule entries exist for water under CGST Act: one exempting drinking water at 12% tax and another taxing waters not containing sugar at 18%. The treated water supplied by applicant is not potable, thus not covered under entry for drinking water. The treated water qualifies as purified water, taxed at NIL rate under Notification No. 02/2017-C.T. (R).
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• AAR: the ruling clarified GST rates for royalty charges and aggregates. Separate transactions apply with different tax rates.

  Case-Laws - AAR : The case involves a query regarding the classification of goods and services for GST purposes. The applicant sought clarification on the consideration charged for supplying aggregates and recovering royalty charges. The ruling determined that the applicant's tax collection on royalty charges and goods supplied separately in invoices indicated distinct transactions. Royalty charges were classified under SAC 997337, attracting 9% CGST and 9% SGST, while aggregates fell under HSN code 251710, subject to CGST @2.5% and SGST @2.5%. The ruling emphasized the separate nature of the transactions, not constituting mixed or composite supply.
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Income Tax

• Validity of re-assessment notice: The Tribunal ruled in favor of assessee, declaring JAO's notice invalid u/s 151A.

  Case-Laws - AT : The Appellate Tribunal considered the validity of a re-assessment notice issued by the jurisdictional AO instead of the designated Faceless Assessing Officer (FAO) as required by Notification No 18/2022. The Tribunal held that the Scheme formulated by the CBDT applies to both assessment and issuance of notice u/s 148 of the Act. It clarified that only the FAO, not the JAO, can issue notices u/s 148. The Tribunal emphasized that Section 144B applies to assessment or reassessment, not to the issuance of notices. Citing a case, the Tribunal deemed notices issued by JAOs invalid u/s 151A of the Act. Consequently, the Tribunal declared the assessment based on JAO's notice as void ab initio, ruling in favor of the assessee.
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• High Court ruled receipt from hotel license as revenue, not capital gain. Decision favored Revenue/Appellant.

  Case-Laws - HC : The High Court considered a case involving the nature of a receipt received by a company for relinquishing its right to operate a hotel under a license agreement. The court analyzed the terms of the operating agreement and settlement agreement between the parties. It concluded that the amount received was a revenue receipt, not a capital receipt, as it was part of a trading contract and related to settling disputes, not the transfer of a capital asset. The court held that the sum did not qualify as long-term capital gain, overturning the decision of the ITAT. Ultimately, the court ruled in favor of the Revenue/Appellant, stating that the receipt was a revenue receipt in the hands of the company.
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• High Court Allows Tax Deduction for Pan Masala Manufacturer u/s 80-IC, Excludes Tobacco Products.

  Case-Laws - HC : The High Court addressed the issue of deduction u/s 80-IC (2) (a) for a company manufacturing Pan Masala. The company's product was considered excluded for deduction due to the Thirteenth Schedule provisions. The Court noted the specific exclusion of tobacco and related products in Part B of the Schedule for certain states. As the company was located in an area specified by the Central Board of Direct Taxes, the Court found that the product, which did not contain tobacco, was eligible for the deduction. It emphasized that the legislature's omission of Pan Masala in the relevant part of the Schedule precluded its inclusion under the deduction disqualifications. Ultimately, the Court ruled in favor of the company, allowing the deduction u/s 80-IC (2) (a) (i) and Section 80-IC (3) of the Income Tax Act, 1961.
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• Court Rules Reassessment Invalid: No New Evidence, Just a Change of Opinion on Expense Classification.

  Case-Laws - HC : The High Court examined the validity of reassessment proceedings regarding the treatment of certain expenditures as capital expenditure. The Court found that the Assessing Officer had already perused the books of accounts and formed a view that the expenses were revenue in nature, not capital. The Court also noted that during the initial assessment, the Assessing Officer independently analyzed the relevant materials provided by the petitioner. The Court highlighted that the reasons for reopening the case were based on the Audit Party's objections and not new facts. It emphasized that a change of opinion cannot be a valid reason for reassessment. Ultimately, the Court concluded that the reassessment was an attempt to revive an issue already addressed in the original assessment, rendering it unjustified.
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• The court upheld a tax assessment at 8% net profit rate for civil work contract, favoring the assessee.

  Case-Laws - HC : The High Court reviewed a case involving a rough assessment of tax quantum and the validity of a Best judgment assessment for determining net profit in a civil work contract. The assessing officer acknowledged the receipt of consideration for civil work, which was supported by materials not disputed. The ITAT noted the net profit rates of the past seven years and comparable rates in the trade, settling on a rate of 8% agreed upon by the assessee. The court found no fault in the application of the 8% net profit rate, upholding the ITAT's decision as legally sound. The judgment favored the assessee based on best judgment assessment principles.
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• High Court rules in favor of assessee on tax exemption issue. Approval u/s 10(25)(iii) valid = exemption granted.

  Case-Laws - HC : The High Court addressed the issue of exemption u/s 10(25)(iii) of the Income Tax Act. The Assessing Officer denied the exemption to the assessee fund, claiming it lost recognition without a formal order of withdrawal by the Commissioner of Income Tax. The Court held that as long as the approval u/s 10(25)(iii) and rules remained valid, the Assessing Officer must grant exemption. The Assessing Officer lacked jurisdiction to deny exemption based on recognition loss. The power to withdraw approval lies with the competent authority as per the rules. The High Court set aside the ITAT's order, ruling in favor of the assessee, emphasizing the importance of upholding approved exemptions and maintaining judicial discipline.
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• ITAT upheld penalty for late filing of financial transactions statement. Compliance with section 285BA is key.

  Case-Laws - AT : The Appellate Tribunal held that the penalty u/s 271FA for delay in filing the Statement of Financial Transaction (SFT) without reasonable cause was justified. The SFT filing is crucial for tracking high-value financial transactions to prevent tax evasion. The assessee failed to provide a valid reason for the delay in filing, despite notices issued. Compliance with section 285BA is mandatory, and the failure to submit the SFT within the deadline resulted in the penalty being upheld against the assessee.
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• A tax tribunal ruled in favor of a taxpayer on depreciation for a biometric device, saying it was a matter of interpretation, not deception.

  Case-Laws - AT : The ITAT, an Appellate Tribunal, considered a case involving a penalty u/s 271(1)(c) for a difference in depreciation treatment of a biometric device. The issue was whether the device should be classified under 'Plant and Machinery' or 'Computer' block for depreciation. The ITAT found the claim was not false but a matter of interpretation. Merely disagreeing with the claim does not warrant a penalty if the assessee provided all relevant details. Citing a precedent from Reliance Petro Products Pvt. Ltd, the ITAT ruled in favor of the assessee, deleting the penalty imposed by the Assessing Officer.
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• Appellate Tribunal discussed best judgment assessment & exemption eligibility. No docs, non-compliance led to remand for fresh assessment.

  Case-Laws - AT : The Appellate Tribunal addressed issues including best judgment assessment u/s 143(3) and eligibility for exemption u/ss 11/12. The Tribunal noted the lack of documentary evidence and non-compliance by the assessee despite notices. The assessee raised fresh grounds on the applicability of section 12AA and cited CBDT Circular No. 01/2015 regarding the retrospective operation of the first proviso to section 12A(2). The Tribunal found the AO did not consider this issue during assessment and remanded the matter for a fresh assessment. The appeal of the assessee was allowed for statistical purposes.
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• Tax Tribunal Upholds Deduction Claim; Dismisses Additions Due to Lack of Evidence in Search and Assessment Dispute.

  Case-Laws - AT : The ITAT addressed multiple issues related to the assessee's eligibility for deduction u/s 80IA and various additions made by the AO. The AO's assessment u/s 153A questioned the deduction u/s 80IA, but the ITAT upheld the assessee's claim, noting no incriminating material was found during the search. The ITAT also addressed alleged illegal payments, finding no corroborative evidence to support the claims. Additions u/s 68 related to share capital were dismissed as the transactions were independent of the assessee's involvement. Additional issues such as unrecorded cash transactions, subcontract payments, sale of Gitti, and other unaccounted transactions were also dismissed due to lack of corroborative evidence and retracted statements. The ITAT affirmed the CIT(A)'s decisions, granting relief to the assessee on all contested grounds.
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• Exemption u/s 11: The Tribunal ruled in favor of assessee, addressing various issues like trustee appointments and property transfer.

  Case-Laws - AT : The Appellate Tribunal addressed various issues. Firstly, on cancellation of registration u/s 12AB(4), it found no violation as trustee appointments did not conflict with the Act. Secondly, unexplained security deposit was deemed premature to conclude as pending appeal challenges the addition. Thirdly, the construction and sale activity was not deemed a business venture u/s 2(15). Fourthly, allegations based on an inspector's report lacked evidence. Fifthly, no requirement to inform on property transfer under court permission. Lastly, cancellation due to lease deed changes was unfounded as per Trust Deed provisions. The Tribunal ruled in favor of the assessee, noting the jurisdictional error in registration cancellation.
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• ITAT: No reason for extra tax on property sale! Fair Market Value versus actual price. AO must follow limited scrutiny rules!

  Case-Laws - AT : The Appellate Tribunal held that the case was selected for "limited scrutiny" based on large cash deposits and property transfers. The addition u/s 56(2)(vii)(b) for the difference between Fair Market Value and actual consideration was not justified. The addition did not relate to the basis for limited scrutiny. The Tribunal cited M/s. Suraj Diamond Dealers Pvt. Ltd., stating that the AO can only go beyond limited scrutiny reasons with approval. The AO's addition was deemed erroneous as it was not part of the limited scrutiny reasons, thus the appeal grounds were allowed.
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• ITAT reviewed undisclosed foreign income & assets through paper companies. Evidence proved legit source of funds, taxes paid. No undisclosed assets found.

  Case-Laws - AT : The ITAT considered the issue of undisclosed foreign income and assets allegedly layered through paper companies. The Black Money Act definitions were reviewed. Evidence showed the foreign company was legitimate, with taxes paid. The investment source was explained, with funds channeled through authorized banks. The assessment focused only on credit entries, overlooking legitimate business transactions. The assessee's explanations and documentation proved lawful sources of funds. No undisclosed assets or foreign income were found, leading to the CIT(A) deleting the addition. The Revenue's appeal was dismissed.
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• ITAT: Notices for 2011-12, 2012-13 Quashed; Reassessment Invalid Due to 6-Year Limit Breach and Lack of Direct Evidence.

  Case-Laws - AT : The ITAT held that the period of limitation for issuing a notice u/s 153C is six years from the end of the financial year preceding the date of recording satisfaction. In this case, the satisfaction was recorded on 31.10.2018 for AY 2018-19, so AYs 2011-12 and 2012-13 were outside the 6-year limit. The notice for these years was deemed not maintainable and quashed. The satisfaction note by the AO lacked a direct correlation between the seized material and the relevant assessment years as required by section 153C. As the seized documents did not establish this link, the reasoning for reopening the assessment was deemed vague and invalid. Following the precedent set in CIT vs. Sinhgad Technical Education Society, the reassessment proceedings u/s 153C were quashed, and the assessee's appeals were allowed.
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• Appellate Tribunal decides on Transfer Pricing issues incl. software services, guarantees, inter-company loans, & brand royalties.

  Case-Laws - AT : The Appellate Tribunal addressed various Transfer Pricing (TP) issues. Regarding software services, the Tribunal upheld the selection of comparables by the assessee over the Transfer Pricing Officer's choices. The Tribunal also adjusted rates for guarantees provided to AEs based on performance and financial aspects. For inter-company loans, the Tribunal questioned the characterization as loans without considering the quasi-equity nature argued by the assessee. The Tribunal dismissed a claim for brand royalty fees, affirming that the brand is not owned by the assessee, hence no royalty is applicable.
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• Tribunal Rules Cash Payments in Compliance with Section 40A(3) Exemption for Milk Distributor's Verifiable Transactions.

  Case-Laws - AT : The Appellate Tribunal considered an issue related to the disallowance of expenditure in cash exceeding the permissible limit u/s 40A. The assessee, a milk distributor, received milk products from a main supplier and conducted sales through sub-distributors, with payments made in cash through banking channels. Despite high turnover and low margins, the Tribunal referred to relevant case precedents to establish that payments made to others could be verified, thus exempting them from section 40A(3). It was found that the payee had also acted as the assessee's agent and was required to make cash payments to the company, leading to the deletion of the disallowance. The decision favored the assessee based on the provided evidence and legal interpretations.
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• Appellate Tribunal Orders Fresh Review on Transfer Pricing Adjustments, Comparable Selection, and Section 14A Disallowances.

  Case-Laws - AT : The Appellate Tribunal addressed several key issues. Firstly, on Transfer Pricing (TP) adjustment, it found errors in the CIT(A)'s decision as rectification was only sought for professional fees, not ESOP, leading to a flawed dismissal. The Tribunal directed a fresh review by the CIT(A) with proper consideration and opportunity for the assessee. Secondly, on comparable selection, the CIT(A) erred by only addressing the validity of comparables, neglecting other raised issues. The Tribunal ordered a reevaluation by the CIT(A) on all grounds. Lastly, on disallowance u/s 14A, the Tribunal remitted the matter back to CIT(A) for a thorough review of dividend income and related expenditures, emphasizing due process. Additionally, on disallowance u/s 14A for MAT purposes, the Tribunal found the CIT(A)'s order lacking and mandated a new review with proper consideration and hearing for the assessee.
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• ITAT Rules in Favor of Foreign Firm, Validates Long-Term Share Sale; Deletes Addition u/s 68.

  Case-Laws - AT : The ITAT considered an addition made u/s 68 for the sale of shares as an 'unexplained source of investment'. The assessee, a foreign company tax resident of Mauritius, had held the shares for almost 10 years before selling them. The tribunal found the price increase over the years reasonable, unlike typical penny stock cases. The financials of the company whose shares were sold were substantiated, showing it was not a bogus entity. The AO's concerns about debt levels not correlating with sales were dismissed. The assessee, a SEBI registered FPI, had legitimate income from investments. The tribunal noted a High Court ruling that supported long-term share retention as genuine investment. The ITAT allowed the assessee's appeal, concluding the share transaction was genuine, directing deletion of the addition u/s 68.
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• Appellate Tribunal rules in favor of assessee on alleged bogus capital gains! No direct link to wrongdoing found.

  Case-Laws - AT : The Appellate Tribunal addressed the issue of addition u/s 68 for alleged bogus long-term capital gain. The Tribunal found that the Assessing Officer's reliance on a general investigation report and statements did not directly implicate the assessee or her broker in any wrongdoing. The Tribunal noted that the department did not link the assessee or her broker to entities identified by SEBI for price manipulation. The AO's reliance on the SEBI order and the suspension of trading in the scrip of M/s. Sunrise was deemed irrelevant. Citing a precedent, the Tribunal held that the transactions were genuine, and the assessee's claim for exemption u/s 10(38) was allowed. The decision favored the assessee.
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Customs

• Importers cleared of duty evasion charges for undervalued perfumes. Tribunal rules transaction value based on supplier invoices valid.

  Case-Laws - AT : The case involved under-valuation of imported perfumes and deodorants, leading to evasion of duty and mis-declaration of Maximum Retail Price (MRP). The issue was whether the value declared in the Bills of Entry (B/Es) should be accepted as the transaction value for Customs duty payment. The Tribunal held that the value declared in the B/Es, based on invoices from the overseas supplier, should be considered the transaction value. Rejecting the department's attempt to use MRP for valuation, it emphasized determining transaction value based on documents exchanged between parties. The Tribunal also found that the appellants, as importers and wholesalers, complied with relevant statutes and set aside all demands and penalties imposed on them.
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• Appeal won! No penalties for alleged smuggling. Legal twist: Police involvement shifted burden of proof.

  Case-Laws - AT : The case involved an appeal before the CESTAT regarding the levy of a penalty for alleged smuggling activity without providing the appellant with necessary documents or a notice for a personal hearing. The tribunal referenced legal precedents to determine that the provisions of Section 123 of the Customs Act, 1962 did not apply as the goods were seized by the police and handed over to Customs, shifting the burden of proof away from the appellants. Consequently, the Revenue failed to prove the goods were smuggled, leading to the confiscation of the gold and currency seized without imposing penalties on the appellants. The penalties were set aside, and the appeal was allowed.
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FEMA

• Appellate Tribunal ruling on FERA offense issues: seized funds, under-invoicing, reliance on statements, penalty reduction, refund directed.

  Case-Laws - AT : The Appellate Tribunal addressed various issues regarding the Foreign Exchange Regulation Act (FERA) offense, including confiscation of seized funds, under-invoicing imports, reliance on statements, denial of cross-examination, and charges of contravention. The Tribunal found the statements made by the Appellant to be true and voluntary, upheld the validity of the Show Cause Notices (SCNs), and established charges of contravention against the Appellant. The Tribunal reduced the penalty amount imposed and ordered adjustment of the pre-deposit. The Tribunal also set aside certain charges and directed a refund. The Appellant, now deceased, was represented by legal heirs.
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Corporate Law

• Court Confirms Sale Agreement Valid Post-Winding Up Petition, Clarifies "Void" as Voidable Under Companies Act 1956.

  Case-Laws - HC : The High Court addressed the issue of whether a sale agreement made after the commencement of a company's winding up is affected by Section 536(2) of the Companies Act, 1956. The court held that the winding up commences at the presentation of the petition and any disposition of company property after that is void unless the court orders otherwise. The court emphasized that the jurisdiction is equitable and should prevent unjust enrichment by the company. Referring to a Supreme Court case, the court noted that the term "void" in Section 536(2) does not always imply complete nullity, but rather voidable. The Applicant had conducted due diligence, paid consideration, settled dues, and obtained necessary permissions, making the transaction bonafide, fair, and just. Therefore, the court ratified the sale agreement, protecting the transaction.
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IBC

• Resolution Plan Upheld: Tribunal Confirms Compliance on Eligibility, Unsold Areas, and Funding; Dismisses Objections.

  Case-Laws - AT : The case involved issues regarding the approval of a Resolution Plan, including eligibility criteria for association of allottees, locus to file an appeal, correctness of unsold area mentioned in the plan, commitment of payment, equal opportunity for submitting a plan, irregularities by the Resolution Professional, and objections raised by various parties. The NCLAT held that different eligibility criteria for allottees is sustainable, rational basis for the registration cutoff date, and the Plan's approval was not vitiated by various challenges. It found no fault in the Plan's details, including the unsold area and funding sources. The Resolution Plan was deemed compliant, and no interference was justified. The applicants' requests were dismissed, and the appeal was disposed of.
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• NCLAT clarifies that moratorium under IBC starts upon filing, not registration. Emphasizes importance of filing date in legal proceedings.

  Case-Laws - AT : The NCLAT addressed the maintainability of an application filed u/s 95 of the IBC, concerning the appointment of an RP for a personal guarantor. The tribunal held that the moratorium commences upon the filing of the application, not upon registration. Citing a previous case, it emphasized that the date of filing is crucial. The tribunal also discussed a case involving proceedings u/s 13(2) of the SRFAESI Act, highlighting the importance of the date of filing for determining stay of proceedings. The tribunal dismissed the appeal challenging the appointment of an RP, finding no jurisdictional issues.
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PMLA

• Tribunal Upholds 180-Day Extension for Seized Property Due to COVID-19; Validates Single-Member Adjudicating Authority Under PMLA Section 20(3.

  Case-Laws - AT : The Appellate Tribunal addressed two key issues: 1) The duration for which property can be retained u/s 20(3) of PMLA, 2002, and 2) The constitution of the Adjudicating Authority. The Tribunal found that the Adjudicating Authority exceeded the 180-day limit for retaining seized property due to Covid-19 related extensions. Citing precedents, the Tribunal ruled that the excluded period from 15.03.2020 to 28.02.2022 should not count towards the 180-day limit. Additionally, it upheld the competence of a single-member bench as the Adjudicating Authority based on judgments from Calcutta High Court and Telangana High Court. The appeal was dismissed for lacking merit.
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• Petitioner's request to halt money laundering trial denied; law still valid despite review petition. Double jeopardy claim rejected.

  Case-Laws - HC : The petitioner sought to restrain criminal proceedings for money laundering. Citing a Supreme Court case, it was held that money laundering can be a continuing offence regardless of the scheduled offence date. The petitioner referenced a review petition, but as the law remains binding until reviewed, the stay request was denied. Section 13 of PC Act is a scheduled offence under PMLA, thus the claim of double jeopardy lacks merit. The Court dismissed the applications seeking a stay of trial court proceedings based on the above analysis.
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Central Excise

• CESTAT ruled on pre-deposit during appeal & interest on duty refund. Stay is exception, total duty payment is norm.

  Case-Laws - AT : The case involved the issue of pre-deposit during the pendency of appeal, applicability of Section 11B and unjust enrichment, and eligibility for interest on refund of duty paid. The Appellate Tribunal held that total duty payment was the norm, with stay being an exception. Pre-deposit u/s 35F was confirmed, with deposited amounts considered as mandatory pre-deposit. The tribunal referred to legal precedents regarding pre-deposit under similar laws. The decision clarified the distinction between full and partial pre-deposit. The tribunal ruled that the amounts paid under protest qualified as pre-deposit and were not subject to Section 11B. Interest on delayed refunds was granted post-amendment.
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• Adhesive Classification Dispute Resolved: Tribunal Favors Chapter 35-06; Department's Appeal Time-Barred Since 2010.

  Case-Laws - AT : The case involved the classification of a mixture of Melamine Formaldehyde Resin and Cardanol Phenolic Formaldehyde used as Adhesive/Glue/Resin for the manufacture of a final product. The issue was whether it should be classified under Chapter 35-06 as claimed by the appellant or under Chapter 39-09 as alleged by the Department. The Tribunal held that such mixtures used as adhesive/glue/resins for manufacturing laminates are classifiable under Chapter heading 35-06 based on established precedents. It was noted that the Revenue failed to prove the marketability of the product, which is essential for determining dutiability. Regarding time limitation, it was held that the demand up to December 2010 was beyond limitation as the facts were known to the Department since 2006. The appeal was allowed as the impugned order was deemed unsustainable in law.
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• High Court reconsiders input tax credit on furnace oil. Previous order set aside; remanded for fresh consideration. Parties agree for remand.

  Case-Laws - HC : The High Court considered the issue of allowing input tax credit on furnace oil on a proportionate basis or directing the respondent-assessee to pay 8% on the total value of exempted supply as per Rule 6(3) of Cenvat Credit Rules, 2004. The Tribunal's previous order was set aside, and the matter was remanded back for fresh consideration in light of a Supreme Court decision. Both parties agreed for the remand. The Tribunal was requested to expedite the disposal of the appeal, preferably by October 30, 2024, after giving both parties a hearing. The appeal was disposed of accordingly.
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VAT

• Court Rules "PET Resin" and "PVC Granules" Not Chemicals Under Assam Entry Tax Act; Invalidates Tax Assessment.

  Case-Laws - HC : The case involved a challenge to the levy of Entry Tax on "PET Reisin" and "PVC Granuels" under the Assam Entry Tax Act, 2008. The issue was whether these items could be considered "chemicals" under Entry No. 51 of the Act. The court held that in the absence of a statutory definition, the common parlance test should apply. As the authorities failed to apply this test, the decision was not valid. Referring to a Supreme Court case, the court emphasized that the trade meaning should guide interpretation. Since the Act did not define "Chemicals," and specific items were listed separately, the court concluded that "PET Reisin" and "PVC Granuels" were not chemicals. The court ruled in favor of the petitioner, setting aside the assessment and orders, as they were not sustainable.
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Case Laws:

• GST

• 2024 (7) TMI 175
  Validity of assessment order - no reasonable opportunity to contest the tax demand on merits - impugned order travels beyond the scope of the SCN - Violation of principles of natural justice - HELD THAT:- On examining the summary of show cause notice and detailed notice, it is clear that the detailed notice deals with eleven tax proposals. The said eleven tax proposals correspond to those specified in the earlier intimation. It is, however, noticeable that there was no proposal with regard to interest and penalty. In the impugned order, penalty was imposed at 10%. Thus, as regards interest and penalty, the petitioner did not have an opportunity to respond to the proposal. For such reason, the order calls for interference - Since the petitioner did not respond in spite of several opportunities being provided, it is just and appropriate that the petitioner be put on terms. On instructions, learned counsel for the petitioner agrees to remit 10% of the disputed tax demand as a condition for remand. The impugned order dated 06.02.2024 shall be treated as a show cause notice and the petitioner is permitted to respond thereto within four weeks from the date of receipt of a copy of this order - Petition disposed off.

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• 2024 (7) TMI 174
  Validity of impugned order - time barred proceedings - extension of limitation in terms of Notification issued under Section 168A of the GST Act, 2017 - HELD THAT:- Considering the issues involved, let Notice be issued returnable by 4 (four) weeks. Since, the learned Standing Counsel has entered appearance on behalf of the respondents, notices waived, however, extra copies of the writ petition be furnished within a period of 1 (one) week from today - Let this matter also be listed along with other similar matters, which was fixed on 22.07.2024.

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• 2024 (7) TMI 173
  Violation of principles of natural justice - order-in-original assailed on the ground that the petitioner did not have a reasonable opportunity to contest the tax demand on merits - mismatch between the petitioner s GSTR 3B returns and the GSTR 9/9C returns and Form 26AS - HELD THAT:- On examining the impugned order, it is evident that the tax proposal relates to the mismatch between the petitioner s GSTR 3B returns and the GSTR 9/9C returns, on the one hand, and Form 26AS, on the other. It is also clear that the assessment period is 2017-18 when the GST enactments came into force on 01.07.2017. Learned counsel for the petitioner contended that the reason for mismatch is that the pre-GST period from 01.04.2017 to 30.06.2017 is reflected in Form 26AS, whereas the same is not reflected in the GST returns of the petitioner. This aspect should be examined by the assessing officer. The impugned order dated 28.12.2023 is set aside on condition that the petitioner remits 10% of the disputed tax demand within two weeks from the date of receipt of a copy of this order. Within the said period, the petitioner is permitted to submit a reply to the show cause notice - Petition disposed off.

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• 2024 (7) TMI 172
  Violation of principles of natural justice - order assailed on the ground that the petitioner was not provided a reasonable opportunity to contest the tax demand on merits - HELD THAT:- The conclusion that the aggregate sum of Rs. 470,38,00,000/- is taxable merely because the petitioner had not placed on record all necessary documents is therefore untenable. This amount constitutes about 85% of the total demand. Interference with the impugned order is, therefore, warranted. The petitioner cannot be absolved of complete responsibility for the current state of affairs in as much as the petitioner did not submit all necessary documents. Therefore, it is necessary to put the petitioner on terms so as to safeguard revenue interest to some extent. The impugned order dated 25.04.2024 is set aside subject to the condition that the petitioner remits a sum of Rs. 50,00,000/- within a period of three weeks from the date of receipt of a copy of this order - Petition dipsosed off.

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• 2024 (7) TMI 171
  Cancellation of GST registration of petitioner - failure to file returns - HELD THAT:- The petitioner is directed to file returns for the period prior to the cancellation of registration, if not filed, 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 170
  Violation of principles of natural justice - no reasonable opportunity to contest the tax demand on merits - mismatch between the petitioner s GSTR 1 statement and the GSTR-3B returns - HELD THAT:- The tax proposal relates to a mismatch between the petitioner s GSTR- 3B returns and the GSTR-1 statement. The petitioner asserts that this was on account of an erroneous double reporting of turnover both by the petitioner and its sister concern M/s.Proactive Systems. In these facts and circumstances, the interest of justice warrants that the petitioner be provided an opportunity to contest the tax demand on merits, albeit by putting the petitioner on terms. The impugned order dated 27.12.2023 is set aside on condition that the petitioner remits 10% of the disputed tax demand within two weeks from the date of receipt of a copy of this order - Petition disposed off.

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• 2024 (7) TMI 169
  Maintainability of petition - time limitation - Section 107 of the TNGST Act, 2017 - HELD THAT:- This Court is of the view that the petitioner may have a case on merits and therefore, discretion is exercised in favour of the petitioner and quashed the impugned order, subject to the petitioner depositing 10% of disputed tax to the credit of the respondent within a period of 30 days from the date of receipt of this order. The impugned order, which stands quashed, shall be treated as addendum to the show cause notice that preceded the impugned order - Petition disposed off.

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• 2024 (7) TMI 168
  Imposition of tax, interest and penalty - seeking an extension of time on the ground that notices were received in respect of five financial years and that the petitioner is in the process of gathering the required data to submit a detailed reply - HELD THAT:- The documents on record clearly indicate that the petitioner was provided several opportunities to contest the claim for tax, interest and penalty. Upon receipt of the intimation and show cause notice, the petitioner could and should have placed on record documents indicating movement of goods between the group entities. Such documents could have been in the form of e-way bills, lorry receipts, weighment slips and the like. The petitioner cannot be absolved of responsibility for the current state of affairs. It should, however, be noticed that substantial amounts were imposed as penalty without taking into account documents that the petitioner claims is in his possession. When these facts and circumstances are considered cumulatively, a case is made out to provide the petitioner another opportunity, albeit by putting the petitioner on terms. The order impugned herein is set aside subject to the condition that the petitioner remits 10% of the disputed tax demand under the impugned order as a condition for remand in the aggregate, after giving credit of amounts remitted earlier - petition disposed off.

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• 2024 (7) TMI 167
  Provisional Attachment order of Bank Account - Section 83 of the Central Goods and Service Tax Act, 2017 - expiry of one year from the date the order is made. It is conceded by the respondent that provisional attachment order was issued on 27.01.2022 and thereafter no fresh attachment order has been issued. HELD THAT:- It is held that the provisional attachment of the Bank Account No. 1711210216080660 with AU Small Finance Bank in the name of petitioner has ceased to have effect - The respondent bank is accordingly directed to forthwith permit operation of the said bank account and not impose any embargo on the operation of the same based solely on the provisional attachment order dated 27.01.2022. Petition alllowed.

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• 2024 (7) TMI 166
  Seeking to quash Form GST APL-02 - Appeal challenging the determination of tax rejected due to non-supply of certified copy of the order - order of rejection has been passed without giving any opportunity of hearing to the petitioner - violation of principles of natural justice - HELD THAT:- There is no dispute that the petitioner preferred the appeal on 18.02.2021. If the authority found some defect, the obligation casts on the appellate authority to intimate the appellant with regard to the defect in the appeal itself. But as it appears nothing has been placed on record nor any argument has been advanced by the Revenue Department with regard to intimation of any defect, but rejected the same after long lapse of around 11 months only on 20.05.2022. Even if that will also be taken into consideration, the action of the opposite parties is absolutely arbitrary, unreasonable and contrary to the provisions of law and in violation of the principle of natural justice, reason being, if the party files an appeal in ignorance of the position that he has to file the certified copies of the order and the filing of appeal is defective one, then the appellate authority has to intimate the applicant with regard to the defect in the appeal by giving him opportunity to rectify the defect, so that the appellant can remove the same within the time stipulated. The order passed by the appellate authority under Annexure-1 in rejecting the appeal preferred by the petitioner for non-supply of the certified copies, cannot sustain and the same is hereby set aside and the matter is remitted back to the appellate authority to entertain the same and pass order after allowing the petitioner to remove the defect as would be pointed out by the appellate authority - Petition disposed off by way of remand.

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• 2024 (7) TMI 165
  Maintainability of appeal from the order passed under Section 107 of West Bengal Goods and Services Tax Act, 2017 - non-constitution of appellate tribunal - Challenge to order passed under Section 74 of the Act - HELD THAT:- The justice would be sub-served if the petitioner is directed to deposit with the GST authorities the sum equal to 5 % of the remaining amount of tax in dispute, in addition to the deposit already made under sub-section (6) of Section 107 of the said Act. The petitioner is directed to enclose all documents filed before the Appellate Authority in a compilation, in the form of a paper book - List this matter in the Combined Monthly List of July, 2024.

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• 2024 (7) TMI 164
  Violation of principles of natural justice - no personal hearing provided to petitioner - non-speaking order - HELD THAT:- There is no discussion with regard to the reply of the petitioner. No reasons are recorded as to why such reply was rejected except for stating that proper documents were not provided. The petitioner appears to have provided the audited financial statements, tax audit report, Form 26AS, trial balance and the reply. In view thereof, the impugned order is unreasoned and cannot be sustained. It should also be noticed that sub-section(4) of Section 75 of the applicable GST enactments mandates that a personal hearing be provided either if requested for or if an order adverse to the tax payer is proposed to be issued. Such statutory prescription was also not adhered to in this case. The impugned order dated 30.12.2023 is set aside and the matter is remanded to the respondent for reconsideration. The respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within three months from the date of receipt of the petitioner s reply - Petition disposed off by way of remand.

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• 2024 (7) TMI 163
  Validity of assessmnet order - assessment periods are challenged primarily on the ground of breach of principles of natural justice - mismatch between the GSTR 3B returns filed by the petitioner and the auto-populated GSTR 2A returns - HELD THAT:- The documents on record disclose that the liability pertains to alleged mismatch between the GSTR 3B returns of the petitioner and the auto-populated GSTR 2A returns. In recognition of difficulties faced in this regard, Circular No. 183 was issued. The petitioner has also placed on record a certificate from the Chartered Accountant with regard to the reason for disparity between the above mentioned returns. Although the petitioner did not respond to the notices and participate in the assessment proceedings, the above facts and circumstances justify interference with the impugned orders, albeit by putting the petitioner on terms. The impugned assessment orders are quashed and both these writ petitions are remanded for reconsideration subject to the condition that the petitioner remits 10% of the disputed tax demand in respect of each assessment period within a period of 15 days from the date of receipt of a copy of this order - Petition disposed off by way of remand.

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• 2024 (7) TMI 162
  Applicability of CGST/SGST regime on the petitioner, a Co-operative Society registered under the provisions of the Kerala Co-operative Societies Act, 1969 - HELD THAT:- The present writ petition is disposed of with a direction to the petitioner to produce all the documents as required vide Exts. P1 P6 summonses dated 12.7.2023 and 21.10.2023, respectively, within a period of seven days from today. If the petitioner has produced all the documents as above, the petitioner will be heard by the first respondent and a decision will be taken by the Authority first on the preliminary issue raised by the petitioner with regard to the applicability of the CGST/SGST regime on the petitioner Society. The writ petition is disposed of.

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• 2024 (7) TMI 161
  Tax on supply of Copra - difficulty faced by the dealers during the initial years of implementation of the GST regime in the financial years 2017-18 and 2018-19 - applicability of Circular No. 183/15/2022-GST dated 27.12.2022 - HELD THAT:- Considering the fact that it was for the financial year 2017-18 and the petitioner has produced some proof regarding tax, invoice and payment etc., this Court deem it appropriate to set aside the impugned assessment order, Ext. P6. The matter is remanded back to the assessing authority to take into consideration the Circular No. 183/15/2022-GST dated 27.12.2022 and other documents that will be submitted by the petitioner to prove his case that he had received the supply and paid the tax to the supplier/dealer. The petitioner is directed to appear before the assessing officer within a period of three weeks from today with all the relevant documents and evidence in his possession to prove his case - Petition disposed off by way of remand.

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• 2024 (7) TMI 160
  Time limitation - Effect of the retrospective amendment brought about in Section 50 of the CGST Act, 2017 by Finance Act, 2021 - petition dismissed solely on the ground that the appellants had approached the court belatedly - HELD THAT:- On going through the order passed by the appellate authority dated 14.9.2020 it appears that the effect of the said retrospective amendment has not been gone into. Considering the fact that a legal issue has been raised, the same can be gone into by the appellate authority and a fresh decision can be taken by the appellate authority - the appeal as well as the writ petition are allowed and the order passed by the appellate authority dated 14.9.2020 is set aside and the matter is remanded back to the appellate authority to consider the appeal petition afresh.

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• 2024 (7) TMI 159
  Seeking grant of bail - economic offences - availment of irregular ITC - 73 fake firms were created without transaction of any goods - HELD THAT:- It is not in dispute that petitioner is in custody since 12.07.2023 and other two persons involved in the present case namely Rajat and Ishu have already been enlarged on bail, though by virtue of Section 167(2) Cr.P.C.; there are no antecedents against the petitioner for similar nature of offences and the punishment for the alleged offence related to evasion of tax is not more than 5 years and fine, as per relevant provisions of Section 132(1)(i) of CGST Act, 2017 and in view of judgment of Hon ble Supreme Court passed in case of Ratnambar Kaushik [ 2022 (12) TMI 263 - SUPREME COURT ], but without commenting on merits of the case, this Court deems it just and proper to release the petitioner on bail. It is ordered that the accused-petitioner Mohit S/o Shri Ishwar Sharma shall be released on bail provided he furnishes a personal bond in the sum of Rs.1,00,000/- with two sureties of Rs.50,000/- each to the satisfaction of the learned trial Judge for his appearance before the court concerned on all the dates of hearing as and when called upon to do so - the bail application is allowed.

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• 2024 (7) TMI 158
  Direction to respondent to restore the petitioner s GST Registration - HELD THAT:- It appears that the present issue was already covered by the judgement of this Court in TVL. SUGUNA CUTPIECE CENTER VERSUS THE APPELLATE DEPUTY COMMISSIONER (ST) (GST) , THE ASSISTANT COMMISSIONER (CIRCLE) , SALEM BAZAAR. [ 2022 (2) TMI 933 - MADRAS HIGH COURT ] where it was held that The petitioners are directed to file their returns for the period prior to the cancellation of registration, if such returns have not been already filed, together with tax defaulted which has not been paid prior to cancellation along with interest for such belated payment of tax and fine and fee fixed for belated filing of returns for the defaulted period under the provisions of the Act, within a period of forty five (45) days from the date of receipt of a copy of this order, if it has not been already paid. This Court is inclined to allow this petition. While allowing this petition, it is made clear that if the petitioner is liable to pay any tax or penalty, he is required to pay the same in accordance with law - the impugned order is set aside - petition allowed.

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• 2024 (7) TMI 157
  Reimbursement of VAT/ET/SGST paid under the Bihar Industrial Incentive Policy, 2011 - Attachment order - claims under Bihar Industrial Incentive Policy 2011 rejected - rejection on the ground that petitioner has started production even before the approval has been granted by the State Investment Promotion Board (SIPB) - HELD THAT:- Admittedly, in the present case, the State of Bihar has floated Bihar Industrial Incentive Policy, 2011 to attract investments in the State. The petitioner, admittedly, has applied to the Competent Authority i.e. SIPB and was granted approval on 30.06.2015 and as per the said policy, the petitioner is entitled for re-imbursement of VAT/ET/SGST. But, the case of the petitioner has been rejected on the sole ground that the petitioner has started commercial production even before the grant of approval by SIPB - Admittedly in the present case, the approval was granted on 30.06.2015 and it is the case of the respondents that the commercial production has started on 08.08.2014 merely because the production is started the incentive under the scheme cannot be disallowed. At the most, the incentives can be granted from the date of the approval of SIPB but the authorities cannot deny the incentives under the scheme as a whole. The court does not find any valid reasons for upholding the impugned order passed by the authorities and the same is set aside. The authorities are directed to grant the incentives as envisaged under the Bihar Industrial Incentive Policy, 2011 from the date of approval of the SIPB and make necessary payments to the petitioner as per the entitlement within a period of three months from the date of receipt of the copy of this order. Petition allowed.

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• 2024 (7) TMI 156
  Interpretation of statute - expression parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 in Entry No. 252 of Schedule-I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017 and Entry No. 252 of Schedule-I of Notification No. 01/2017 Integrated Tax (Rate) dated 28.06.2017. Whether the goods/ spares used by the applicant are parts of a warships/submarines? HELD THAT:- In view of the meanings/definitions of part/parts/Spare Part, as to what are the parts of Goods of CTH 8901,8902,8906 and 8907 and whether the subject goods/spares as mentioned by the applicant listed in Annexures 2A, 2A (i), 2A (ii), 2B,2B (i), 2C, 2D and 2D (i) of this ARA application can be taken to be covered within the meaning of Parts for Sr. No. 252 of notification No. 01/2017 Central Tax (Rate) Dated: 28.06.2017 - items like Engines, gearbox, Propeller, Diesel generators, shift generator, Engine driven pumps, shaft generator, etc. are very essential parts of a ship or vsessel and are quite clearly parts of a vessel/ship and a ship cannot be imagined to be in existence without these parts. The items that are discussed as essential parts of a ship/vessel are such essential components of a vessel/ship without which the ship would not be complete and would not exist. These are very integral for the functioning of the ship and can also be separated from the ship for repair/ replacement. On refering to the definition of the word part as discussed, it is found that part is a separate piece of something or a piece that combines with other pieces to form the whole of something - the second definition of part also defines part as one of the pieces that together form a machine or some type of equipment. It is pertinent to mention here that serial number 252 of Schedule I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 is applicable only to goods which qualify to be parts of goods of headings 8901, 8902, 8904, 8905, 8906 and 8907. This implies that any goods in the nature of consumables, tools and other materials, which do not answer the specific requirement of being parts of warships, would not fall under the said serial number 252 of Schedule 1 of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. In this instant case, subject to the information furnished and as per contractual agreements made by the applicant the following attract GST @ (SGST 2.5% and CGST 2.5%). In annexure 2A, it is found that except the equipment s mentioned in Sl. Nos. 25, 28, 60, 72, 73, 90, 97, 111, 117, 118, 119, 123, ( Ref annexure 2A (i) ),124 (Ref annexure 2A (ii)), all other equipment s are to considered as an essential part of a warship/submarine without which the ship would not be complete and would not be able to function and accordingly chargeable under Sl. No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. All other annexure items i.e, 2A (i), 2A (ii), 2B, 2B (i), 2C, 2D and 2D (i) are chargeable at the respective rates under respective schedules, but not come under Sl. No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017.

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• 2024 (7) TMI 155
  Levy of GST - Liquidated Damages - supply or not - amount recovered by the Applicant from the Suppliers or the Contractors as part of breach of contract or for Non-performance of Contract within the stipulated period, as represented by the penalty - HELD THAT:- The empowerment to levy liquidated damages is for the reason that there had been a delay and the same would be tolerated, but for a price or damages. The income though presented in the form of a deduction from the payments to be made to the contractor was the income of the applicant and would be a supply of service by the applicant in terms of clause (e) of Para 5 of Schedule II appended to the Central Goods and Services Tax Act, 2017 . The nature of damages for the purpose of GST the reciprocal obligations are essential to constitute supply and accordingly any payment in the nature of damages to balance equities between parties, in the presence of enforceable reciprocal obligations, would constitute supply and would attract GST - The purpose of imposing compensation or penalty is governed by the provisions of Indian Contract Act to ensure the defaulting act is not undertaken or repeated. The same maybe equated as receipt of consideration on account of toleration of an act. Supply or not - HELD THAT:- In the light of section 7 read with definition of consideration u/s 2 (31), compensation amounts paid by defaulting party to the non-defaulting party for tolerating the act of non-performance or breach of contract have to be treated as consideration for tolerating of an act or a situation under an agreement and hence such an activity constitutes supply of service and the compensation amounts such as liquidity damages are exigible to tax under GST Act.

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• 2024 (7) TMI 154
  Levy of GST - Sewerage water treated by GVSCCL and supply of Treated Water to various industries by GVSCCL - forward supply - rate of GST - HELD THAT:- It is found that water is covered under Chapter heading 2201 of GST Tariff. It is also found that there are two schedule entries for water under Chapter heading 2201 under the CGST Act. The first entry no. 99 of the Notification No. 02/2017 Central Tax (Rate), Dt. 28-06-2017 which is an exemption notification. The second is Entry No. 24 of the Notification No. 01/2017-Central Tax (Rate) dt. 28-06-2017. Drinking Water packed in 20 liters bottles are liable to tax 12% and the *Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar on other sweetening matter nor flavored are taxable and liable lo tax @ 18% GST. In the subject case, the water supplied by the applicant to GVMC is obtained after the treatment to sewage water as submitted by the applicant and the said water is not potable. Hence Entry no. 46 B which pertains to drinking water only, is not applicable to the impugned product. The impugned goods, called as Sewerage Treated Water , is purified water - rate of tax NIL as per Notification No. 02/2017-C.T. (R) dated 28.06.2017 Subject from amended time to time.

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• 2024 (7) TMI 153
  Maintainability of Advance Ruling application - Refund of ITC under section 16 (1) and 16 (3) (a) of the IGST Acttax was collected by the supplier and ITC passed on - refund of unutilized input tax credits (application of Zero rating of tax in the case of SEZ) - SEZ unit (claimant) as a supplier to SEZ or not - HELD THAT:- In view of the discussion, virtual hearing held, legal provision of the act, and as the action has been initiated by the proper officer on the same subject matter, which has been agreed upon by the applicant at the time of hearing which is now present before the undersigned authority, it is felt that the subject application is liable to be rejected under section 98 of the Act. The application is hereby Rejected .

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• 2024 (7) TMI 152
  Classification of goods and services - consideration charged from customers for supplying aggregates and recovering royalty charges - rate of GST on the supplies as per N/N. 01/2017-CGST (R) and N/N. 11/2017-CGST (R) - HELD THAT:- On careful examination of the submissions made by the applicant ,it is observed that the applicant is collecting tax on the royalty charges collected and the goods supplied separately in the tax invoices. The submissions of the applicant is considered that the supply of the aggregate and recovery of royalty charges do not fall under the purview of mixed supply or composite supply but are two different and separate. The royalty charges collected by the applicant would fall under SAC 997337 and would attract 9% CGST and 9% SGST. The supply of aggregates manufactured from the boulders would fall under HSN code 251710 and attract CGST @2.5% and SGST @2.5%.

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• Income Tax

• 2024 (7) TMI 176
  Validity of re-assessment notice issued by the jurisdictional AO and not by NFAC - Faceless Assessing Officer (FAO) - assumption of jurisdiction by the Ld. AO u/s 148 was in violation of mandatory jurisdictional conditions as stipulated in Notification No 18/2022 dated 29th March 2022 - HELD THAT:- Section 151A of the Act itself contemplates formulation of Scheme for both assessment, reassessment or re-computation under Section 147 as well as for issuance of notice u/s 148 of the Act. Therefore, the Scheme framed by the CBDT, which covers both the aforesaid aspect of the provisions of Section 151A of the Act cannot be said to be applicable only for one aspect, i.e., proceedings post the issue of notice under Section 148 of the Act being assessment, reassessment or recomputation under Section 147 of the Act and inapplicable to the issuance of notice under Section 148 of the Act. The Scheme is clearly applicable for issuance of notice under Section 148 of the Act and accordingly, it is only the FAO which can issue the notice under Section 148 of the Act and not the JAO. For the purposes of making assessment or reassessment, the provisions of Section 144B of the Act would be applicable as no such manner for reassessment is separately provided in the Scheme. For issuing notice, the term to the extent provided in Section 144B of the Act is not relevant. The Scheme provides that the notice under Section 148 of the Act, shall be issued through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in Section 148 of the Act and in a faceless manner. Therefore, to the extent provided in Section 144B of the Act does not go with issuance of notice and is applicable only with reference to assessment or reassessment. The phrase to the extent provided in Section 144B of the Act would mean that the restriction provided in Section 144B of the Act, such as keeping the International Tax Jurisdiction or Central Circle Jurisdiction out of the ambit of Section 144B of the Act would also apply under the Scheme. Further the exceptions provided in sub-section (7) and (8) of Section 144B of the Act would also be applicable to the Scheme. The Hon ble Telangana High Court in the case of Kankanala Ravindra Reddy [ 2023 (9) TMI 951 - TELANGANA HIGH COURT] has held that in view of the provisions of Section 151A of the Act 14 (2023) read with the Scheme dated 29th March 2022 the notices issued by the JAOs are invalid and bad in law. We hold that the assessment framed u/s 147 based on the notice issued u/s 148 by the JAO is bad in law and the same is quashed as void ab initio. Decided in favour of assessee.

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• 2024 (7) TMI 151
  Nature of receipt - receipt of money on account of relinquishment of its right to operate a hotel as a license - sum received by the assessee from ELEL [licence grantor] under an award/consent terms - LTCG or revenue receipt - M/s. ELEL Hotels Investment Ltd. ( ELEL ) granted licence to the respondent/assessee herein i.e., ITC to operate the hotel Sea Rock from the first day of July, 1986 for a period of 25 years with an option to renew the licence for a further period of 25 years on giving notice to ELEL of such intention of not less than 24 months before the expiry of the licence HELD THAT:- As from the agreement dated 03.05.1986 it is evident that under the agreement the ITC was authorised to run and operate hotel with all the employees, staff including managerial staff of the ELEL. No right, title or interest of any kind was created by the ELEL in favour of the ITC in any of the assets/properties of ELEL (Hotel) to carry on the aforesaid commercial activity of operating the hotel. The ELEL was to get 23% of the gross turnover as license fees (subject to some variation as provided in clause V). Considering the terms of the licence operating agreement in its entirety, it is a Trading contract. The settlement agreement between ELEL and ITC shows that to fully and finally adjust, compromise and settle disputes between the parties, the settlement agreement was entered. Clause I(f) of the settlement agreement defines disputes to mean that all allegations, claims, counter-claims and disputes forming the subject matter of the Suits and/or the Arbitration and includes all allegations, claims, counterclaims and/or demands between the Parties, of any nature, arising, in any manner, out of or touching or relating to the Hotel and/or any and all arrangements / understandings / agreements relating to the Hotel including the Operating Licence. The aforesaid sum was received by the ITC from the ELEL for relinquishment of right to operate Hotel under the operating license as mentioned in Clause 3 (n) (iv) of the Consent Terms. The license operating agreement dated 03.05.1986 is clearly a trading contract and the receipts of ELEL under the said agreement being the business receipts have always been revenue in nature. ITC never had any right title or interest in the Hotel or properties of ELEL. The settlement agreement dated 11.05.2005 was entered between the parties to settle number of disputes, claims and counter claims between the parties including those which were pending in courts. The termination of operating license agreement was part of the settlement of dispute. To run or operate Hotel is one of the business activity of the ITC under it was also running the Hotel in question belonging to ELEL. The amount in question was part of Award received by the ITC to finally adjust, compromise and settle all disputes, allegations, claims, counter claims and case pending in counts arising out of or relating to operating licence Agreement to run Hotel in question. The amount so received under the Award (consent terms) by the ITC in the matter of a Trading Contract, to settle all disputes, claims and counter claims, is certainly not the transfer of any capital asset. All the employees required to run the hotel were employees of the ELEL. The termination of agreement was the result of settlement/compromise of all claims, counterclaims and disputes relating to the aforesaid business contract and in lieu thereof the ITC received from ELEL and not in lieu of its rights in any capital assets. The aforesaid amount was part of the award by the Arbitrator as per consent terms. Thus the amount received by the ITC as per consent terms to settle/ compromise all dispute or in any case in the form of compensation for loss of trading operation of running the hotel under the agreement and not for loss of any asset of enduring value. Under Article XVII of the Operating Lisence Agreement the ELEL had the sovereign right to terminate the agreement. Thus, the termination of the Operating Lisence Agreement and payment by the ELEL to the ITC was revenue receipt in hands of the ITC and not capital receipt and consequently formed part of total income of the ITC. We hold that the sum received by the respondent assessee shall not fall under long term capital gain. The findings recorded by the ITAT that the aforesaid sum of Rs. 32.42 crores constituted long term capital gain is perverse. The impugned order of the ITAT to the extent it relates to the aforesaid sum cannot be sustained. For all the reasons afore stated the substantial question of law is answered in favour of the Revenue/Appellant and against the respondent assessee. It is held that the receipt in question in the hands of the respondent assessee is revenue receipt and not capital receipt.

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• 2024 (7) TMI 150
  Deduction u/s 80-IC (2) (a) - Product of the appellant/assessee to be Pan Masala (Mouth Freshener) - process applied by the assessee is manufacture but the product of the assessee shall stand excluded for deduction in view of part B of the Thirteenth Schedule to the Act, 1961 - HELD THAT:- Appellant/assessee has established its unit in an area notified by the Central Board of Direct Taxes by notification no. 41 dated 06.02.2004 u/s 80-IC (2) (a) of the Act, 1961. The product manufactured by the appellant/assessee is mouth freshener (Pan Masala) and its ingredients/raw materials do not include tobacco in any form. Thirteenth Schedule under Section 80-IC (2) of the Act, 1961 is in three parts namely Part A, Part B and Part C. Part A is for the State of Sikkim, Part B relates to the State of Himachal Pradesh and Uttaranchal and Part C relates to the Jammu and Kashmir. In the present case, we are concerned with Part A which is for the State of Sikkim. Clause (a) of sub-Section (2) of Section 80IC is applicable to any undertaking or enterprise established in an area notified by the Central Board of Direct Taxes to manufacture or produce any article or thing except those specified in the 13th Schedule. Part-A of the 13th Schedule is applicable for the State of Sikkim, whereby tobacco and tobacco products (including cigarettes, cigar, gutkha etc.), aerated branded beverages and pollution causing paper and paper products have been excluded. Except these items any undertaking or enterprise established in a notified area within specified dates to manufacture or produce any article or thing, is eligible for deduction under Section 80IC (3) of the Act, 1961. Entry-1 of Part-B of the 13th Schedule applicable to the State of Himachal Pradesh and State of Uttaranchal, provides the article or thing tobacco or tobacco products including cigarettes and pan masala . The word pan masala used in Entry 1 of Part B is not incorporated in Part-A of the 13th Schedule (for the state of Sikkim). Once the Legislature has not included pan masala in Part-A for the State of Sikkim, then it was not open for the ITAT to read the aforesaid entry-1 of Part-B in Entry-1 of Part-A. The finding recorded by the ITAT that the item manufactured by the appellant/assessee is included in tobacco products, is totally baseless and beyond the provisions of Section 80IC (2) read with the 13th Schedule to the Act, 1961. Both the substantial questions of law are answered in favour of the assessee and against the revenue. It is held that the appellant assessee is entitled for deduction under Section 80-IC (2) (a) (i) read with Section 80-IC (3) of the Act, 1961.

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• 2024 (7) TMI 149
  Revenue Seeking extension of time for a further period of six months to comply with the directions of this Court s order [ 2024 (1) TMI 1296 - BOMBAY HIGH COURT] - order passed by a co-ordinate Bench of this Court, whereby, directions were issued, enabling the petitioner to file detail objections to the notice issued u/s 148 of the Income Tax Act, 1961 and as set out in paragraph six of the said order - AO was to pass a reasoned order to dispose of the objections in accordance with law HELD THAT:- Assessee would not have any objection for extension of time in terms of what has been prayed for in prayer clause (A), however, in relation to the directions as made in paragraph seven of the order passed by the Court on the Writ Petition. We are also informed that insofar as compliance of paragraph six of the orders dated 23 January 2024 passed by the Court are concerned, the same stands complied as the objections were decided by the revenue by an order passed on 8 June 2024, which was however passed beyond the period as directed by this Court that the same were required to be decided prior to 30 April 2024. What remains to be complied are the further directions of the Court in paragraph seven of the said order passed by this Court, namely, that after the order disposing of objections filed by the petitioner having being passed, and the objections of the assessee being not accepted the Assessing Officer would be required to complete the assessment proceedings on or before 30 June 2024 as per law. The present application was filed on 24 June 2024, it is certainly filed prior to the timelines as set out in paragraph seven of the order, which would expire on 30 June 2024. First step to be undertaken by the Assessing Officer was to consider the objections as raised by the petitioner which was to culminate in taking the second step of completion of reassessment proceedings on or before 30 June 2024, which is now being undertaken by the Assessing Officer. If this be so, considering the facts that there are voluminous documents which would be required to be considered, in our opinion, in the facts and circumstances of the case the prayers as made by the petitioner are required to be granted. Thus grant interim application as Hon ble High Court be please to extend the time for further 6 months from 30.06.2024 to comply with the order.

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• 2024 (7) TMI 148
  Validity of reassessment proceedings - reasons to believe - treating certain expenditures as capital expenditure - borrowed satisfaction of the Audit Party or independent application of mind - HELD THAT:- It is not in dispute that the original assessment by the AO in this case was framed vide assessment order dated 28.03.2016 and during the course of these proceedings, entire books of accounts, bills and vouchers have been duly perused by the then Assessing Officer. It is after perusal of the books of accounts, bills and vouchers that the AO had formed a view that the parts imported from Majesty Packaging International Ltd. were used in the manufacturing of product. Therefore, reopening of the case, that too, on the ground that expenditure was incurred for acquisition of capital, is not liable to be treated as revenue expenditure, is absolutely wrong as admittedly what was imported was perfume pumps to be installed for packing and sale of the product of the petitioner-company and the same could not have been held to be capital expenditure at all and the same, therefore, has rightly been booked as revenue expenditure. As regards an amount towards earned receipt of damaged goods that was claimed by the petitionercompany, there was nothing on record to suggest that the sale of damaged stock had not been derived from an industrial activity and, therefore, not admissible for deduction u/s 80IC. Here again, while framing initial assessment of the petitioner-company, the AO had made independent analysis of the books of accounts and other relevant material. As a matter of fact, a detailed notice had been issued to the petitioner-company on 28.03.2021 qua this very aspect of the matter to which detailed written submissions along with cogent and corroborative documentary evidence in the form of invoices etc. had been duly supplied by the petitioner-company. Record reveals that the objections were raised only by the Audit Party and, therefore, reasons have been recorded on borrowed satisfaction of the Audit Party and not that of the respondent-department. A perusal of the reasons for reopening the case would make it evidently clear that all the material have been culled out from the assessment record submitted by the petitioner. Therefore, in absence of new facts coming to the knowledge of the Assessing Officer subsequent to the original assessment proceedings, the reopening of the case cannot be done on the basis of the same material. (Refer M/s Tech Span India Private Limited and another [ 2018 (4) TMI 1376 - SUPREME COURT ] The assessment order in the instant case is not the one which could be termed to be nonspeaking, cryptic or perfunctory in nature and, therefore, it can easily be inferred and attributed to the Assessing Officer that he was fully aware of the questions that have been raised in the proposed reassessment proceedings. Once, there is a conscious application of mind after taking into consideration the relevant facts and material available and existing at the relevant point of time while making assessment, a different and divergent view cannot again be taken as this would amount to change of opinion . If the assessing authority forms an opinion during the original assessment proceedings on the basis of the material facts and subsequently finds it to be erroneous, then it is not a valid reason under the law for re-assessment . From a overall reading of facts, it is clear that the respondents have sought to resurrect a stale issue which has already been examined during the course of regular assessment pursuant to which the assessment order was passed on 28.03.2016.

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• 2024 (7) TMI 147
  Cancellation of registration u/s 12AA (3) - assessee has not received corpus donation - sum received by the assessee as donation towards corpus from SHGPH was treated as general donation received by the Trust - HELD THAT:- CIT (E) has not recorded any finding disbelieving the application of fund by the respondent assessee towards the object of the Trust. Details of application of fund and receipts of donations were well furnished by the respondent assessee, which have been reproduced by the ITAT in the impugned order. Thus, application of fund by the respondent assessee towards object of the Trust, out of the donations received, is undisputed. Tribunal has recorded specific finding of fact in this regard. Even, SHGPH has not named the respondent assessee but it was in the list furnished by SHGPH that the name of the respondent assessee figured showing donation. The alleged brokers were not examined by the Revenue so as to disbelieve the donations received by the respondent assessee. Instead, the donations received by the respondent assessee were treated as general donations and accordingly it was subjected to tax under the Act, 1961 in the hands of the respondent assessee. The findings recorded by the ITAT in the impugned order and more particularly the findings aforequoted; are findings of fact based on consideration of relevant evidences on record. Therefore, we do not find any illegality or perversity in the impugned order of the ITAT. Decided in favour of the assessee and against the Revenue.

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• 2024 (7) TMI 146
  Rough-and-ready assessment as to the quantum of tax - Validity of Best judgment assessment - Net profit determination - HELD THAT:- It has not been disputed by the assessing officer that the assessee carried civil work and in view thereof he received a certain amount as consideration. The materials in execution of contract have not been disbelieved by the AO. In this regard, the CIT(A) and ITAT have also recorded findings of fact. ITAT has also noticed net profit rate of last seven years which ranged from 0.45% to 3.84%. ITAT has also noticed net profit rate determined in matters of others in the same line of trade, to be about 4%. Assessee himself has agreed before the CIT(A) for net profit at the rate of 8% on the gross receipts under the contract. Appellant could not place any material before us on the basis of which determination of net profit at the rate of 8% in the line of trade of the assessee can be said to be perverse or insufficient under the facts and circumstances of the present case. The findings recorded by the CIT(A) and the ITAT for applying the net profit rate of 8% on the gross receipts under the contract, cannot be said to suffer from any apparent illegality in the facts and circumstances of the present case. Thus, applying the principles of best judgment assessment and the net profit rate, we do not find any illegality in the impugned order of the ITAT. Decided in favour of the assessee.

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• 2024 (7) TMI 145
  Addition of unexplained expenditure based on seized diary during the course of search action u/s 132 - HELD THAT:- As held that group companies having offered income on account of unexplained expenditure for the AY 2007-08 in their respective hands can be considered as an explanation and coupled with the fact that the department has not disproved the contention of the assessee company with any corroborative evidence. Tribunal further observed a well reasoned Order is passed by the CIT(A). The Tribunal has further recorded that the assessee company in support of its stand has in fact filed an affidavit, the contents of which affidavit has not been disproved by the AO and no further inquiry appears to have been carried out by the AO. Tribunal observed that the AO has arrived at a belief that the contents in the said seized diary are pertaining to the instant Assessment Year 2010-11 only on the basis of presumption. We do not find any perversity in such a finding. Addition of legal expenses - Tribunal based on the materials on record, arrived at a conclusion that it is not discernable whether the Assessee has actually paid the said amount towards the legal expenses as no date is mentioned nor any other information can be gathered to say that the said amount has been incurred towards legal expenses by the assessee company and no corroborative evidences have been brought on record by AO - HELD THAT:- As observed that the assessee company has to this effect, filed an affidavit itself, which cannot be brushed aside since the averments made in the duly sworn affidavit has not been disproved by the AO during the course of assessment proceeding or before the CIT(A) or before the Tribunal. We find that the CIT(A) and the Tribunal has recorded findings of fact based on the materials which cannot be said to be perverse. The view is a possible one. Thus, the CIT(A) and the Tribunal have concurrently come to the conclusion that the materials on record does not justify such additions of the AO.

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• 2024 (7) TMI 144
  Exemption u/s 10(25)(iii) - AO denied exemption to the assessee fund on the finding that the Fund looses its recognition. Hence exemption u/s 10(25)(iii) claimed by the Fund is rejected - as argued no formal order of withdrawal of approval in respect of the pension fund of the assessee by the Commissioner of Income Tax given - HELD THAT:- The question whether the Tribunal erred in law in holding that the assessee is not entitled to exemption u/s 10(25)(iii) in the absence of withdrawal of the order approving the fund of the assessee, stands answered from bare perusal of the provisions of the Rules aforequoted and Section 10(25)(iii). Section 10(25)(iii) of the Act 1961 clearly mandates that any income received by the Trustees on behalf of an approved superannuation fund shall not be included in computing the total income of a previous year of any person. The approval has been granted under the Rules afore-quoted. It is admitted case of the respondents that the approval continued during the assessment year in question. No power has been conferred upon the assessing officer to interfere with the order of approval granted by the Chief Commissioner or Commissioner of Income Tax. Therefore, the assessment order as upheld by the ITAT, holding that the fund loses its recognition and hence exemption under Section 10(25)(iii) of the Act 1961 claimed by the Fund is rejected; is without jurisdiction. So long as the approval order under Section 10(25)(iii) of the Act read with rules continues, AO is bound to accord exemption. The action of the Assessing Officer to deny exemption and to hold that the funds loses it recognition is without jurisdiction. It is conducive to judicial discipline, propriety and to maintain certainty and uniformity in administering the law that the taxing authorities should proceed on the basis that approval granted by the competent authority under Section 10(25)(iii) of the Act of 1961 read with rules available for a particular assessment year satisfies all the conditions and cannot sit in judgment over it. The power to withdraw approval as conferred under the rules, can be exercised only by the competent authority and in accordance with the provisions of the rules. Until the approval order continues, AO cannot take a different view or deny exemption. Thus, we find that the impugned order of the ITAT is legally unsustainable and is, therefore, set aside - Decided in favour of assessee.

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• 2024 (7) TMI 143
  Penalty u/s 271FA - delay in filing SFT statement as per section 285BA read with rule 114E of I.T. Rules - reasonable cause for delay in filing of SFT return given or not? - HELD THAT:- As in the present case, the assessee has not adduced any reasonable cause for not filing the SFT. The submission of the Annual Information Return (AIR) is a crucial component of compliance for the companies obligated to do so. It is an essential requirement, as it enables the Income Tax Department to track high-value financial transactions carried out by individuals, businesses, and other entities. This collected information is used to verify if the reported income of taxpayers is consistent with their spending patterns, and to detect any potential tax evasion. The assessee suo moto ought to have filed the AIR/SFT as per the provisions of section 285BA within the specified deadline. But in the present case, despite issuance of notices under section 285BA(5) and under section 271FA read with 274 of the Act, the assessee failed to file the AIR/SFT - Decided against assessee.

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• 2024 (7) TMI 142
  Exemption u/s 11 - assessee failed to furnish audit report in Form No. 10B within prescribed time limit - HELD THAT:- The assessee filed its return of income on 23/11/2022 claiming exemption u/s 11 for the amount applied for charitable purpose during the year. In the return processed u/s 143(1)(a) of the Act, exemption u/s 11 of the Act was denied on the ground that audit report on Form No. 10AB is filed belatedly. Assessee challenged the adjustment made by the CPC in its order u/s 143(1)(a) of the Act before the CIT(A) but failed to get relief since the audit report in Form 10B was not e-filed within due date. Subsequent to the passing of the impugned order on 18/01/2024, assessee s application for condonation of delay in filing Form 10B for Assessment Year 2022-23, dt. 11/04/2023 (filed prior to the passing of impugned order) has been allowed and vide order dt. 30/04/2024, delay of 132 days in filing Form 10B for Assessment Year 2022-23 has been condoned. Since the only ground on which the exemption u/s 11 of the Act has been denied was on account of delay of furnishing Form 10B and there is no dispute about the activity of the assessee being carried out for charitable purposes and the amount has been applied for the object for which it is registered u/s 12A, in our considered view, since delay in filing form 10B has been condoned assessee is entitled to the benefit of deduction u/s 11 of the Act as claimed in the Income Tax return filed for A.Y. 2022-23. Accordingly, the sole ground raised by the assessee is allowed.

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• 2024 (7) TMI 141
  Additions u/s 11(2) - assessee has not filed Audit report in form 10B along with its ITR, which is mandatory as per the provisions of section 12A(1)(b) - HELD THAT:- As per the provisions of the Act and the Rules, the audit report in Form 10B is required to be filed before the due date of filing of return. It is not mandatory that it should be filed along with the return of income itself. As long as the audit report is filed within the time allowed u/s 139(1) of the Act, the claim of the assessee has to be allowed. There is no dispute to the fact that the audit report was filed in this case on 30.11.2014, which was within the time as admissible under the provision of Section 139(1) of the Act. We do not find anything wrong with the direction of the Ld. CIT(A) to allow the claim for deduction u/s 11(2) - The decision of the Ld. CIT(A) is, therefore, upheld and the appeal of the Revenue is dismissed.

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• 2024 (7) TMI 140
  Penalty u/s. 271(1)(c) - non specification of clear charge u/s 274 - whether the order passed u/s. 271(1)(c) was bad in view of the fact that both, at the time of initiation as well as at the time of imposition of the penalty, AO was not clear as to which limb of section 271(1)(c) was attracting? - HELD THAT:- Time of issuing the notice u/s. 274 r.w.s. 271(1)(c), AO is not aware of the fact as to whether assessee is going in appeal or not on the quantum additions made. Hence, the notice so issued for initiating penalty proceedings must contain a specific charge out of the two charges contained in section 271(1)(c) for imposing a penalty on the assessee. We note that in the present case before us, the facts and circumstances are altogether different from the peculiar set of facts as contained in the case of Veena Estates (P) Ltd [ 2024 (1) TMI 701 - BOMBAY HIGH COURT] - The observations and findings arrived at by the Hon ble Court in that case are specific to those peculiar set of facts. In the case of Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] held that contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Penalty imposed in the present case, since similar facts are present in this appeal - Assessee appeal of assessee.

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• 2024 (7) TMI 139
  Penalty u/s 271(1)(c) - addition made on account of difference in depreciation on biometric device by treating it as part of Plant and Machinery block instead of part of Computer block - HELD THAT:- It is not a case where the claim is held to be false or bogus or sham. There is no dispute about the asset in question, and the higher rate of depreciation is only a question of interpretation of definition of the computer. It is a case where he had claimed depreciation at certain percentage by treating, the equipment under the block of computers eligible for higher rate of depreciation which has not been found acceptable by the AO who has altered its treatment and subjected it to a lower rate of depreciation. Such a non-acceptance of claim of the assessee by the Assessing Officer per se does not lead to imposition of penalty. In the present case, when the assessee has disclosed and explained all the relevant facts and details pertaining to the claim of higher depreciation on biometric devices, then we do not find that merely claiming a higher depreciation, which is otherwise supported by various judicial presidents would lead to a conclusion that assessee has furnished inaccurate particulars of income. Thus considering case of Reliance Petro Products Pvt. Ltd [ 2010 (3) TMI 80 - SUPREME COURT] we hold that no penalty is impossible on the disallowance made by the Assessing Officer towards the claim of depreciation made by the assessee. We therefore, delete the penalty so imposed - Appeal of the assessee is allowed.

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• 2024 (7) TMI 138
  Best judgment assessment u/s 143(3) - as argued Assessment framed u/s 143(3) of the Act as against required to be framed u/s 144 of the Act is illegal and bad in law - Eligibility to exemption u/s 11/12 - adhoc disallowance of all expenses debited in income and expenditure account - HELD THAT:- As no documentary evidences has been filed by the assessee neither before the AO nor before the first appellate authority, in support of the income and expenditure account and the balance sheet and no books of account has been produced at any stage. We also find that the ld. CIT(A) has issued four notices through the departmental portal and also in the given E-mail ID available in the departmental portal but there was no compliance of the assessee at any stage. Before the tribunal, the assessee has taken a fresh grounds regarding applicability of section 12AA of the Act, where the benefits of section 11 and 12 of the said Act shall be available in respect of any income derived from property held under trust in any assessment proceedings for an earlier assessment year which is pending before the AO as on the date of such registration. Moreover, the CBDT Circular No. 01/2015 dated 21.01.2015 has also been cited by the ld. AR to argue the point that insertion of first proviso to section 12A(2) of the Act w.e.f. 01.10.2014 should be read as retrospective in operation. We find that this issue has neither been raised nor considered by the AO in course of assessment proceedings. We think it fit and proper to set aside the matter back to the file of the ld. AO for de novo fresh assessment - Appeal of the assessee is allowed for statistical purposes.

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• 2024 (7) TMI 137
  Unexplained Cash Deposits - Assessee had made a large number of cash deposits in the various bank accounts held by the assessee on various dates - CIT(A) restricted the addition to only Rs. 9,56,400/- by holding that the assessee has been able to prove the identity, creditworthiness and genuineness of the balance gifts and source of cash deposit was out of agreement for sale of agricultural land, which was placed before the assessing officer, during the course of assessment proceedings - HELD THAT:- CIT(A) has noted specifically that agreement to sale of land was furnished before the assessing officer during the course of assessment proceedings, clearly this fact is not coming either from the contents of the assessment order and neither from the assessment records placed before us. The assessee has not been able to conclusively proof that copy of agreement to sale of land was furnished before the assessing officer and further, the assessee has also not furnished copy of bank statement of the donors to establish that the source of such gifts made by them to the assessee was sourced out of agreement to sale. Accordingly, in our considered view, in view of the apparent contradiction between the findings of the assessing officer and ld. CIT(A), in the interest of justice, the matter is restored to the file of assessing officer to confirm whether the donors had entered into agreement of sale in respect of certain immovable property and also to examine the copy of bank statement of the donors to confirm whether any amounts were received by the donors pursuant to such agreement of sale , which formed the source of such amounts being given as gift to the assessee. As assessee has not been able to establish the creditworthiness of the donors and in our considered view, necessary verification needs to be carried out to ascertain whether the donors had the capacity to make the aforesaid gift to the assessee. Ground No.1 of Departments appeal is allowed for statistical purposes. Addition on account of Loan Receipts - AO held that the deposit represents the unaccounted income of the assessee - CIT(A), while allowing the appeal of the assessee has held that the assessee has submitted PAN, Address, Bank statement and confirmation of both the parties from whom the short term loans were taken - HELD THAT:- There is a clear contradiction between the findings of the assessing officer in the assessment order and findings of the Ld. CIT(A) in the appellate order. While in the assessment order, the assessing officer has observed that the assessee has failed to furnish confirmation of the parties and the assessee has not furnished any documentary evidence to show when the loans were taken etc, in the appellate order, Ld. CIT(A) has held that the assessee has furnished all the documentary evidences, including confirmation of the parties and accordingly, established the genuineness and creditworthiness of the parties - the matter is being restored to the file of assessing officer to carry out necessary verification regarding the identity, creditworthiness and genuineness of the transaction. Ground No.2 of Departments appeal is allowed for statistical purposes. Unexplained Unsecured Loans - assessee has not been able to establish the genuineness of the transaction as the confirmation of the parties was also not furnished by the assessee - as per CIT(A) loans stand explained by the appellant, the Assessing Officer is directed to delete the entire additions - HELD THAT:- There is an apparent contradiction between the findings of the assessing officer and the Ld. CIT(A). While the assessing officer has observed that the assessee has failed to file confirmation of the parties as well as the copy of the bank statement of the respective parties, whereas the Ld. CIT(A) has allowed relief to the assessee by observing that the assessee has filed copies of confirmation and bank statement of the respective parties and accordingly has been able to establish the identity and creditworthiness of these parties. Accordingly,matter is restored to the file of the assessing officer to carry out the necessary verification as to whether the copy of confirmation of the parties and the bank statement of the parties have been furnished by the assessee to establish their creditworthiness. Ground No. 3 of the Department s appeal is allowed for statistical purposes. Disallowance of interest paid to various Lenders U/s 40(a)(ia) - Since this ground is connected with ground no. 3, which has been restored to the file of assessing officer for carrying out necessary verification, accordingly, Ground no. 4 is restored to the file of assessing officer as well. Unexplained Investment in Mutual Funds - during the course of assessment proceedings, the assessing officer observed that the assessee is not in a position to give details of mutual funds transactions and source thereof - As per CIT(A) entire additions are made without any evidence in possession of A.O. or making any enquiry about the correctness of the information about the unrecorded investments by the appellant, the addition cannot be sustained - HELD THAT:- Assessee has furnished a chart in support of investments made by the assessee in various mutual funds, during the impugned year under consideration - the contents of the chart and the details of investments made by the assessee as coming in the chart/table furnished by the assessee is clearly at variance with the details of investments in mutual funds noted by the assessing officer during the course of assessment proceedings. We observe that at several places, there is a clear mismatch between the date of transaction as coming from the assessment order and the table furnished by the assessee. Accordingly, in the interest of justice, the issue is being restored to the file of assessing officer for carrying out the necessary verification. Ground No. 5 of the Department s appeal is allowed for statistical purposes. Levy of penalty u/s. 271(1)(c) in respect of cash deposits - HELD THAT:- As we have restored this issue to the file of assessing officer for carrying out the necessary verification, accordingly, the appeal filed by the assessee in respect of confirmation of penalty U/s 271(1)(c) of the Act is also restored to the file of assessing officer.

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• 2024 (7) TMI 136
  Deduction u/s 80IA - According to AO, the assessee herein is merely executing works contract of getting contracts - Assessment u/s 153A - AO observed that the assessee had not maintained separate books of account for its eligible and non eligible business which is evident from the Tally data found during the course of search in the premises of the assessee - HELD THAT:- AO while granting deduction u/s 80IA of the Act to the assessee for AY 2009-10 u/s 143(3) of the Act on 16.12.2011 had indeed narrated the entire activity carried out by the assessee and had categorically stated that the assessee is indeed engaged in the business of development of infrastructure facility. There is absolutely no such material which has been found during the course of search to disturb this particular finding of the ld AO. All the documents issued by the concerned regulatory authorities are only favoring the assessee. Similar was the view taken by the ld AO for AY 2010-11 also u/s 143(3) of the Act on 25.03.2013. We find that the ld CIT(A) had granted relief to the assessee both on merits with regard to claim of deduction u/s 80IA of the Act and also on the aspect of absence of incriminating material found during the course of search qua this addition. The existence of incriminating material in respect of unabated assessment as mandatory has been endorsed by the Hon ble Supreme Court in the recent decision of Pr.CIT Vs. Abhisar Buildwell Pvt. Ltd.[ 2023 (4) TMI 1056 - SUPREME COURT] Further, we find that the ld CIT(A) had relied on the decision of Vijay Infrastructure [ 2015 (12) TMI 897 - ITAT LUCKNOW] to give relief to the assessee on merits. We find that this decision of Lucknow Bench of Tribunal has been approved by the [ 2017 (7) TMI 956 - ALLAHABAD HIGH COURT] , wherein, specifically, the widening of roads from 2 lanes to 4 lanes have been approved to be development of roads activity by placing reliance on the CBDT Circular No. 4/2010. We find that the Special Leave Petition preferred by the revenue against this decision of the Hon ble Allahabad High Court has been dismissed by the Hon ble Supreme Court in Special Leave Petition (Civil) [ 2018 (7) TMI 1039 - SC ORDER] . In any event, we find that the claim of deduction u/s 80IA of the Act is to be examined in the initial year of its claim and the same is allowed in the initial year. The same cannot be disturbed by the revenue in the subsequent years, unless there exists any contrary materials on record or fresh development in facts. In the instant case, admittedly no such contrary material or fresh development on facts, had been brought on record by the ld AO. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon ble Bombay High Court in the case of Simple Food Products Pvt. Ltd., Nagpur [ 2017 (8) TMI 646 - BOMBAY HIGH COURT] and International Tractors [ 2017 (7) TMI 822 - DELHI HIGH COURT] Thus, we hold that, on merits, the assessee would be entitled for claim of deduction u/s 80IA of the Act. Apart from this, the assessee s claim of deduction u/s 80IA of the Act could not be disturbed by the ld AO up to AY 2013-14 (being unabated/ completed assessments) as there is no incriminating material at all found during the course of search. Accordingly, the ground No. 1 raised by the revenue for all the assessment years is dismissed. Illegal payments through ShriGovind Prasad Pandey - HELD THAT:- Though, Shri Govind Prasad Pandey had initially stated in his statement u/s 132(4) of the Act that the payments reflected in the seized documents represent illegal gratification made to various Government officials for and on behalf of the assessee company and he had acted as per instructions of Shri Padam Singhania, the said statement stood retracted by him on 15.01.2015 before the Investigation Wing itself during the post search proceedings. This fact was further corroborated by Shri Padam Singhania s statement wherein he had categorically stated that he had not given any instructions to Shri Govind Prasad Pandey to make any payment in the form of illegal gratification to various Government officials and the assessee company had not made any illegal payments. Further, the Investigation Wing had also conducted independent enquiries with the concerned Government officials mentioned in the seized documents by recording statements on oath from them, behind the back of the assessee, wherein all the parties had denied having received any money from the assessee company directly or through Shri Govind Prasad Pandeyor through any other person. Hence, the seized documents found from Shri Govind Prasad Pandey s premises which is not supported by any corroborative evidence/material cannot be used against the assessee company for making addition in the hands of the assessee company. In view of the aforesaid observations, we have no hesitation to delete the substantive addition in the hands of the assessee company. Accordingly, the addition made on alleged illegal payments for various assessment years are hereby deleted. Addition u/s 68 in respect of share capital contribution - AO observed that the assessee had allotted shares at a premium of Rs. 40 per share to different Kolkata based companies - assessee made a preliminary objection that AY 2011-12 being unabated/ completed assessment and no incriminating material was found during the course of search qua the issue of share capital either at par or at a premium, no addition per se could be made in the hands of the assessee company in the search assessment u/s 153A - HELD THAT:- During the year under consideration, the promoters of the assessee company had purchased the shares held by Kolkata based companies in the assessee company at a nominal value. This is purely a transaction that has happened between the promoters of the assessee company and the Kolkata based companies, on which, the assessee company is not at all involved and does not have any control. Hence, the assessee company cannot be impleaded at all in the entire set of transactions. Addition on account of unrecorded cash transactions - seized documents only refer to cash received from Shri Guddu Rastogi allegedly - HELD THAT:- The revenue before us had not brought any evidence on record as to whether any addition has been made in this regard in the hands of Shri Guddu Rastogi. The entire addition has been made merely based on rough notings made in the seized documents and based on statement given by Shri Padam Singhania ignoring the fact that the said statement was subsequently retracted by him. As stated earlier, the seized document does not refer to any cash payment, hence there is no question of invoking provisions of section 40A(3) of the Act. The entire addition has been made only based on allegations that there was some cash payment which was not supported by any corroborative evidence. These aspects were rightly appreciated by the ld CIT(A) while granting relief to the assessee as is evident from the observations made hereinabove. In view of the aforesaid observations, we do not find any infirmity in the order of the ldCIT(A) in granting relief to the assessee. Addition on account of sub-contract payments - HELD THAT:- It is a fact that the assessee had made sub-contract to Shri Sushil Singhal. It is a fact that Shri Sushil Singhal also was covered in the search based on the consequential search warrant issued in his name on 16.10.2014 and search assessments were independently framed on him by the very same ld. AO just 4 days prior to the completion of search assessments in assessee s company case. In the search assessments completed in the hands of Shri Sushil Singhal, the sub-contract payments made by the assessee company to Shri Sushil Singhal were treated as business income by the very same ld AO, meaning thereby, the ld AO had indeed accepted the fact that Shri Sushil Singhal had acted as a subcontractor to the assessee company. Having taken the said stand while framing the search assessment of Shri Sushil Singhal, the very same ld AO would not be justified in taking a divergent stand while framing the search assessment in the hands of the assessee company by stating that Shri Sushil Singhal is a man of no means and does not have capacity to execute sub-contract work for the assessee company. These facts were duly appreciated by the ld CIT(A) on merits while granting relief to the assessee company, on which, we do not find any infirmity. In any event, no addition could be made at all in the hands of the assessee company for AYs 2012- 13 and AY 2013-14, being unabated/ completed assessments, as there was absolutely no incriminating material that was found either in the course of search of assessee company or in the course of search of Shri Sushil Singhal to doubt the genuineness of sub-contract payment to Shri Sushil Singhal. Addition on account of Sale of Gitti - AO observed that the assessee company apart from civil construction works is engaged in mining of minor minerals. It excavates black basalt, Gitti , murum etc and the same are used as raw material at their construction sites and sold to others as well - HELD THAT:- The addition made by the ld AO ignoring this fact and merely based on statement of Shri Padam Singhania cannot be sustained in the eyes of law. The seized document A- 1/LPS-22/page 17 is reproduced at page 90 of the assessment order. On perusal of the said seized documents, we find that the same contains the name of the party, sale of gitti made during the particular period, number of trips undergone together with the quantity sold thereon. Nowhere the said seized document contains the value of rate per metric ton. Hence, the basis of Rs. 250 per metric ton adopted by the ld AO for arriving the sale figures of Rs. 12,02,643/- is apparently devoid of merit. Further, we find from the perusal of the said seized documents that the sale has been made spread over a period of 3 FYs i.e. FY 2010-11, 2011-12 and 2012-13 relevant to AYs 2011-12, 2012-13 and 2013-14. There is absolutely no break up of quantity sold for each of the financial years in the said seized documents. Apart from these rough notings in the loose papers, no other corroborative evidence was found by the search team or any other corroborative material brought on record by the ld AO in the assessment proceedings - the said seized documents require to be considered as dumb documents based on which no addition could be made. It is pertinent to note that the addition has been made based on the statement of Shri Padam Sighania by the ld AO. But we find that the said statement had been retracted by him subsequently which fact has been ignored by the ld AO. There is absolutely no basis brought on record by the ld AO to adopt the sale rate of Rs. 250 per metric ton for arriving at the unaccounted sale of gitti. Addition on account of unaccounted cash payment - CIT(A) deleted addition - HELD THAT:- The seized document based on which the addition has been made was the ledger account of various imprest cash payments made to Shri Pradeep Khare for meeting expenses for and on behalf of the assessee company. As stated earlier, the imprest cash has been paid to Shri Pradeep Khare out of sufficient cash balance available with the assessee company. On receipt of details of expenditure from Shri Pradeep Khare, the same are reflected in the books of account of the assessee company under the concerned expenditure head. Till the time Shri Pradeep Khare produces the accounts with evidence seeking for replenishment of the imprest account for day-to-day expenses incurred by him, the expenditure incurred gets reflected only in the imprest cash book maintained by him at the site. It is not disputed that the expenditure incurred by Shri Pradip Khare for and on behalf of the assessee company were duly claimed as deduction and allowed by the ld AO in the search assessment proceedings. Hence, it cannot be said that those payments are not recorded in the books of accounts of the assessee company warranting any addition. In these facts and circumstances of the case, the statement given by Shri Padam Singhania has got absolutely no relevance. In any event, the said statement stood subsequently retracted by him. Hence, the entire addition is made by the ld AO without appreciating the modus operandi adopted and the evidences on record. Addition on the basis of rough extracts of invoices - CIT(A) deleted addition -HELD THAT:- We find that the ld CIT(A) had taken due cognizance of the independent verification carried out by the ld AO from the proprietor of 2 concerns i.e. Om marketing and Ishwari Industries, wherein the proprietor had categorically denied having made any cash sales in respect of those invoices to the assessee company and also denied having made any transaction qua those invoices reflected in the seized documents with the assessee company. This clearly goes to prove that the documents are merely rough notings and proforma invoices not acted upon by the parties. In fact, the corroborative material in the form of third-party independent examination goes in favour of the assessee. This fact has been duly appreciated by the ld CIT(A) while granting relief to the assessee company on which we do not find any infirmity. Addition on account of unaccounted receipts - occasion for the assessee to receive any money from Shri Ashok Singh, proceeded to add the rough notings in the loose papers as unaccounted receipts in the hands of the assessee - CIT(A) deleted addition - HELD THAT:- AO having ignored the fact that there was no occasion for the assessee to receive any money from Shri Ashok Singh, proceeded to add the rough notings in the loose papers as unaccounted receipts in the hands of the assessee and had not even given the benefit of telescoping to the assessee. It is a fact that the contents in the said documents are absolutely not supported with any corroborative evidence whatsoever. We agree with the contention of the assessee that there was no occasion at all for the assessee to receive any money from Shri Ashok Singh. Hence the notings in the loose papers found in the search are to be construed only as dumb documents not supported with corroborative evidence and hence no addition per se could be made in the hands of the assessee based on such dumb documents, dehors the statement given by Shri Padam Singhania. No work was executed by the assessee to Shri Ashok Singh, so as to enable the assessee to receive any money from Shri Ashok Singh. The assessee to prove its bona fide had also given the complete address of Shri Ashok Singh before the ld. AO. A simple verification on the part of the ld AO with Shri Ashok Singh in the manner known to law, would have brought the truth present in the transaction, which was admittedly not done by the ld. AO. Hence, there is absolutely no case for the revenue to make any addition in the hands of the assessee. We find no infirmity in the order of the ld. CIT(A) granting relief thereon. Addition on account of difference in work in progress (WIP) - rough estimate relied upon - HELD THAT:- It is a fact that seized documents representing closing WIP as on 31.08.2014, is a rough estimate submitted to the bank for availing the credit facility from the bank. It is also pertinent to note that in the instant case, the stock statement submitted to the bank is less by Rs. 4.14 crores than the actual WIP as on 31.08.2014. It is not the case of the revenue in the instant case that the said differential amount of Rs. 4.14 crores has been invested by the assessee towards WIP from sources outside of the books of account. No addition, whatsoever was even sought to be made as unexplained investment or unexplained expenditure by the ld AO. On the contrary, the said investment of Rs. 32.89 lakhs as on 31.08.2014 representing closing WIP as on 31.08.2014 matches with the regular books of account maintained by the assessee. Hence, the source for such investment stands duly explained from the regular books of account itself which had not been rejected by the ld AO. Hence, these facts have been duly appreciated by the ld CIT(A) while granting relief to the assessee on which we do not find any infirmity. Accordingly, we hold that there is absolutely no case for making addition in the hands of the assessee for AY 2015-16.

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• 2024 (7) TMI 135
  Denial of exemption u/s 11 - assessee was doing commercial activity and is covered by proviso to Section 2(15) - HELD THAT:- We find that the facts of the instant assessment year before us are similar to the facts in AY 2014-15, 2015-16, 2016-17 and 2017-18 in assessee s own case and in all the preceding assessment years, the issue has been decided by the Co-ordinate Bench in favour of the assessee by holding that the assessee is entitled to exemption u/s 11 of the Act on the ground that the profit derived from services rendered as general public utility is very meager after following the decision of Indian Chamber of Commerce [ 2023 (12) TMI 1259 - ITAT KOLKATA] wherein an identical issue has been decided in favour of the assessee. We also note that the Co-ordinate Bench while passing the above order has followed the decision passed by in the case of ACIT vs. Ahmedabad Urban Development Authority [ 2022 (10) TMI 948 - SUPREME COURT] and also other various High Court decisions. Thus, direct the AO to allow the exemption u/s 11 of the Act to the assessee by holding that the profit derived from the services rendered by the assessee as public utility services is very meager and therefore the same is held to be charitable. Appeal of the assessee is allowed.

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• 2024 (7) TMI 134
  Accrual of income in India or not - income made on account of the administrative support services rendered by the assessee company to its Indian entity - Fees for Technical Services (FTS)/included services taxable in India under Article 12 India and United States of America Treaty (DTAA) - whether the assessee makes available technical knowledge, experience, skill, know-how, or process to JIPL [Indian entity]? - HELD THAT:- The word technical services is preceded by the word managerial and succeeded by the word consultancy . Since the expression technical services is duly covered for tax, in case of reimbursement, it is also enabled taxed in India. But considering Article 12(4)(b) of DTAA, the Administrative Support Services is re-defined, and issue is duly covered by the order of the Co-ordinate bench of ITAT in assessee s own case [ 2023 (3) TMI 1485 - ITAT MUMBAI ] A.Y. 2012-13 So, both the amounts are not liable for tax in India u/s 9 of the Act. In our considered view, we cannot circumvent the order of co-ordinate bench in case of taxation on FTS which covered by DTAA of IU treaty. No plausible ground to interfere in appeal order. The grounds of the revenue are failed, and both the additions are deleted.

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• 2024 (7) TMI 133
  Cancellation of registration u/s 12AB(4) - appellant Trust violated certain provisions of the Income of the Income tax Act, 1961 by not adhering to the conditions of registration granted u/s. 12A - assessee has violated/deviated as Non-intimation of change of Trustees to the Department - HELD THAT:- Once the Trust Deed provides for appointment of trustees, including filling of casual vacancies on account of death or resignation of any trustees, in our considered view, such appointment of trustees is an administrative matter of the trust as provided in the Trust Deed which need not be informed to the department. Further, as per law, the information to the department or taking a prior approval from the CIT(E) will arise only in a case where modifications or amendments is made to the Trust Deed which are repugnant to the provisions of sections 11, 12 and 13 of the Act. Since the appointment of trustees to fill casual vacancies does not repugnant to the provisions of sections 11, 12 and 13 of the Act, in our considered view, the said changes need not to be informed to the department. Therefore, in our considered view, the Ld.CIT(E) erred in observed that above issue is deviation/specified violation referred to u/s. 12AB(4) of the Act for cancellation of registration of Trust. Unexplained security deposit received - The appellant has filed ledger extract which shows receipt of amounts from the developer through proper banking channel. The assessee has explained the credit with necessary evidences before the AO and argued that said sum of Rs. 1 crore was received from builder as advance for security deposit. AO did not accept the explanation of the assessee and has made addition u/s. 68 of the Act for the AY. 2017-18. The assessee has challenged the assessment and additions made thereon before the appellate authorities, which is pending for adjudication. Unless the issue is reached finality, by adjudication from the appellate authorities, in our considered view it cannot be said that additions made by the AO towards unexplained credit is sacrosanct and further the said addition violated the provisions of section 13(1)(c) of the Act. Thus, it is pre-mature for the Ld.CIT(E) to come to the conclusion that additions made in the assessment is a basis to hold that the assessee is not maintaining books of accounts properly and further the said violation comes under specified violation referred to u/s. 12AB(4) of the Act. Therefore, on this ground, the assumption of jurisdiction by the Ld.CIT(E) and cancellation of registration is illegal and devoid of merit. Activity of construction and sale of flats and under reporting of sale consideration - The Trust has only commercially exploited its property with the permission of the court in terms of section 34 of the Trust Act, 1882 subject to condition that the proceeds should be appropriated or applied for the objects of the Trust. The court has permitted the appellant Trust to enter into Joint Development Agreement and sale of property. In our considered view, the said activity cannot be considered as adventure in the nature of trade or commerce or business, which can be considered in light of proviso to section 2(15) of the Act. Further, the appellant Trust can be said to have involved in trade or commerce or business only if the appellant is engaged in the activity of buying and selling properties or entering into Joint Development Agreement with some other land owners for development of property on commercial lines and sells the property. In the present case, it is not a case of the Ld.CIT(E) that the appellant was engaged in the business activity of buying and selling of the property or entering into Joint Development Agreement with land owners in commercial lines and carrying on trade and commerce. The appellant Trust is only exploiting its property, which is incidental to the attainment of main objects of the Trust of construction of a hospital that too when the Trust finds that the property in question was not suitable for its objects and which can be utilised to construct hospital in some other land owned or possessed by the Trust for the purpose of construction of hospital. Therefore, we are of the considered view that the allegation of the Ld.CIT(E) that the Trust is engaged in the activity of trade and commerc is devoid of merit and fails. Allegation of the Ld.CIT(E) in light of the report of the Inspector in our considered view said report issued by the Inspector of Income Tax is only a self-serving document for the Ld.CIT(E) to take an adverse inference against the assessee - the selling rate of any property depends on various factors, including the time of the sale, terms and conditions between the parties relationship with the seller and location of the property. Therefore, there cannot be any uniform selling rate for all flats in society and particularly in different time. Therefore, the allegation of the Ld.CIT(E) based on the self-serving report of Inspector of Income Tax is only a suspicion, without any evidence to the contrary that the appellant has sold property as claimed by the Ld.CIT(E) - there is no evidence including any agreement to sell with the department to allege that even a single flat was sold for the rate claimed by the Inspector of Income Tax. Therefore, the conclusion drawn by the CIT(E) on the basis of the inspector report to cancel the registration of the Trust u/s. 12AB(4) of the Act is illegal and devoid of merits. Non-intimation of transfer of property and acquisition of property - As regards the transfer of property held by the Trust in pursuant to Joint Development Agreement, in our considered view, the said transaction has been entered into with the court permission in terms of section 34 of the Indian Trust Act. The Hon ble City Civil Court, Secunderabad has passed an order and permitted the appellant to transfer the property subject to a condition that sale proceeds should be applied for objects of the Trust. Once the property has been sold with the permission of court, in our considered view, there is no requirement under the law to intimate the transfer of property to the Income Tax Department or to the Ld.CIT(E). Although subsequent amendment to section 12AB which has been inserted by the Finance Act, 2021 with effect from AY. 2022-23 stipulates that the Ld.CIT(E) can impose any other conditions while granting registration u/s. 12AA of the Act, in our considered view, the Ld.CIT(E) cannot impose any conditions, which cannot be enforceable or implemented. In the present case, transfer of property by Joint Development Agreement and subsequent sale in pursuant to court order is an administrative matter of the trust and trustees can decide the affairs in accordance with the rules and regulations of the Trust, if the Trust rules permit the trustees to sell or purchase the property, then the same can be done subject to satisfaction of relevant laws. In the present case, the appellant has transferred the property in pursuant to court order in terms of section 34, of the Indian Trust Act, in our considered view, the said Act of the Trust cannot be or need not to be intimated to the Income Tax Department. Therefore, on this ground, the Ld.CIT(E) cannot cancel the registration of the Trust. Cancellation of Lease Deed on a property taken by the Trust for 99 years and subsequent acquisition of property by way of a Will from one of the trustees and not informing the said changes to the court or the department - Trust had taken a lease of land for a period of 99 years from one of the trustees for establishment of a hospital. Subsequently, one of the trustees has executed a Will and bequeathed another property in the name of the Trust for establishment of hospital. On demise of the trustee, the said land has been came into the possession and enjoyment of the Trust. The appellant Trust has cancelled the earlier Lease Deed entered into with another company for taking certain land on lease for 99 years because the said land was not long required to the appellant. Since the appellant has got land on its own by way of Will, and it can use the said land for the purpose of construction of hospital, in our considered view, cancellation of Lease Deed cannot be a strategy of imagination referred to u/s. 12AB(4) of the Act. If the Trust Deed provides for the trustees and entered into various agreement for better utilization of the Trust, including buying and selling of the property, such an act should not be considered as repugnant to the provisions of sections 11, 12 and 13 of the Act unless the activity or changes carried out by the Trust, which is repugnant to the provisions of sections 11, 12 and 13 of the Act. In our considered view, the Trust need not to intimate the said act or take permission from the Ld.CIT(E) before entering into the said transactions. Application of income for purposes other than charitable purposes as appellant has constructed Gosala in Nandiwanaparthy village land which is not in accordance with the objects of the Trust - The reasons given by the Ld.CIT(E) for cancellation of registration is unwarranted and devoid of merit for the simple reason that construction and maintenance of Gosala has definitely come under the advancement of any other object of general public utility. Therefore, if the assessee applied its income for the purpose of construction of Gosala, then it cannot be said that the income of the Trust is not applied for the objects of the Trust. Further, the appellant also explained that by establishing Gosala, the appellant Trust has got benefit for its Ayurvedic Hospital. Although the appellant is in the process of establishing Ayurvedic Hospital, still the appellant can very well spend its income for construction and maintenance of Gosala, which in our considered view falls under the objects of the Trust, i.e advancement of any other object general public utility. Therefore, the observation of the Ld.CIT(E) that construction of Gosala is not in accordance with the objects of the Trust, is devoid of merit and thus rejected. The powers of the Ld.CIT(E) u/s. 12AB(4) of the Act is limited inasmuch as the Ld.CIT(E) can exercise his powers in a case where any Trust violates any of the specified violations as defined in explanation to section 12AB(4) of the Act - In the present case, if you go by the reasons given by the Ld.CIT(E) and deviations/violations referred to in his order, we find that none of the reasons given by the Ld.CIT(E) falls under the specified violations referred to in explanation to section 12AB(4) of the Act. Therefore, in our considered view the Ld.CIT(E) is erred in cancelling the registration of the Trust u/s. 12AB(4) r.w.s. 12AB(5) of the Act w.e.f. 16-08-2018. Decided in favour of assessee.

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• 2024 (7) TMI 132
  Scope of limited scrutiny - case of the assessee was selected for scrutiny for the limited purpose as mentioned in the notice u/s. 143(2) , viz. whether the cash deposits were made from disclosed sources - addition u/s. 56(2)(vii)(b) based on the difference between Fair Market Value (FMV) of the property purchased by the assessee vis- -vis the actual consideration - as argued case of the assessee was selected for limited scrutiny , but the A.O, thereafter, had traversed beyond the scope of his jurisdiction and made an addition with respect to an issue which had never formed the basis for selection of the case for such limited scrutiny assessment. HELD THAT:- As case of the assessee was selected for limited scrutiny for two-fold reasons viz, (i) large cash deposits in her savings bank account; and (ii) assessee has transferred one and more properties during the year. Be that as it may, if the A.O s report regarding reasons for selecting the assessee s case for limited scrutiny is taken as correct even then the addition u/s. 56(2)(vii)(b) is not found to be justified. As addition made u/s. 56(2)(vii) had been made by the A.O with respect to difference between Fair Market Value (FMV) of the property purchased by the assessee as against the actual consideration for which the property was purchased vide registered deed, addition made u/s. 56(2)(vii)(b) of the Act by the A.O as regards the deficit consideration paid for purchase of the property by the assessee by no means can be brought within the meaning of transfer of properties by the assessee . Accordingly, the addition made by the A.O u/s. 56(2)(vii)(b) does not form the basis for selection of the assessee s case of limited scrutiny . As decided in M/s.Suraj Diamond Dealers Pvt. Ltd. [ 2019 (12) TMI 26 - ITAT MUMBAI] A.O in a case of limited scrutiny assessment only after obtaining approval from the Pr. Commissioner of Income Tax/Commissioner of Income Tax can traverse beyond the reasons for which the case was selected for limited scrutiny after converting the same into complete scrutiny. It was observed by the Tribunal that in all other cases, the A.O would be divested of his jurisdiction from traversing on issues which did not fall within the limited purpose for which the case was selected for scrutiny assessment. A.O had grossly erred in law and facts of the case in making an addition u/s. 56(2)(vii)(b), i.e. on an issue which did not form part of the reasons for selecting the assessee s case for limited scrutiny. Grounds of appeal No.1 to 4 raised by the assessee are allowed.

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• 2024 (7) TMI 131
  Revision u/s 263 - assessee has claimed exemption under wrong section i.e. Section 10(23C)(iiiae) which AO failed to examine and disallow and hence the order is erroneous - assessee during the revision proceedings vide various submissions submitted that the assessee being wholly and substantially funded by Government and existing solely for philanthropic purposes, its income is exempt under section 10(23C)(iiiac) - primary contention of the counsel for the assessee , since the assessee is a Govt. funded organization exiting solely for philanthropic purposes, in the instant case, the assessee is eligible for exemption under section 10(23)(iiac) of the Act and there is no prejudice caused to the Revenue in the instant facts. HELD THAT:- While passing the order, CIT has not commented upon various alternate arguments taken by the assessee while passing the 263 order. The assessee is a Govt. funded organization for philanthropic purposes. During the course of 263 proceedings, the assessee submitted that in the instant facts, the assessee is eligible for deduction u/s. 10(23)(iiiac) and also u/s. 11 of the Act. Admittedly, the assessee incorrectly and inadvertently filed incorrect claim u/s. 10(23)(iiiae) of the Act. However, owing to this mistake, no prejudice is caused to the Revenue since the assessee is a wholly Government funded organization existing solely for philanthropic purposes and is eligible for exemption u/s. 11 and 10(23C)(iiiac) of the Act. We observe that while passing the order, CIT did not comment on the alternate claim u/s. 11 r.w.s 10(23C)(iiiac) of the Act and simply set aside the assessment order without giving any specific finding whether the assessment order passed is prejudicial to the interest of the Revenue. In our considered view, the CIT should have considered the submissions filed by the assessee (along with supporting documents) with regard to the claim of exemption u/s. 10(23C)(iiiac) and thereafter after looking into the claim of the assessee and written submission filed by the assessee CIT should have given a specific finding as to whether in the instant facts any prejudice has been caused to the Revenue i.e. whether any loss has been caused to the Revenue in the instant facts before setting aside the order u/s. 263. Appeal of the assessee is allowed.

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• 2024 (7) TMI 130
  Black Money - Undisclosed Foreign Income and Asset noted - as alleged layering of funds was done through various paper companies as clearly established in the assessment order and hence the affairs of the company itself were not beyond doubt - CIT(A) deleted addition holding that the investment in the shares of the foreign company, RH Global Pte. Ltd. was made out of declared income - HELD THAT:- After going through the finding of ld. CIT(Appeals) and various details before adverting to the adjudication of facts of the case, we would first like to peruse the relevant provisions of Black Money Act, 2015 applicable in the instant case. Undisclosed asset located outside India is defined in Section 2(11) and means an asset (including financial interest in any entity) located outside India, held by the assessee in his name or in respect of which he is a beneficial owner, and he has no explanation about the source of investment in such asset or the explanation given by him is in the opinion of the ld. Assessing Officer unsatisfactory . Section 2(12) of the Act defines undisclosed foreign income and asset means the total amount of undisclosed income of an assessee from a source located outside India and the value of an undisclosed asset located outside India, referred to in Section 4, and computed in the manner laid down in section 5. Undisclosed assets in the form of funds remitted from India to Singapore in the Bank account held with SBI, Singapore in the name of RBGPL - Various documentary evidences have been placed in the paper book, which are more than sufficient to prove that RBGPL is a registered company in Singapore and is regularly assessed to tax and filing the audited financial statement with the authority at Singapore. Secondly it is also an admitted fact that the assessee being a Director has been receiving salary from RBGPL and is regularly filing the income tax return at Singapore and is paying due taxes. The ld. Assessing Officer has taken note of this fact and has observed that the assessee has received income in INR 7,08,47,050 from 2013 to 2019 and had paid total income tax in Singapore at Rs. 82,53,263/-. Though there is a mistake at the end of the assessee that he being a resident of India should have declared global income in his income tax return in India, but apart from not disclosing the global income in the return, sufficient details have been filed to prove that taxes have been paid in the country where salary was earned and there is no prejudice caused to the revenue in terms of Double Taxation Avoidance Agreement (DTAA) with Singapore. We thus note that for the alleged period, income earned by the RBGPL as well as the income received by the assessee from RBGPL has been disclosed with the authorities in the country, where it is earned and due taxes have been paid. Proper explanation has been given about the source of funds applied for making investment in the equity shares of RBGPL and the same have been channelized through the authorized banks and information about the sender and receiver have been provided by the assessee at the time of making payment. Therefore, the investment made in the equity of RBGPL is explained from the disclosed sources in India. Credits in the account with SBI, Singapore in which funds were remitted by the assessee for making investment towards purchasing of equity shares in RBGPL - made the addition for lack of necessary details and assessee having not explained the purpose of remittance and confined its proceedings only to examine the various individual/firm/company/ concern, which remitted the funds to RBGPL - HELD THAT:- Assessing Officer erred in only focusing up the credit entries in the Bank account with SBI, Singapore and failed to take note of the goods received against such remittances and which have entered into the regular business cycles of the various business concerns. The ld. Assessing Officer also erred to take note of the fact that RBGPL, Singapore is not only exporting goods in India to the alleged concerns but other concerns in India and abroad also. Further importing of goods from other countries is a part of regular business activity. The ld. CIT(Appeals) has taken note of this aspect and on finding that it is not a case of creating asset/earning income outside India through undisclosed sources but it is merely a commercial transaction between two concerns of which one is in India and one is based on abroad has given relief to assessee. We would like to observe that the purpose of Black Money Act, 2015 is mainly to bring those cases into light where resident-assessees are having assets located abroad or having income in abroad but the source of such asset is not coming from any declared source in India or the source is from any other income assets located in any part of the world other than India or undisclosed source in any other part of the world. However, in the instant case, the assessee has made the investment in the equity of RBGPL from the declared sources and the funds are applied for making investment. The other remaining entries in RBGPL with SBI, Singapore are part of the regular business transactions and even though the assessee is a beneficial owner of RBGPL but he has paid due taxes in Singapore on the income earned, accrued and received in Singapore. Since the assessee has successfully explained about the source of investment in the equity of RBGPL, to our satisfaction and has also explained the source and genuineness of remaining credit entries appearing in the Bank account held with SBI, Singapore in the name of RBGPL by way of placing documentary evidences that such funds remitted outside India through proper banking channel are for the purpose of importing goods from RBGPL and complete details to this effect has been placed before us and therefore, the alleged asset in the form of funds remitted to SBI, Singapore held in the name of RBGPL do not fall in the category of undisclosed assets located outside India as defined to section 2(11) of the Act and there being no undisclosed foreign income as per section 2(12) of the Black Money Act. Since in the given case, there is neither any undisclosed asset located outside India nor undisclosed foreign income, we fail to find any infirmity in the finding of ld. CIT(Appeals) deleting the impugned addition. Therefore, all the grounds of appeal raised by the Revenue are dismissed.

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• 2024 (7) TMI 129
  Period of limitation to issue notice u/s 153C - computation of period of six years from the end of the financial year preceding the date on which the satisfaction was recorded - HELD THAT:- Since admittedly, the satisfaction was recorded by the Learned AO of the assessee on 31.10.2018, falls in the Assessment year 2018-19, the immediately preceding 6 Assessment Years would be the Assessment Years from 2013- 14 to 2018-2019 . Therefore, the notice under Section 153C of the Act could not have been issued for A.Ys. 2011-12 and 2012-13 as rightly pointed out by Learned Counsel appearing for the assessee. Thus, taking into consideration the entire aspect of the matter and further having regard to the amendment under 2017 Act w.e.f 01.04.2017 with prospective effect as clarified by CBDT Circular No.2/2018 dated 15.02.2018, as the recording of satisfaction was made by the Learned AO of the assessee only on 30.10.2018, the issuance of notice under Section 153C of the Act for A.Ys. 2011-12 2012-13 since had not fall in the previous 6 years, the assumption of jurisdiction in reopening of assessment under Section 153C of the Act for A.Ys. 2011-12 and 2012- 13, therefore, found to be not maintainable. The same is void ab initio and thus, quashed. Validity of the satisfaction note recorded by AO - In the case in hand the satisfaction note simply referred the seized material i.e. Annexure A-3 seized during the search and seizure operation carried out, whereas from the plain reading of the language of Section 153C of the Act and judicial pronouncement cited hereinabove it is abundantly clear that in order to reopen assessment of the other person under Section 153C of the Act for the Assessment Year earlier to the year of search, direct co relation must exist between existence of incriminating material and relevant Assessment Year. Therefore, the reasoning should be logical while recorded satisfaction; the same must be valid having regard to the provision of Section 153C of the Act. It is an undisputed fact that these documents did not establish co relation, document wise with these six Assessment Years. The very essential element for invoking the provision of Section 153C is therefore, found to be missing. In that view of the matter, the reason assigned by the Learned AO while recording satisfaction is not found to be logical one rather vague; the material seized does not properly disclosed how the same belongs to be appellant; neither has it established any co relation document wise with these Assessment Years sought to be reopened and finalized upon making addition thereon. We, thus, respectfully relying upon the judgment passed in the case of CIT vs. Sinhgad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] do not find any force in such satisfaction note recorded by the Learned AO as the said is recorded not in terms of the provision of Section 153C of the Act and thus, found to be invalid. The entire reassessment proceedings under Section 153C of the Act are, therefore, quashed. Assessee s all appeals are allowed.

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• 2024 (7) TMI 128
  TP Adjustment - provision of software technical and consultancy services - As per the assessee, it has provided software and consultancy services to its AEs in its transfer pricing study report since the assessee is a software service provider, it assumes responsibility for the deliverables while the sales and marketing, business relation and customer contracting is generally undertaken by the AEs - TNMM has been considered as the most appropriate method - Comparable selection - HELD THAT:- We find that this Tribunal in [ 2019 (11) TMI 408 - ITAT MUMBAI] for A.Y.2009-2010 has considered a similar quarrel and held in course of appeal proceedings, the learned Commissioner (Appeals) examined them in detail and after a detailed analysis approved some comparables selected by the assessee and also added some new comparables. Whereas, the comparable selected by the Transfer Pricing Officer were not on the Tata Consultancy Services Ltd. basis of any detailed search process. At least, no such analysis is either forthcoming from the order of the Transfer Pricing Officer or could be brought to our notice by learned Departmental Representative. On the contrary, on a thorough and careful reading of the impugned order of learned Commissioner (Appeals), we are of the view that learned Commissioner (Appeals) has taken pains to examine in detail the alternative benchmarking done by the assessee with foreign comparables and after detailed analysis has shortlisted the final comparables to be considered for comparability analysis. No convincing argument or evidence has been brought on record by the learned Departmental Representative to persuade us to disturb the finding of learned Commissioner (Appeals) on these issues. In view of the aforesaid, we do not find any merit in the grounds raised by the Revenue on the issues . Provision of guarantee - Performance, financial, and lease guarantees, provided by the assessee for its AEs - main contention of the assessee is that the charges should be levied only on the component of services performed by the AEs - HELD THAT:- The contentions of the assessee have been duly considered by this Tribunal while deciding the quarrel in A.Y. 2009-2010 [ 2019 (11) TMI 408 - ITAT MUMBAI] as held in respect of performance guarantee, the rate to be applied is 0.88 % as against 1.39% in AY 09-10. The premium has changed to USD 1.1 million and the insurance cover to 125 million in this FY. Further according to assessee as against 48% on site revenue in AY 09-10, the figure is 31.72% in this FY making necessary modification. This claim may be verified by AO/TPO and same approach in calculation by CIT(A) in AY 09-10 may be adopted. In respect of Finance guarantee, the rate remains unaltered at 0.77% (0.75% +mark up of 0.02%) In respect of Lease guarantee, my predecessor CIT(A) has taken the same rate as applicable for performance guarantee. Therefore the rate is to be taken @ 0.88% as against 1.23% in AY 09-10. As the assessee is occupying 40% and the AE is occupying 60%, the guarantee charges should be restricted to 60% only. Assessing Officer is directed to re-compute the figure in accordance with the above direction. Provision of inter-company loans - TPO was of the opinion that since the assessee has advanced loan to its AEs and it is recorded so in the books of both the assessee and the AEs, therefore, in form and substance, the nature of the transaction is loan only - HELD THAT:- Similar quarrel was considered by this Tribunal in A.Y. 2009-2010 [ 2019 (11) TMI 408 - ITAT MUMBAI] as held Commissioner (Appeals), though, has observed that the loans advanced were not merely for downstream acquisition but for a variety of purpose including working capital requirement and other business uses, however, he has not elaborated as to for what other purpose loans were advanced. Without properly dealing with the factual aspect of the issue, learned Commissioner (Appeals) has jumped to the legal aspect and has held that the amount advanced by the assessee is in the nature of loan and has to be benchmarked as such. After considering the submissions of the parties and examining the material on record, we are convinced that various submissions made by the assessee before learned Commissioner (Appeals) have not at all been dealt with. The primary contention of the assessee that the advance made to the AEs is in the nature of quasi equity and falls within shareholder s activity has not been properly addressed by the Departmental Authorities keeping in view the ratio laid down in the relevant case laws. It also requires deliberation whether it can be considered as an international transaction under section 92B r/w Explanation-1(c). Brand royalty fees - whether Tata Sons Pvt.Ltd. is the legal owner of the trademarks and service marks containing TATA including Tata Consultancy Services and TCS used in relation to the business of the assessee? - main contention of the assessee is that the name TATA is owned and used by Tata Sons since 1868 - HELD THAT:- As decided in A.Y. 2014-2015 [ 2023 (9) TMI 1114 - ITAT MUMBAI] held that the fee paid by the assessee towards the brand to Tata and Sons Ltd. is not capital in nature for the reason that the brand is not owned by the assessee. Accordingly there cannot be any royalty that needs to be charged on the brand since assessee is not the owner of the brand and there cannot be any TP adjustment towards the amount that ought to have been received by the assessee towards brand royalty. We therefore see no infirmity in the order of the CIT(A). This ground of the revenue is dismissed.

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• 2024 (7) TMI 127
  Addition u/s 40A - disallowance of expenditure in cash exceeding permissible limit [in excess of Rs. 20,000] - HELD THAT:- Assessee is a milk distributor and sales were carried out through the sub-distributors. The assessee received the milk products from a main supplier, Hisar Jind Co-Op. Milk Producers Union Ltd. The mode of collection against the sale of milk was in cash and the cash was paid through banking channel. Account statements show turnover was very high, the margins were very low in the business of milk distribution. As per ratio of judgments in Sri Renukeswara Rice Mills [ 2004 (8) TMI 319 - ITAT BANGALORE-B] and Suresh Kumar s cases [ 2020 (12) TMI 1061 - ITAT DELHI] it is well settled that since assessee paid amounts to others which could be verified a combined reading of Clauses (f) and (1) of Rule 6DD will take away the transaction from the clutches of Section 40A(3). From the bills produced by the assessee before the assessing officer it is evident that the assessee apart from paying price of the products also paid commission to the payee. Thus, the payee has become the agent of assessee also. Such agent is required to pay the company in cash. Accordingly, there is no violation of Section 40A(3). We accordingly uphold deletion of the disallowance in respect of payment made to the company. Decided in favour of assessee.

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• 2024 (7) TMI 126
  TP Adjustment - non-considering extra-ordinary expenses incurred on account of canceflation of employee stock option plan (ESOP) pursuant to acquisition as non-operating in nature - HELD THAT:- It is not in dispute that the assessee had moved a rectification application before the Ld. TPO only on the matter of professional fees. However, the Ld. CIT(A) while adjudicating the grounds mistaken the rectification moved on the matter of professional fees as rectification moved on the matter of ESOP and passed the orders on three issues instead of only one issue on which the rectification had been sought by the assessee and accordingly dismiss the appeal of the assessee on these three issues. In our opinion the Ld. CIT(A) failed to appreciate the grounds raised by the assessee properly on merits, before passing the order. Hence, we set aside the issues and restore the same to the file of Ld.CIT(A) with a direction for fresh consideration of the matter in accordance with law, by giving an opportunity of being heard to the assessee. These grounds are accordingly treated as allowed for statistical purposes. Comparable selection - HELD THAT:- It is not in dispute that the assessee had raised many issues i.e. selection of comparables ( grounds No. 7 to 9), erroneous computation of income of margins of comparable companies ( ground No. 10), computation of TP adjustments ( ground No. 11 12), corporate guarantee ( ground no. 13), use of single year data ( ground no. 14) and benefits of +/- 5 percent (ground no. 15) before the Ld. CIT(A) through the ground no. 7 to 15 . However, the Ld. CIT(A) adjudicated the grounds no.7 to 15 on the basis of only single issue i.e. whether the comparables are valid or not and dismiss the grounds on all the different issues. In our opinion the Ld. CIT(A) failed to appreciate the grounds raised by the assessee on merits, before passing the order. Hence, we set aside the issues and restore the same to the file of Ld.CIT(A) with a direction for fresh consideration of the matter in accordance with law, by giving an opportunity of being heard to the assessee. These grounds are accordingly treated as allowed for statistical purposes. Disallowance u/s 14A - DR submission that before invoking the provisions u/s 14A r.w. rule 8D of the Act, Ld.CIT(A) ought to have considered that any investment which is yielding or likely to yield exempt income falls within the ambit of section 14A of the Act and expenditure in relation to such investment has to be computed as per the formula in Rule 8D and there is no exemption in case where no exempt income is earned or not - DR also submitted that the Ld. CIT(A) did not appreciate that the said Section 115BB of the Act prohibit the allowance on any expenditure against the said foreign dividend income - HELD THAT:- The facts whether the dividend received by the assessee covered u/s 115BB of the Act and whether any expenditure have been incurred for earning those dividend are required to be verified from the records of the assessee. CIT(A) has not elaborately dealt with the issue in his order. Hence we think it proper to remit back the issue to the file of the CIT(A) with the direction to denovo verify the issue and decide as per the provision of the Act. It is need less to say that before deciding the same an opportunity of being heard should be given to the assessee. Accordingly the issue raised by the revenue is decided. Disallowance u/s 14A and disallowance u/s 14A for the purpose of MAT - HELD THAT:- The contention of the assessee is correct. The order of the Ld.CIT(A) is very cryptic and did not deal with the submission made by the assessee. Hence considering the principle of natural justice to decide the issue on merits, we think it proper to set aside the impugned order and restore the issue to the file of Ld.CIT(A) with a direction for fresh consideration of the matter in accordance with law, by giving an opportunity of being heard to the assessee. Grounds are accordingly treated as allowed for statistical purposes.

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• 2024 (7) TMI 125
  Validity of final assessment order passed u/s 144C without passing the draft assessment order - HELD THAT:- Circulars cannot supersede the provisions of Section 144C(1) of the Act, and held the final assessment order null and void that was passed without passing the draft assessment order in violation to mandatory provisions of Section 144C(1) of the Act. Subsequently, the CBDT came out with another clarificatory circular dated 19.11.2013, the relevant contents of the same have been reproduced by us hereinabove in para 8 of this order. The subsequent clarificatory circular issued by CBDT is in line with the provisions of Section 144C(1) - CBDT Circular and decision referred above makes it explicit that after 01.10.2009, the AO is statutorily required to pass draft assessment order u/s. 144C(1) of the Act, if he makes any addition, before passing the final assessment order u/s. 144C(3) of the Act. As decided in the case of Xander Advisors India Pvt. Ltd.[ 2022 (12) TMI 501 - ITAT DELHI] in somewhat similar case where the final assessment order was passed without passing draft assessment order, after considering various decisions including the decision rendered in the case of Zuari Cement Ltd. ( 2013 (9) TMI 1167 - SC ORDER ) the decision of CIT vs. C-Sam (India) (P.) Ltd [ 2017 (8) TMI 291 - GUJARAT HIGH COURT] and CBDT circular dated 03.6.2010 and dated 19.11.2013 (supra) quashed the final assessment order. CIT(A) has correctly quashed the final assessment order that has been passed without following the mandatory provisions of Section 144C(1) of the Act. Appeal of the Revenue is dismissed.

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• 2024 (7) TMI 124
  Addition made u/s. 68 - sale of shares to be an unexplained source of investment made by the assessee [Foreign company] - assessee is said to have sold shares of International Conveyors Ltd. thereby offering a capital gain which has been claimed as exempt as per the DTAA between India and Mauritius - HELD THAT:- Assessee being a tax resident of Mauritius has acquired the shares and has been holding the same for almost 10 years from the date of acquisition which was during the year under consideration was purchased by M/s. Team India Managers Ltd. The contention of the ld. A.O. that the movement of the price of shares is abrupt and unrealistic, is not acceptable for the reason that the price per share was Rs. 11.90 at the time of acquisition and has increased to Rs. 29.66 over a period of 10 years, is according to us a reasonable increase in the price of the share unlike in most of the penny stock cases where the price of the shares sky rockets manifolds within a short span of time. We also have noticed that the assessee has substantiated the financials of M/s. ICL where it is inferred that the said company is merely not a bogus entity having dummy directors. Pertinently, the ld. A.O. has merely relied on the fact that inspite of increase in the debt, the sales of the said company has not increased proportionately. The assessee being a SEBI registered FPI is engaged in the investment in various companies out of which the assessee earns income and is also the only source of income for the assessee. A.O. has failed to substantiate how the assessee is involved with Shri Naresh Jain alleged to be an accommodation entry provider who has even otherwise not specifically mentioned the assessee to be the beneficiary of accommodation entry and the scrip of ICL to be a penny stock. High Court of Gujarat in the case of Pr. CIT vs. Jagat Pravinbhai Sarabhai[ 2023 (1) TMI 44 - GUJARAT HIGH COURT] where it has been held that the shares were retained for more than 10 years and sold after a long time which infer that the investment was not bogus and the scrip was held to be not a penny stock. It was also held that such investments are not merely for the purpose of earning exempt income but is a genuine transaction. We deem it fit to allow the grounds of appeal filed by the assessee by holding that the transaction made by the assessee in the scrip of ICL is a genuine transaction and, therefore, direct the ld. A.O. to delete the addition made u/s. 68 of the Act rw.s 115BB of the Act. Decided in favour of assessee.

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• 2024 (7) TMI 123
  Addition u/s 68 - Bogus Long term capital gain - AO has disbelieved the claim of the assessee only on the basis of the investigation report of the department which identified the scrip of M/s. Sunrise as a penny stock - HELD THAT:- We find that investigation report of department is a general-report, which has not spelled out any wrongdoing on the part of assessee or her broker. Therefore, the reliance made by AO on the general-report of investigation wing cannot be accepted. Likewise, the AO has also referred to the statement given by Shri Vipul Bhatt which also does not contain any direct testimony to incriminate the assessee or her broker (Anand Rathi share and stock broker Ltd) in any wrong-doing [wrongdoing as reported in the investigation report/modus-operandi]; Further, we note that department s case is not that the name of assessee or her broker finds mention in the list of 83 entities/persons identified by SEBI as having acted in concert with M/s. Sunrise and its directors to manipulate the price as given in SEBI order dated 19.12.2014. It is not disputed that no action has been taken by SEBI against the assessee or her broker M/s. Anand Rathi. So the reliance placed by AO on SEBI order without linking it with assessee or her broker is irrelevant/misplaced and erroneous. Since there is no testimony which incriminate assessee or her broker, reliance made by AO to draw adverse view cannot be countenanced. We note that the AO has also referred to the SEBI report wherein according to him, the SEBI was pleased to suspend the trading of the scrip of M/s. Sunrise for certain period. But, nothing turns on it, because by suspending sale for some time, does not in any way link assessee or her broker with wrongdoing or connected to Shri Vipul Bhat. As decided in Bhavin Vaghasia [ 2023 (6) TMI 1399 - ITAT MUMBAI] material on record supports the case of the Assessee/Legal Heir that transactions of sale of shares of Sunrise Asian were genuine transactions undertaken during normal course by the Assessee who had knowledge of the stock-market and had been making investments in shares since many years. Accordingly, the claim of exemption under Section 10(38) of the Act is allowed in respect of capital gains arising from sale of shares of Sunrise Asian during the previous year - Decided in favour of assessee.

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• 2024 (7) TMI 122
  TP adjustment - Comparable selection - HELD THAT:- Nihilent Limited is not functionally comparable to the assessee s case, as such it is to be excluded from the list of comparables. Tata Elxsi Limited company is functionally different and engaged in diversified activities. thus is to be excluded from the list of comparables. Larsen Toubro Infotech Ltd. cannot be considered to be comparable to the assessee s case on functionality basis, accordingly we direct the ld. AO/TPO to exclude this company from the list of comparables. Persistent Systems Limited is functionally dissimilar to the assessee company since this company has significant related party income transactions and accordingly, fails the RPT filter of less than 25% of sales for the year under consideration, applied by the ld. TPO. Wipro Limited is functionally dissimilar to the assessee company since it is engaged in providing cognitive computing, hyper automation, robotics, cloud, analytics and emerging technologies. Also, the company is engaged in offering software products. Infosys Limited be excluded on the basis of functionality as well as on turnover basis. Adjustment on account of interest on outstanding receivables - HELD THAT:- This issue is remitted to the file of ld. AO/TPO with the rider that period of credit should be for 30 days only.

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• Customs

• 2024 (7) TMI 121
  Under-valuation of import of perfumes and deodorants - cosmetics - evasion of duty - mis-declaration of Maximum Retail Price (MRP)/ Retail Sale Price (RSP) - rejection of declared value - value declared in the B/Es, to be considered as transaction value, or not. It is contended that the value declared in the B/Es, which are based on the invoices issued by the overseas supplier, should be considered as the transaction value in terms of Section 14 ibid for payment of the Customs duty, which had been properly discharged by the appellants and also accepted by the proper officer at the time of assessment of the B/Es. HELD THAT:- Since, the transaction value is determinable on the basis of the documents exchanged between the parties i.e., the appellants and the overseas supplier, the value of the imported goods, for which the payments were made through the approved banking channel, should be considered as the transaction value in accordance with sub-rule (1) of Rule 3 ibid. There is no scope or occasion for the department to reject the declared value for the purpose of consideration of some other transaction value inasmuch as the transaction value has already been determined and on the basis of such determination, the remaining 45 nos. of disputed B/Es were already assessed under sub-section (1) of Section 17 ibid, which had not been objected to by the department by taking recourse to sub-section (4) of Section 17 ibid, ordering for re-assessment of the same. The learned adjudicating authority has not analyzed the provisions contained in Section 14 ibid read with Rule 3(1) ibid in their proper prospective with regard to determination of the transaction value on the goods imported by the appellants into the territorial waters of India. There cannot be any reason to doubt the declared value in the B/Es as the transaction value, for the purpose of duty assessment. Rule 4 ibid deals with the situation of consideration of transaction value of identical goods. It has been provided that in applying the said rule, the transaction value of identical goods in a sale at the same commercial level and in substantially the same quantity should be used. On perusal of the above table, it transpires that the volume of imports made on behalf of M/s Rasasi Perfumers Pvt. Ltd. was only 0.57%, as compared to the imports made by the appellants for their wholesale business during the disputed period. Further, the facts are not under dispute that the appellants had imported the goods for their wholesale business in India; where as, the overseas supplier had supplied the goods for exclusive sale in retail through its outlet(s) located in India, that too, in a minuscule quantity. The dealings of a wholesaler vis- -vis a retailer cannot be considered at the same commercial level. Thus, determination of value under Rule 4 ibid cannot be resorted to by the department under the above factual matrix. The learned adjudicating authority has confirmed the differential demand of Basic Customs Duty (BCD) by adopting to the deemed value based on MRP, for arriving at the transaction value. The valuation of goods for the purpose of computation of BCD amount has to be in accordance with Section 14(1) ibid and has thus, to be based on transaction value and not on the basis of MRP declared on the said goods. Therefore, no recommendation has been provided in the Customs statute for adopting the MRP as the basis for arriving at the transaction value of the imported goods. Even considering the fact that the transaction value can be arrived at on the basis of RSP, the wholesale dealers (appellants herein) are outside the scope and ambit of the Legal Metrology (Packaged Commodity)Rules, 2011. Imported cosmetics - HELD THAT:- As an importer and wholesaler of perfumes, the appellants had duly complied with the provisions of Drugs and Cosmetics statute. In view of the fact that the appellants as the importer/wholesaler of perfumes and deodorants are governed under the provisions of Drugs and Cosmetics statute, they are outside the purview of the Legal Metrology Act, 2009 and the rules framed there under. It is opined that in the present set of facts, rejection of transaction value, re-determination of the same, confiscation of the impugned goods, confirmation of the differential duty demand along with interest and imposition of penalties on the appellants shall not stand the judicial scrutiny. Therefore, the impugned order dated 09.07.2020, confirming the adjudged demands on the appellants are set aside in entirety. The appeal is allowed in favour of the appellants.

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• 2024 (7) TMI 120
  Levy of penalty - Allegation of smuggling activity - violation of principles of natural justice - no copy of relied upon documents was provided to the appellant and no notice or personal hearing was served upon the appellants - when the seizure case has been done by the Police and the Police handed over the said goods to the Customs, in that circumstances, the provisions of Section 123 of the Customs Act, 1962 are applicable or not? HELD THAT:- The said issue has been examined by the Hon ble Apex Court in the case of GIAN CHAND AND OTHERS VERSUS STATE OF PUNJAB [ 1961 (11) TMI 1 - SUPREME COURT] , which was followed by this Tribunal in the case of MAHESH B. MALI VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [ 2013 (4) TMI 7 - CESTAT MUMBAI] , wherein this Tribunal has observed The provisions of Sea Customs Act and the Customs Act, 1962 are identical with respect to the seizure and the onus of proof in the instant case. From the records it is evident that it is the police who seized the goods on 6-11-2009 and thereafter they were handed over to the Customs authorities by the police on the request of the Customs authorities. In other words, the Customs authorities did not seize the goods from the appellants; therefore, the provisions of Section 123 which casts the onus on the appellants to prove that the goods are not smuggled is not applicable, inasmuch as no seizure has been made from the appellant by the Customs. As the provision of Section 123 of the Customs Act, 1962, are not applicable for seizure of goods and Indian Currency in this case. The Revenue has failed to discharge the burden to prove that the gold in question is smuggled one and currency seized is sale proceeds of the smuggled gold, therefore, the gold and seized currency are liable for confiscation. Thus, no penalty can be imposed on the appellants. Accordingly, the penalties imposed on the appellants are set aside - appeal allowed.

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• Corporate Laws

• 2024 (7) TMI 119
  Seeking declaration that the sale agreement dated 5th September, 2007 is not affected by Section 536 (2) of the Companies Act, 1956 and to ratify the said sale - It is the case of the Applicant that the said company did not inform the Applicant of the filing of the winding up petition nor of any order of admission or of winding up and the Applicant came to know of the same only in the year 2011 - HELD THAT:- Pursuant to Section 441 of the Companies Act, winding up of a company by Court shall be deemed to have commenced at the time of presentation of the petition which in the present case would be 25th August 2003. It is also provided under Section 536(2) of the Companies Act that in the case of a winding up by a Court, any disposition of the property of the company made after the commencement of the winding up shall, unless the Court otherwise orders, be void - the jurisdiction vested is equitable and is meant to be exercised as such. If even bonafide transaction for a consideration would not be protected, then the company, only by the fact that the process of winding up has started, would benefit itself by unjust enrichment. Such a result is clearly to be avoided while exercising power under the said provision. In the case of Pankaj Mehra and Another vs. State of Maharashtra and Others [ 2000 (2) TMI 718 - SUPREME COURT ], the Hon ble Supreme Court has considered the impact of the legislative direction in Section 536(2) that any disposition of the property of the company made after the commencement of the winding up shall be void. The Hon ble Supreme Court has observed that there are two important aspects: first is, that the word void need not automatically indicate that any disposition should be ab-initio void. That, the legal implication of the word void need not necessarily be a stage of nullity in all contingencies. The Hon ble Supreme Court has observed that the manner in which the word void has been employed in Section 536(2), the same means voidable. In the facts of the case, the Applicant has conducted its due diligence before entering into the sale agreement dated 5th September 2007, has paid the entire consideration to the company in liquidation and the sale agreement is duly registered after obtaining permission from the MIDC and confirmation of no dues from Bank of Baroda and has also settled the dues of the petitioner in the winding up petition - The transaction is not only bonafide but also fair, just and reasonable and deserves to be protected. The sale agreement dated 5th September, 2007 being a bonafide transaction is ratified - application allowed.

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• Insolvency & Bankruptcy

• 2024 (7) TMI 118
  Approval of Resolution Plan - Sustainability of different eligibility criteria fixed for association of allottees as compared to other Resolution Applicant - eligibility criteria for allottees association being registered prior to 03.01.2020 - locus on Crown Business Park Tower A Association to file appeal - correctness of Resolution plan mentioning unsold area - saleable area available to the Resolution Applicant - sale of car parking area - approval of Resolution Plan while keeping various applications filed by the allottees pending consideration - non- commitment of payment of assured amount by the SRA - denial to Cimco Project equal opportunity to submit a Resolution Plan vitiating the approval of the Resolution Plan submitted by SRA - no opportunity of hearing without passing the order - sufficient material irregularities committed by the Resolution Professional in conduct of the CIRP to justify by interference with the decision of the CoC to approve the Resolution Plan or not. Whether the different eligibility criteria fixed for association of allottees as compared to other Resolution Applicant is unsustainable and violates the provisions of CIRP Regulations 2016? - HELD THAT:- The different eligibility criteria fixed for Association of Allottees as compared to other Resolution Applicants, does not violate the provisions of CIRP Regulations 2016 and is sustainable. Whether the eligibility criteria for allottees association being registered prior to 03.01.2020 has no rational basis and was choosen only to oust the Crown Business Park Tower A Association, hence, deserves to be set aside? - HELD THAT:- The eligibility criteria for allottees of Association to be registered prior to 03.01.2020 has rational basis and cannot be set aside. More so, the Appellant in Company Appeal (AT) (Insolvency) No.431 of 2023, who claims to be Association of Allottees, neither filed any objections before the RP or filed any Application before the Adjudicating Authority, challenging the criteria or seeking liberty to file a Resolution Plan. They filed the Application before the Adjudicating Authority after one year and 10 months from the approval of the Resolution Plan by the CoC. Whether Crown Business Park Tower A Association has locus to file Company Appeal (AT) (Ins.) No. 434 of 2023? - HELD THAT:- Admittedly, there are large number of Members of Association, who are not part of the CoC and the grievance raised is also on claims of large number of Members of the Association have not yet been admitted and kept under verification and further several applications filed by some of the Members, are still pending before the Adjudicating Authority. Looking to the various issues raised by the Appellant in Company Appeal (AT) (Insolvency) No.431 of 2023, it is opined that submission in the Appeal, needs to be considered on merits and the Appeal is not to be thrown out on the ground of locus - Crown Business Park Tower A Buyers Association has locus to file Company Appeal. Whether the Resolution Plan which mentions 1 Lakh sq. ft. as unsold area depicts an incorrect figure since the addendum to Resolution Plan only mentions 83,940 sq. ft. as available area? - Whether no Resolution Plan could have been approved by the Adjudicating Authority without their being certainty regarding saleable area available to the Resolution Applicant which figure not being final the entire resolution plan deserves to be rejected? - HELD THAT:- It is SRA, who is responsible to take all loss and gain in the Project. We, thus, are of the view that present is a case where in view of the pending applications before the Adjudicating Authority, the Adjudicating Authority itself has directed the applications to be listed after approval of the Plan, no certainty with regard saleable area, could have been made, nor at the time of submission of Resolution Plan, there could have been certainty with regard to saleable area available to the SRA. The SRA, who is Association of Allottees, took the business decision and submitted a Plan for completing the Project on the basis of funds as delineated in the Plan and on the basis of source of funds as mentioned in the Plan - on the ground that Plan mentions 1,00,000 sq. ft as unsold area, which is not in accord with 83,940 sq. ft area mentioned in addendum, the Plan neither fails nor can be interfered with - the Adjudicating Authority took a conscious decision to consider the various IAs filed for acceptance of their claims, after approval of Resolution Plan, there was no certainty of saleable area, even on the date when Adjudicating Authority approved the Resolution Plan. Hence, no fault can be found with there being no certainty of the saleable area of which the SRA was well aware and took a risk to proceed with the Resolution Plan and implemented the same. Whether there is no certainty with regard to saleable area available to the Resolution Applicant for raising fund in view of the pendency of the large number of applications filed by the allottees before the Adjudicating Authority? - Whether the Resolution Plan ought to have provided receivables from allottee of Rs. 62.95 Cr. as mentioned in the Information memorandum and the figures of Rs.36.66 Cr. only mentioned in Resolution Plan is incorrect figures? - HELD THAT:- It is true that there was no certainty with regard to saleable area available to the Resolution Applicant, in view of large number of applications filed by the allottees before the Adjudicating Authority, but that itself is not any ground to find fault with the Resolution Plan, specially, when the Adjudicating Authority itself has decided to decide the applications after approval of Resolution Plan - The Resolution Applicant providing for receivables of Rs.36.66 crores, cannot be said to be incorrect figure, it being calculated on the basis of area for which claims were accepted, i.e. area 4,26,240 sq. ft. Whether Resolution Plan proposing to raise funds from sale of car parking @ of Rs.4 lacs is impermissible and the above source of funds was not available to the Resolution Applicants? - HELD THAT:- The RERA Act, 2016 covers under common areas, only the open parking area and in the present case, the SRA was dealing with covered parking, which is on different levels, was constructed on the expenditure of Rs.40 crores and Information Memorandum, clearly mentioned that open parking area was Zero - it is clear that the amount, which was mentioned in the Proposed Funding Plan for allocation of car parking slot, cannot be said to be wrongly included in the Funding Plan - Resolution Plan proposing to raise Rs.54.50 crores from sell of car parking space @ Rs.4,00,000/- was clearly permissible and the above source of fund was available to the Resolution Applicant. Whether Adjudicating Authority erred in approving the Resolution Plan by the impugned order dated 21.02.2023 while keeping various applications filed by the allottees pending consideration? - HELD THAT:- The Adjudicating Authority consciously directed the applications to be listed after the approval of the Resolution Plan with clear undertaking by the SRA that SRA shall abide by all liabilities and claims, which are accepted by the Adjudicating Authority and bear the consequences. The course adopted by the Adjudicating Authority in the present case, looking into the enormous number of applications, cannot be said to be impermissible. When the SRA came forward with an undertaking that in event the Plan is approved, it shall abide by all subsequent orders, accepting any claim of the allottees, there are no error in approving the Resolution Plan and direction for listing of the applications subsequently. Whether non- commitment of payment of assured amount of Rs.52.50 Cr. by the SRA is modification of the Resolution Plan? - HELD THAT:- The SRA has clearly contemplated under Clause 8.18.10, if there is any deficit/ shortfall, with regard to amount proposed in the Resolution Plan towards assured returns shall stand modified accordingly. Thus, payment of assured returns of Rs.52.50 crores was itself contemplated in the Plan to be modified in event of any deficit or shortfall. Thus, in event, in the implementation of Plan, the SRA is not able to pay the assured return of Rs.52.50 crores, due to any deficit or shortfall, there can be no modification of the Plan, rather to cover the deficit and shortfall from assured returns payable to the allottees, is part of the Resolution Plan - Non-commitment of payment of assured returns of Rs.52.50 crores by the SRA is not a modification of Resolution Plan. Whether Cimco Project was denied equal opportunity to submit a Resolution Plan vitiating the approval of the Resolution Plan submitted by SRA? - HELD THAT:- Cimco Projects was well aware about refusal of its request for extension of time. Cimco Projects has filed the Writ Petition in Delhi High Court, which was ultimately dismissed as withdrawn. Despite extension of time granted to the Cimco Projects, on its request, no Resolution Plan was filed. Cimco Projects, having not filed any Resolution Plan despite extension of time, cannot be heard in complaining that it was not given ample opportunity to file the Resolution Plan. Cimco Projects is also party to preferential transaction application filed by the RP - Cimco Projects was granted equal opportunity to submit a Resolution Plan. It having sent its Expression of Interest, it was open for Cimco Projects to file the Plan in which it failed - Cimco Projects having been granted ample opportunity to submit a Resolution Plan, hence, the approval of Resolution Plan is not vitiated on the above ground. Whether the Appellant- Amarjit Singh, Suspended Director was not given any opportunity in passing the order dated 23.02.2023 and his objection by IA No.5006 of 2021 was rejected without hearing the Appellant? - HELD THAT:- Application filed by the Appellant Amarjit Singh, raising objection to the Resolution Plan was considered and was rejected. Hence, the submission that he was not given any opportunity/hearing or that his objections were not considered, cannot be accepted. Whether there were sufficient material irregularities committed by the Resolution Professional in conduct of the CIRP to justify by interference with the decision of the CoC to approve the Resolution Plan? - Whether in these appeals sufficient grounds have been made out to interfere with the approval of the Resolution Plan? - HELD THAT:- The mere fact that in the funding of Plan certain saleable area was according to the Appellant, in excess was taken, hence, the entire area of 1,00,000/- sq. ft. was not available and the funding as contemplated was deficient, is not a sufficient ground to find any violation of provisions of Section 30, subsection (2). Further, it is noticed Clause 7.1 and 7.2 of the Resolution Plan, where the SRA has had made provisions for any deficiency and shortfall in the funds available. Thus, the SRA was conscious that even if there is shortfall in funding, there was backup Plan. Hence, on the ground that there was no certainty regarding saleable area available to the SRA and there was certain discrepancy regarding saleable area in the addendum to Informaton Memorandum and the Resolution Plan, is not a ground on which the approval of Resolution Plan can be interfered with by the Adjudicating Authority - approval of Resolution Plan by the CoC, being compliant of Section 30, sub-section (2), has rightly been approved by the Adjudicating Authority and no grounds have been made out in these Appeal(s) to interfere with the approval of Resolution Plan. Whether, the Applicants who filed IAs in Company Appeal (AT) (Insolvency) NO.431 of 2023 are entitled for any relief in their Applications? - HELD THAT:- No reliefs can be granted in the IAs, which have been filed by the Applicant(s) as noted above except to pursue the Applications before the Adjudicating Authority. Appeal disposed off.

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• 2024 (7) TMI 117
  Maintainability of Application filed under Section 95, sub-section (1) of IBC - Appointment of RP to submit a Report under Section 99 - application filed against Personal Guarantor - moratorium has commenced in the Application filed by the PNBHFL, prior to registration of the Application filed by IFCI - HELD THAT:- The three Member Bench of this Tribunal in Krishan Kumar Basia s case [ 2022 (7) TMI 834 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] has approved the view of the Adjudicating Authority that filing of the Application under Section 95 by the State Bank of India is on the date when the Application was filed and the date shall not be the date when the Application is numbered. Applying the above ratio in the present case, we have to hold that filing of the Application by IFCI, was prior in time and the mere fact that Application filed by PNBHFL was registered earlier is inconsequential and moratorium shall commence on filing of the Application by IFCI. It is further to be noticed that present is not a case that any skelton Application was filed by IFCI - in the present case, there was no such defect in the Application, where it can be termed as a skelton Application. The Kerala High Court in Jeny Thankachan vs. Union of India Ors. [ 2023 (11) TMI 834 - KERALA HIGH COURT] had occasion to consider the issue as to whether on an Application filed under Section 94 by the Corporate Debtor the proceedings under Section 13(2) of SRFAESI Act, 2002, which was initiated by the Bank, shall be deemed to have been stayed. In the above case, the Bank has initiated proceedings under Section 13(2) of the SRFAESI Act. In the above case, proceedings under Section 14 of the SRFAESI Act were filed before Chief Judicial Magistrate, who has passed an order on 30.06.2020. Before the Chief Judicial Magistrate, an affidavit was filed stating that an Application under Section 94 of the IBC was filed on 21.08.2023 before the NCLT, hence proceedings pending before the Chief Judicial Magistrate has to be stayed. The date of filing the Application has to be determined as per statutory Rules governing for filing of Application under Section 95. There are no substance in submission of the Appellant that order passed by Adjudicating Authority dated 01.05.2024 appointing RP, is without jurisdiction. No grounds have been made to interfere with the impugned order - appeal dismissed.

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• FEMA

• 2024 (7) TMI 116
  Offence FERA - confiscation of US$ 8200 seized from Canara Bank - Penalty imposed - charge of under invoicing of the imports - seven SCNs issued - As argued SCNs were vague and baseless since these advert to seized documents without specifying the description and the contents of the documents - Appellant argued that the charge of under invoicing of the imports allegedly made against the Appellant has not been established - contention that the statements of the Appellant were recorded under duress and were retracted at the earliest opportunity - HELD THAT:- As already noted the contents of the statements made by the Appellant as well as the circumstances under which he tendered his statements in the preceding paragraph. We therefore agree with the Ld. Adjudicating Authority that the statements made by the Appellant were true and voluntary. Validity of SCN(I) - We do not find that the SCNs were vague and baseless. We have perused all the SCNs and find that there is an Annexure to each of the SCN. Annexure list the documents which have been relied upon and include statements, documents seized specifying the premises from which recovery was made, bank draft, diary marked M with specific page therein, fax message and transcript of bank account. Since the documents recovered and seized were referred in the various statements which have been relied upon, we are unable to agree to the proposition that unless the documents are specifically pointed out in the Annexure to the SCN the same will be vague and baseless. Appellant pleaded that the statements made by the co-noticees cannot be relied upon - We do not intend to rely upon the statements of the co-noticees. However, the evidential value of the documents seized from their premises will remain intact in so far as these have significance for the case against the Appellant and have been referred by him in his statements. Request for the cross examination of various witnesses - We do not find that the denial of cross examination of the witnesses caused prejudice to the interest of the Appellant. The documents which were relied upon to establish charges against the Appellant were supplied to him as part of SCNs and for which he got opportunities to rebut and explain. We have already observed that we do not intend to rely upon the statements of the co-noticees. We thus note that the failure to permit the Appellant to cross-examine does not call for reversal of the Order and de novo enquiry. Case of under invoicing - Where the goods have escaped the levy of customs duty and discovery thereof, is made subsequent to the customs clearance, the reliance on the valuation of contemporaneous imports may not be necessary in the face of other evidence. In the present case there are evidences on record which are documentary in nature and explained through the statements of the Appellant with respect to the under invoicing of the import of 32 consignments of Carbamezapine by M/s Centaur Chem which were handled by the Appellant. Moreover, from the documents which are part of the Appeal Paper Book as pointed out by the Ld. Counsel for the Respondent, there was a sharp decline in the CIF value of Carbamezapine imported by the Appellant in the years 1993 and 1994 in comparison to imports of years 1991 1992.No cogent explanation for the said decline has been given. We therefore find that the charges of contravention of Sections 8 (1) and 9 (1) (a) of FERA invoked in SCN are proved against the Appellant to the extent of US$ 1, 14, 150. We also note that there is acknowledgment of debt by the Appellant to his sister abroad in contravention of Section 9 (1) (c) of FERA invoked in SCN V dated 11.08.1995. Validity of SCN II - As categorically admitted having paid various amounts to different persons, mostly based in Kerala, on the instructions of his brother-in-law - We find that the Appellant referred in his statement to fax message from James Mathew, New York to his brother-in-law Shri Prakash C. Shah who was also resident abroad in his statement. The fax message was recovered during the search of his premises. The message was forwarded by his brother-in-law to the Appellant. It had instructions for making payment of specified amounts to certain parties. The Respondent Directorate obtained confirmation of such payments from the recipients. He also referred to a specific page of seized diary marked M.Therefore, the charge invoked in SCN II dated 11.08.1995 stand proved against the Appellant for contravention of Section 9 (1) (d) of FERA for an amount of Rs. 1, 80, 000/-. SCN III relating to acquisition of US $ 19, 000 by the Appellant and placing the same to the credit in NRE account, of Shri Ritesh Shah, his cousin, who was a non-resident - We find from the Annexure to the SCN III dated 11.08.1995 that among the documents received from Canara Bank were transcript of the NRE Account No. 50459, Bank Account opening form, copy of power of attorney of Shri Shailesh V. Shah, credits slips and the letters of Shri Shailesh V. Shah. In his statement the Appellant refused to comment on letter written by him to Canara Bank for issuing draft of US$ 8200 to M/s Indukern Chemie AG, Switzerland. Ld. Adjudicating Authority made certain logical observation in this regards. In the absence of any explanation by the Appellant the charge against him of contravention of Sections 8 (1) and 9 (1) (e) of FERA invoked in SCN III dated 11.08.1995 stands established. SCN IV wherein Appellant has been charged for attempting to make payment of US$ 8200 by issuing instructions to Canara Bank to make draft in the name of M/s IndukernChemie AG, Switzerland.Ld - In view of the documents received from Canara Bank and there being no explanation from the Appellant available on record, the charges invoked under SCN IV VI stand established. The confiscation of US$ 8200 under Section 63 of FERA for contravention of Section 9 (1) (a) r/w 64 (2) of FERA is not intervened with. Charges invoked in SCN VI for contravention of Sections 6 (4) (5) r/w 68 (1) of FERA by the Canara Bank and its officials which have been confirmed by the Ld. Adjudicating Authority - The Appellant who was charged for the abetment of the aforementioned contraventions u/s 64 (2) of FERA has been held guilty by the Ld. Adjudicating Authority - we do not find the abetment charge to be proved against the Appellant as there is no evidence on record to establish that he aided and assisted the bank and its officials to indulge-in the said contraventions. Penalty imposed - SCN I Adjudicating Authority imposed penalty of Rs. 40, 00, 000/- on the Appellant for contravention of Sections 8 (1) and 9 (1) (a) of FERA for an amount of US$ 462, 110 - However, since we have held that the charge is established to the extent of US $ 1, 14, 150 the amount of penalty imposed is not justified. We have also found that the charge of abetment against the Appellant invoked in SCN VII dated 11.08.1995 is not established. Charges invoked against the Appellant in SCN II - There is no reason to doubt the veracity of the denials made by the Appellant in his statements, particularly so when his admissions have been accepted as true and voluntary. We therefore do not find that the charges invoked against the Appellant in SCN II dated 11.06.1996 are established. With reference to the discussions, we note that the Appellant has expired and is represented by his legal heirs that ishis widow namely Ms. Lina Shah and his three daughters namely, Ms. Sunayana Sailesh Shah, Ms. Shaili Bimal Shah and Ms. Sulsa Shah. We reduce the consolidated penalty amount for SCNs I to VI dated 11.08.1995 which have been dealt with in the Impugned Order dated 30.03.1999 to Rs. 10, 00, 000/- (Rupees Ten Lakhs Only). The amount of pre-deposit of Rs. 10, 00, 000/- already made by the Appellant is to be adjusted against the reduced penalty amount. The confiscation of US$ 8200 under Section 63 of FERA for contravention of Section 9 (1) (a) r/w 64 (2) of FERA is not intervened with. We set aside the Impugned Order with respect to the Appellant in so far as the charges have been invoked against him in SCN II dated 11.06.1996. The amount of pre-deposit of Rs. 1, 70, 000/- made on 14.05.2018 with the Respondent Directorate is to be refunded within three months.

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• PMLA

• 2024 (7) TMI 115
  Money Laundering - amassing substantial assets through corrupt and illegal means - seeking issuance of necessary directions including ad-interim ex-parte order restraining the respondent from contemplating any proceedings including criminal proceedings against the petitioner - HELD THAT:- The Hon ble Apex Court in case of Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT] has held that offence of money laundering can be a continuing offence, irrespective of the date and time of commission of scheduled offence. It has also been held that the criminal activity may have been committed before the same had been notified as scheduled offence under PMLA, but if a person has indulged in or continues to indulge directly or indirectly in dealing with proceeds of crime, derived or obtained from such criminal activity even after it has been notified as scheduled offence, such person may be liable to be prosecuted for offence of money laundering under PMLA. In response to the aforesaid ratio laid down by the Hon ble Apex Court, the argument of the petitioner is that a review petition titled Karti P. Chidambaram v. Directorate of Enforcement [ 2022 (8) TMI 1373 - SUPREME COURT] has been filed before the Hon ble Apex Court for review of the judgment in Vijay Madanlal Choudhary. However, this argument can be of no help to the petitioner as far as instant applications seeking stay of proceedings are concerned since as on date, the question of law stands answered by the three-judge Bench of the Hon ble Apex Court and even though review of the said judgment is pending, no direction has been passed by the Hon ble Apex Court, nor has the judgment been stayed. Thus, the proposition of law laid down by the Hon ble Apex Court shall be binding upon this Court. Considering the aforesaid observations of the Hon ble Apex Court, and the fact that Section 13 of PC Act is a scheduled offence under PMLA, which has not been declared as unconstitutional or violative of any fundamental right by any court of law, this Court is of the opinion that the contention raised on behalf of petitioner that trial court proceedings in this case should be stayed since continuation of the same would amount to double jeopardy is also devoid of any merit. This Court finds no reason to allow the present applications seeking stay of trial court proceedings - Application dismissed.

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• 2024 (7) TMI 114
  Period for which property can be retained - order passed by the Adjudicating Authority beyond a period of more than 180 days given under Section 20(3) of PMLA, 2002 - constitution of the Adjudicating Authority. Period for which property can be retained - order passed by the Adjudicating Authority beyond a period of more than 180 days given under Section 20(3) of PMLA, 2002 - HELD THAT:- Section 20(1) provides that if property is seized or frozen, it may continue to remain frozen or seized for a period not exceeding 180 days from the date the property was seized or frozen - In the instant case, the impugned order was passed on 22.08.2022 while the freezing of the amount of FD and bank account was on 05.11.2021. Thus, the impugned order was passed by the Adjudicating Authority beyond the period of 180 days. The fact, however, remains that due to Covid-19, the Apex Court excluded the period for the purpose of limitation and even termination of proceedings till 28.02.2022 in the Suo Motu Writ Petition No. 3/2020 decided on 10.01.2022. The period otherwise started from 15.03.2020. In view of the above, the period till 28.02.2022 cannot be counted for termination of the proceedings. The period has to be excluded from 15.03.2020 till 28.02.2022. Delhi High Court in the case of Vikas WSP Ltd [ 2021 (1) TMI 1161 - DELHI HIGH COURT ] set aside the order of the Adjudicating Authority passed after 180 days on the ground that the Apex Court has excluded the period for the purpose of limitation for taking remedies in the courts by the litigants and not for the extension of the period for termination of proceedings. The period from 15.03.2020 to 28.02.2022 is excluded for computation of 180 days as per the judgment of the Apex Court in Suo Motu Writ Petition [ 2022 (1) TMI 385 - SC ORDER ] - the issue is decided against the appellant and in favour of the respondent. Constitution of the Adjudicating Authority - HELD THAT:- The Calcutta High Court in the case of R.P. Infosystems Ltd. Vs. Adjudicating Authority [ 2023 (8) TMI 1051 - CALCUTTA HIGH COURT ] held that even a single member bench of the adjudicating authority is competent to adjudicate any matter under the provisions of the Act of 2002. In a recent case of Directorate of Enforcement vs. Karvy India Realty Limited [ 2024 (2) TMI 732 - TELANGANA HIGH COURT ], Telangana High Court also held that the powers under Section 6 of the Act of 2002 can be exercised by the Adjudicating Authority comprising of single member. There are no merit in the appeal and accordingly it is dismissed.

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• Service Tax

• 2024 (7) TMI 113
  Levy of service tax - technical inspection and certification agency service - Quality Assurance Charges for testing rifles - period from 2006 07 to 2009 2010 - HELD THAT:- The legal issue has been examined in detail by the Hon ble Jammu and Kashmir High Court in M/S. COMMANDANT, QA AND PROOF VERSUS C.C.E., BHOPAL [ 2017 (7) TMI 299 - CESTAT NEW DELHI] where it was held that there can be no service tax liability on the charges collected by the appellant. Hence, there is no question of interest payable by them. The impugned order is set aside and the appeal is allowed. There are no hesitation in setting aside the impugned order and allowing the appeal - appeal allowed.

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• 2024 (7) TMI 112
  Service tax liability on TDS amount - royalty payments made to the foreign company - non-payment of service tax on TDS portion of the royalty amount retained - HELD THAT:- Prima facie there does not appear to be a bar on tax being a part of assessable value. The Hon ble Apex Court (5 judges) in Jain Bros. Others vs The Union Of India Others [JAIN BROTHERS AND OTHERS VERSUS UNION OF INDIA AND OTHERS [ 1969 (11) TMI 1 - SUPREME COURT] ], a case pertaining to Income Tax, held that If any double taxation is involved the legislature itself has, in express words, sanctioned it. It is not open to any one thereafter to invoke the general principles that the subject cannot be taxed twice over. It is found that the TDS paid/ deposited to the government exchequer by the appellant arises out of a statutory liability. In the normal course TDS cannot be held to be a consideration for the service unless specifically mandated/ deemed by law - the contention of the Appellant that the amount would not be part of the consideration for the taxable services received by them as per Section 67(1)(a) of the Finance Act, 1994 in the absence of the legislature itself sanctioning such a provision, mandating double taxation, in the Act, agreed upon - the service tax is not payable on the TDS paid by the appellant on behalf of the foreign service provider. The issue is no longer res integra as it has already been decided by the Tribunal in the appellants own case and in the case of ADANI BUNKERING PVT. LTD VERSUS COMMISSIONER OF C.E., AHMEDABAD-II [ 2024 (1) TMI 984 - CESTAT AHMEDABAD] wherein the Tribunal has held that TDS deposited to the Income Tax Department in relation to the payment made to the foreign service provider over and above the invoice value of the services, is not liable to service tax. The appellant is not liable to pay service tax on the TDS paid by them on behalf of the foreign service provider - the demand confirmed in the impugned order is not sustainable - the impugned order is set aside - appeal allowed.

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• 2024 (7) TMI 111
  Classification of services - Manpower supply service or cleaning services - supply of manpower to M/s. HLL in terms of Agreements entered into by him with them for painting, cleaning, civil works, carpentry works, loading and unloading - burden of proof - HELD THAT:- Classification of services is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify a service under a particular category different from that claimed by the assessee, the Department has to adduce proper evidence and discharge the burden of proof. The judgments of the Hon ble Supreme Court in UNION OF INDIA VERSUS GARWARE NYLONS LTD. [ 1996 (9) TMI 123 - SUPREME COURT] , HPL CHEMICALS LTD. VERSUS CCE, CHANDIGARH [ 2006 (4) TMI 1 - SUPREME COURT] , PUMA AYURVEDIC HERBAL (P) LTD. VERSUS COMMISSIONER OF C. EX., NAGPUR [ 2006 (3) TMI 141 - SUPREME COURT] , although rendered in the case of classification under the Central Excise Act is also relevant for classification of a service under the Finance Act 1994. It is found that no test has been applied to determine the relationship of the service provider and the workmen being one between master and servant (Maintenance and Repair) or between supplier and recipient of service being between principal to principal, (Manpower Recruitment). The contract between the parties have also not been examined in detail and the relationships between the parties brought out nor has the intention or essential character of the contract been delineated and discussed. Revenue has not proved its case regarding the true nature of the disputed activity. Hence the question of examining the correctness of the extended period invoked or imposition of penalty does not arise. There are no hesitation in setting aside the impugned order and allowing the appeal - appeal disposed off.

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• 2024 (7) TMI 110
  Applicability of the time limit as per section 11B read with section 83 of the Finance Act 1994, for a refund filed under N/N. 4/2004-ST dated 31/03/2004 - adopting the procedure under N/N. 9/2009-ST dated 03/03/2009 - non-availability of list of approved services from the approval committee along with the refund claim as per Notification No. 9/2009-ST dated 03/03/2009. Applicability of the time limit as per section 11B read with section 83 of the Finance Act 1994, for a refund filed under N/N. 4/2004-ST dated 31/03/2004, on 30.9.2009, for the period October 2008 to 02.03.2009, by adopting the procedure under N/N. 9/2009-ST dated 03/03/2009 - HELD THAT:- The notification gives unconditional exemption to taxable services provided to a developer/ SEZ unit. Hence any excess paid duty can be claimed as a refund under section 11B within the time limit stated in the section. Even if the provisions of notification no. 9/2009-ST dated 03/03/2009 is (incorrectly) sought to be applied to the claim for the period prior to 03/03/2009 and the claim treated as time barred in the light of the six months time limit set by the notification, it will not be legally correct - In the light of the judgment of Supreme Court in SONY INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CUSTOMS [ 2014 (4) TMI 870 - DELHI HIGH COURT ] clarifying the legal position, it is clear that a period of limitation mandated through a notification cannot prevail over the statutory period - there are no error in the impugned order and uphold the same. Non-availability of list of approved services from the approval committee along with the refund claim as per N/N. 9/2009-ST dated 03/03/2009, (from 03/03/2009 upto June 2009), which is a mandatory requirement as per the notification - HELD THAT:- It is found that the respondent is silent about the same. The said condition is a mandatory one affecting the essence or substance of the said notification granting exemption. A Constitution Bench of 5 Judges in the case of CCE VERSUS M/S HARI CHAND SHRI GOPAL [ 2010 (11) TMI 13 - SUPREME COURT] held that A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. It is found that detailed procedures laid down in the notification are to curb the diversion and misutilization of goods which are otherwise taxable. Hence as stated in the Apex Courts judgement above it is essential for the respondent to show compliance. Unfortunately, the impugned order and the reply filed by the respondent are silent on this aspect - a substantive benefit should not be denied without giving an opportunity to show that they have complied with the said condition of the notifications or not - it is found proper to remand the matter to the lower authority to examine this matter alone and decide the issue on merits. The applicability of the time limit as per section 11B or a refund claim governed by Notification No. 04/2004-ST for the period up to 02/03/2009 accepted and impugned order upheld - matter remanded back to the Original Authority for de novo adjudication - appeal disposed off by way of remand.

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• 2024 (7) TMI 109
  Classification of services - Renting of Immovable Property Service or Business Support Service - providing services of screening of films, in his multiplex, on revenue sharing basis, to the distributors of the films - HELD THAT:- From the perusal of the show cause notices which were issued to the appellant, it is quite evident that these show cause notices have been issued on the basis of the provisions of the Finance Act, 1994 as they existed before 01.07.2012, i.e. prior to introduction of levy of service tax on the services other than those specified in the negative list or exempted. It is quite evident the show cause notice has not made any averment in respect of the definition of Service as per Section 65 B (44) as introduced by the Finance Act, 2012 or about the negative list - there are no hesitation in holding that the impugned order has travelled beyond the show cause notice while upholding the demand made. It is noted that issue for the period post 01.07.2012, was considered by the Mumbai Bench in case of M/S. INOX LEISURE LTD. VERSUS COMMISSIONER OF SERVICE TAX-V, MUMBAI [ 2022 (3) TMI 1256 - CESTAT MUMBAI] has held that The Department alleged that the agreement was for renting of immovable property as defined under section 65(90a) of the Finance Act. This contention was not accepted by the Tribunal and it was observed that the appellant did not provide any service to the distributors nor the distributors made any payments to the appellant as consideration for the alleged service. In fact, it was the appellant who had paid money to the distributors for the screening rights conferred upon the appellant. There are no merits in the impugned order and the same is set aside - appeal allowed.

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• 2024 (7) TMI 108
  Wrongful availment of CENVAT Credit and utilization of the same - refund of excess service tax paid - Rule 6(4)(A) of Service Tax Rules, 1994 - HELD THAT:- It is found from SCN and original order that there was case of wrong availment of CENVAT Credit. Even the show cause notice proposed Service Tax short paid, there was no proposal in the show cause notice of wrongly availed cenvat demand. In normal course demand of cenvat is raised under Rule 14 of CENVAT Credit Rules which is not the case here. The adjudicating authority has also decided the matter considering the adjustment of excess paid Service Tax. Therefore, it is apparent from the grounds of appeal that the appeal filed by the revenue is absolutely on wrong footing. Therefore, the order of the commissioner appeal also passed assuming the issue is of wrong availment of CENVAT Credit is completely vitiated and not maintainable on this ground alone. Moreover, on the facts of the case there is excess payment of Service Tax on the same service therefore the excess amount of Service Tax paid either by service recipient or by the appellant either needs to be refunded or the same may be allowed as adjustment in the future tax liability. The appellant is entitled either for refund of 50% for excess paid Service Tax or for adjustment against the excess paid towards the future tax liability. As result, the adjustment made by the appellant of excess paid service tax towards the subsequent tax liability is absolutely in order and correct. There are no error in the order passed by the Adjudicating Authority. However, the impugned order passed by the learned Commissioner (Appeals) suffers from apparent error and illegality. Hence, the same is not sustainable - the impugned order is set aside - appeal allowed.

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• 2024 (7) TMI 107
  Classification of service - Cargo Handling Services or Port Services - handling of Sulphuric Acid - extended period of limitation - HELD THAT:- From the cogent reading of the meaning of the service pre post of 01.07.2012 important ingredients is that if any activity provided by one person to another but only for the considering the said activity will amount to service and then only service tax can be charged on such consideration. In absence of any consideration, fact in the present case, no service tax can be charged on a national value assumption by the Department. This issue has been considered by this Tribunal in the case of Commissioner of CGST and Central Excise vs. Edelweiss Financial Services Ltd. [ 2022 (2) TMI 1359 - CESTAT MUMBAI] which was upheld by the Apex Court [ 2023 (4) TMI 170 - SC ORDER] , where it was held that The reliance placed by Learned Authorised Representative on the non-monetary benefits which may, if at all, be of relevance for determination of assessable value under section 67 of Finance Act, 1994 does not extend to ascertainment of service as defined in section 65B(44) of Finance Act, 1994. Consideration is the recompense for the contractual undertaking that authorizes levy while assessable value is a determination for computing the measure of the levy and the latter must follow the former. In the present case admittedly neither any service was provided by the appellant to the HIL nor any consideration was received. Therefore accordingly the ingredients of Section 66 and 67 of the Finance Act, 1994 are not available for charging service tax. The appellant has also relied upon on larger bench judgment of this tribunal as in the case of Commissioner of Service Tax Vs. Bhayana Builders P Ltd. [ 2018 (2) TMI 1325 - SUPREME COURT] as per which was upheld by the Supreme Court wherein the relevant para of the said decision from the above judgment also settled that when involvement of any considering the service tax cannot be charged. Since no consideration is involved in the present case, the Service Tax demand on the notional will not sustain - the impugned order set aside - appeal allowed.

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• 2024 (7) TMI 106
  Classification of service - Commercial or Industrial Construction Services or not for the period prior to 01.07.2012 - rendering construction services to Department of Atomic Energy, M/s Hindustan Aeronautics Limited and M/s Bharat Earth Movers Limited - HELD THAT:- It is brought out from the facts that the assessee has rendered construction services to M/s. HAL and M/s. Bharath Earth Movers Ltd. The types of work executed have been listed in para 3.2 of the show cause notice dated 23.04.2012. on perusal of these work orders it is very much clear that the construction works are composite in nature involving both supply of goods as well as rendition of services. Moreover, for quantifying the demand, the department had allowed 67% abatement as per Notification 1/2006 which establishes that the work executed are composite in nature. As per the decision rendered by the Apex court in the case of CCE Vs. Larsen Toubro [ 2015 (8) TMI 749 - SUPREME COURT] and followed by Real Value Promoters Pvt Ltd., [ 2018 (9) TMI 1149 - CESTAT CHENNAI] the demand of service tax for rendering construction service which are composite in nature can be only under works contract services. In the present case, the demand raised under CICS, therefore cannot sustain. The decision in the case of Real Value Promoters was applied by the Tribunal in the case of Jain Housing Construction Limited versus the Commissioner of Service Tax, Chennai [ 2023 (2) TMI 1044 - CESTAT CHENNAI] whereby the demand raised under Construction of Residential Complex services for the period prior to 01.07.2012 was set aside - Though the department filed appeal against the said order before the Hon ble Apex Court, the decision of the Tribunal was sustained by Hon ble Apex Court by dismissing the department appeal as reported in [ 2023 (9) TMI 816 - SC ORDER] . After appreciating the facts, and following the above decisions it is held that the demand raised under CICS for the disputed period cannot sustain and requires to be set aside. The impugned order is set aside - appeal of assessee allowed.

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• Central Excise

• 2024 (7) TMI 105
  Input tax credit on furnance oil - to be allowed on proportionate basis or respondent-assessee should be directed to pay 8% on the total value of the exempted supply as per Rule 6(3) of Cenvat Credit Rules, 2004 - HELD THAT:- The Tribunal vide its order dated 18th July 2006 has set aside the Order-In- Original (O-I-O) which had directed respondent-assessee to make payment of 8% of the sale price of the exempted final products. It is against the said Tribunal s order, appellant-revenue is in appeal before this Court. Both the parties agree that the Tribunal, in 2006, did not have the benefit of the decision of the Apex Court in the case of THE COMMISSIONER OF CENTRAL EXCISE, VADODARA-II VERSUS GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. [ 2019 (12) TMI 430 - SUPREME COURT] and, therefore, they have no objection if the impugned order is set aside and remanded back to the Tribunal for considering the issue afresh, keeping open all the contentions of both the parties. In view thereof, the said submission is accepted by setting aside the impugned order of the Tribunal and remanding the same for denovo consideration by the Tribunal. Since the matter pertains to issues that developed almost 18 years ago, the Tribunal is requested to dispose the appeal at the earliest and preferably by 30th October 2024 after giving opportunity of hearing to both parties. Appeal disposed off.

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• 2024 (7) TMI 104
  Pre-deposit or not - duty continued to be paid by the appellants, under protest, during the pendency of the appeal - applicability of provisions of Section 11B and the doctrine of unjust enrichment - Eligibility to claim interest on refund of the amount duty paid or deposited. Pre-deposit or not - duty continued to be paid by the appellants, under protest, during the pendency of the appeal - HELD THAT:- The payment of total duty and penalty confirmed was the general rule while grant of stay of the same was an exception subject to the discretion of appellate authorities and the conditions that the appellants may put as deemed fit. After 06.08.2014, the filing of appeals was subject to payment of an amount equal to 7.5 percent or 10 percent, of the duty/ penalty demanded as the case may be. However, there is no provision to discriminate against an appellant who chooses to deposit duty in toto in comparison to the appellant who pays an amount equal to 7.5 percent or 10 percent as the case may be. It appears that before 06.08.2014,the payment of total duty demanded, during the pendency of the appeal, to exercise the right to appeal, would not take away the character of being a deposit from the sums deposited during the pendency of the appeal, under Section 35F or for that matter Section 35L as both fall under Chapter VIA. CBEC vide Circular No 984/08/2014-CX, dated 16.09.2014, issued vide F. No.390/Budget/1/2012-JC clarified that any payment made during investigation shall be counted as part of pre-deposit during the filing of appeal in Central Excise Service Tax matters. The issue as to whether the amount of duty deposited during the pendency of appeal amounts to pre-deposit was deliberated by tribunal and Courts in several Cases. Hon ble Supreme Court in the context of the Maharashtra VAT Act, 2002, in the matter of VVF (India) Ltd Vs State of Maharashtra, [ 2021 (12) TMI 477 - SUPREME COURT] , held that amount pre-deposited under protest prior to assessment order was required to be included in computing amount of mandatory pre-deposit. Hon ble High Court of Gujarat held in the case of C.C. (Preventive)Vs Ghaziabad Ship Breakers Ltd [ 2010 (10) TMI 151 - GUJARAT HIGH COURT] that amount deposited during the pendency of an appeal before the Hon ble Supreme Court would squarely fall within the ambit the Section 129E of the Customs Act, 1962. Section 129E of the Customs Act, 1962 is parimateria with the Section 35F of Central Excise Act,1944. Hon ble High Court held that it is an undisputed position that the amount in question had been deposited by the respondent during the pendency of the appeal before the Supreme Court. In the circumstances, it is apparent that the amount so deposited would squarely fall within the ambit of Section 129-E of the Act and has to be treated as pre-deposit. Thus, the contention raised on behalf of the appellant that the amount has been paid by way of duty and not pre-deposit, being contrary to the provisions of section 129E of the Act, does not merit acceptance. Thus, it appears that the issue whether amounts paid during the pendency of appeal takes the colour of a pre-deposit under Section 35F of the Central Excise, Act 1944, or for that matter Section 35N, has been settled for the period before the amendment of Section 35F w.e.f. 06.08.2014. After 2014, the appellants are required to pay a certain percentage (7.5% or 10% as the case may be) of duty or penalty as the case may be and there is no such requirement to deposit entire duty for preferring an appeal. However, in the instant case, the appeals are filed before the amendment. CBEC circular No 984/08/2014-CX dated 16th September 2014 clarifies that the amended provisions apply to appeals filed after 6th August, 2014 - any amount deposited during the pendency of an appeal before the High Court or the Supreme Court would also be by way of deposit under Section 129E of the Act and has to be treated accordingly. The amounts, deposited/paid by the appellants, during the pendency of the appeals, have to be considered as a mandatory pre-deposit made under Section 35F - The legislative intent that there can be two types of deposit, i.e. of full amount payable under main proviso to section 35F and partial payment as decided by Commissioner (Appeals) or CESTAT, is made clear by the introduction of Section 35F, w.e.f. 10.05.2008, so as to provide for the payment of interest in respect of deposits made in pursuance of deposits made only under First proviso to Section 35F. This difference was obliterated by the amendment w.e.f. 06.08.2014 prescribing a uniform pre-deposit, under Section 35F, as percent of duty or penalty confirmed, as a pre-condition for appeal and providing for payment of interest, under Section 35FF, for all deposits made under 35F. Whether the provisions of Section 11B and the doctrine of unjust enrichment are applicable to such payments? - HELD THAT:- In the instant case, the amount was deposited by the appellants consequent upon the order passed by the Commissioner (Appeals); as both CESTAT and Hon ble Apex Court declined to grant stay of the amounts involved, the appellants continued to pay the amount under protest, on the clearances of clinker made by them for captive consumption. Till 2015, the matter was under litigation and therefore, the amount deposited, to exercise the right to appeal, has to be treated as deposits made under Section 35F and Section 35L - The question involved in the instant case is as to whether the refund of pre-deposit is subject to the rigors of unjust enrichment and as to whether the presumption that incidence of duty has been passed on is applicable and not the question of equity where the passing on of incidence is established. The amounts deposited by the appellants, during the pendency of the appeal, are to be considered as a pre-deposit for the purposes of Section 35F and the return of which is not governed by the rigors of Section 11B - The certificate was issued after going through the accounts of the appellants and after satisfying himself about the truthfulness of the same. A certificate given by a professional cannot be dis-regarded unless it is proved to be blatantly wrong and contrary to the facts and evidence available on the hand. Thus, the certificate given by the Cost/Chartered Accountant has an evidentiary value and cannot be rejected in a half-handed manner. The impugned order having been issued without giving reasons as to why the same has not been taken into account cannot be held to be legally sustainable. The presumption under Section 11B being a rebuttable one, such rebuttal put forward by the appellant is required to be considered in the facts and circumstances of the case and the nature of the product - the amount paid by the appellants is a pre-deposit under Section 35F and as such the same is to be returned without subjecting the same to the provisions of Section 11B. Payment of interest on the delayed payment of refund of pre-deposit - HELD THAT:- A perusal of the provisions of Section 35FF gives a clear understanding that w.e.f. 10.05.2008; a provision has been made to grant interest on the refund of amounts deposited under the proviso to Section 35F. The wordings used in the new Section 35FF, makes it unambiguously clear that a provision to pay interest is made in respect of amounts deposited in terms of the orders passed by the Commissioner (Appeals) or the Appellate Tribunal (hereinafter referred to as the appellate authority), under the first proviso to section 35F.The Section as it stood before 06.08.2014 did not provide for payment of any interest on the deposits made under the main Section 35F. However, it is provided w.e.f. 06.08.2014 that interest shall be sanctioned on the delayed refund of the deposit made under Section 35F - w.e.f. 06.08.2014, the amended Section 35FF provides for payment of interest on the delayed refund of amount deposited under Section 35F irrespective of the fact whether such payment was under main Section or first proviso of Section 35F. Therefore, the appellants are eligible for interest on the delayed refund of amounts deposited by them after 06.08.2014. Appeal allowed in part.

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• 2024 (7) TMI 103
  Classification of Goods - mixture of Melamine Formaldehyde Resin and Cardanol Phenolic Formaldehyde used as Adhesive/Glue/Resin for the manufacture of final product - classifiable under Chapter 35-06 as claimed by the appellant or under Chapter 39-09 as alleged by the Department? - time limitation. Classification of Goods - HELD THAT:- This issue is no more res integra and has been settled by various decisions of the Tribunal wherein the Tribunal has consistently held that the mixture of items used as adhesive/glue/resins for the manufacture of laminates is held to be classifiable under Chapter heading 35-06. This issue has been examined and considered in various decisions relied upon by the appellant, reliance can be placed in VIRGO INDUSTRIES, WOOD STOCK LAMINATES PVT LTD, PUNJAB LAMINATES PVT LTD VERSUS COMMISSIONER OF C.E., CHANDIGARH-I [ 2019 (12) TMI 714 - CESTAT CHANDIGARH ] wherein the identical issue was involved and the Tribunal has held that the mixture of aforesaid items used as Glue/Resin/Adhesive in the manufacture of laminates are classifiable under chapter heading 35-06. It is found that no market inquiry was conducted with reference to the goods in question in order to establish as to whether the mixture is capable of being bought and sold. Further, the Revenue has not been able to establish in the case that the appellant has been either purchasing or selling the main items in the market. The Marketability of the product is an essential ingredients and criteria to hold that a product is dutiable/excisable and thus onus is on the Revenue to prove that the product is marketable or captatively being consumed. Time Limitation - HELD THAT:- Thus, substantial demand upto December, 2010 is beyond limitation specially the fact of used of Melamine Formaldehyde was already in the knowledge or Department on 24.11.2006 the show cause notice was issued after the expiry of normal period of limitation when all the facts were in the knowledge of Department in 2006, the declaration was filed on 24.011.2006 containing the details of finished goods as well as raw materials including Melamine Formaldehyde Phenol etc., as well as verification of units in the year 2006 itself - the substantial part of the demand upto December, 2010 is barred by limitation. The impugned order is not sustainable in law - Appeal allowed.

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• CST, VAT & Sales Tax

• 2024 (7) TMI 102
  Levy of Entry Tax under the Assam Entry Tax Act, 2008 - PET Reisin - PVC Granuels - challenge on levy on the ground that the said items are nowhere mentioned in the Schedule attached to the Assam Entry Tax Act, 2008 to make the same taxable. Whether PET Reisin and PVC Granuels items can be considered as chemicals as stipulated at entry No. 51 of the Schedule to the Assam Entry Tax Act, 2008 and to make the same taxable or not? HELD THAT:- It is well settled that when a taxing statute does not give statutory meaning to a word, that word should be given its popular meaning, i.e. the meaning which is attributed to it in common parlance by people who daily deal with it as consumers or dealers in the market - It is seen that though the Appellate Authority and the Revisional Authority have accepted and held that the items PET Reisins and PVC Granuels are not found in a chemical shop or a chemists shop, the said Common Parlance Test is rejected in the present cases. It would not be that if the items PET Reisins and PVC Granuels are not found in a chemical shop or a chemists shop, ipso facto the common parlance test would apply. However, since the authorities have not made any attempt to apply the common parlance test in the attending facts of the matter as required to be done, such action cannot be countenanced. In the present case, no definition is provided to Chemicals in the Assam Entry Tax Act, 2008. Therefore, for ascertaining the correct meaning of a fiscal entry the same should be construed as understood in common parlance or trade or commercial parlance. In COLLECTOR OF CENTRAL EXCISE, KANPUR VERSUS KRISHNA CARBON PAPER CO. [ 1988 (9) TMI 50 - SUPREME COURT] , the Hon ble Supreme Court has held that it is well-settled that where no definition is provided in the statute itself for ascertaining the correct meaning of a fiscal entry, reference to a dictionary is not always safe. The correct guide in such a case is the context and the trade meaning. The trade meaning is that which is prevalent in that particular trade where such goods are known or traded if a special type of goods is the subject- matter of a fiscal entry, then that entry must be understood in the context of that particular trade, bearing in mind that particular word where, however, there is no evidence how the particular goods are understood in the particular market dealing with those goods then the meaning following from the particular statute at the particular time would be the decisive test. It is well-settled, as mentioned before, that where no definition is provided in the statute itself, as in this case, for ascertaining the correct meaning of a fiscal entry, reference to a dictionary is not always safe. The correct guide, it appears in such a case, is the context and the trade meaning. Coming back to the present cases, under the Assam Entry Tax Act, 2008, at Entry 51, Chemicals have been specified, however, at Entry- 55e, 55f and 55g it specified the items Caustic Soda, Sodium Silicate, and Alum, which would be mean and understood as Chemicals. As no mentioned is made of PET Reisin and PVC Granuels and no definition of Chemical is given in the Statute, same have to be therefore, interpreted that PET Reisin and PVC Granuels are not Chemicals. The common parlance/ user test would be applied. Thus, the items PET Reisin and PVC Granuels cannot be considered as Chemicals under Entry 51 of the Schedule attached to the Assam Entry Tax Act, 2008 - this court is persuaded to take a considered view that the items PET Reisin and PVC Granuels would not be classified or considered as Chemicals under Entry 51 of the Schedule attached to the Assam Entry Tax Act, 2008 by applying the common parlance/ user test. The impugned assessment orders by the Assessing authority and impugned orders of the Appellate and revisional Authority are set aside and quashed on being not sustainable - Petition allowed.

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• 2024 (7) TMI 101
  Disallowance of petitioner s claim for deduction from the aggregate selling price under Section 5(2) of the Central Sales Tax Act, 1956 - privity of contract - HELD THAT:- In order to decide whether the provisions of Section 5(2) of the said Act can be made applicable it is not necessary that there should be a privity of contract between the foreign supplier and the ultimate consumer in India. Section 5(2) of the said Act does not prescribe that there has to be a privity of contract between the end user and the foreign supplier. The aforesaid issue has been considered by the Hon ble Supreme Court in the case of Commissioner of Delhi Value Added Tax [ 2016 (4) TMI 534 - SUPREME COURT ] wherein the Hon ble Supreme Court had clearly recorded that sale in course of imports do not require privity of contract between the foreign supplier and the ultimate consumer in India. In the judgment delivered by the Hon ble Delhi High Court in the case of Abb Limited [ 2012 (10) TMI 185 - DELHI HIGH COURT ], it has been observed that what is relevant consideration was to ascertain whether the movements of goods were integrally connected with the contract for their supply. It would appear from Section 5(2) of the said Act that a sale or purchase of goods shall be deemed to take place in course of import of goods into the territory of India only if, the sale or purchase occasioned such import. This aspect needs consideration on exchange of affidavits especially when a finding has been returned by the Board that the import is not inextricably bound up with local sale. The petitioner having been able to make out a prima facie case, the writ petition shall be heard. On the question of grant of interim protection, taking into account that the matter pertains to revenue and that on the petitioner s own showing a sum equivalent to 5% of the taxable turnover working out to be Rs.1,68,53,080/- has been taxed under the said Act - Petition allowed by way of remand.

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• Indian Laws

• 2024 (7) TMI 100
  Non-empanellment of Chartered Accountant s Firm (CA Firm) as per a Notice Inviting Tender (NIT) - prescription of 5 year certificate is present or not - specific ground on which the petitioner s firm has been disqualified is the fact that they have not proved that they had a Branch Office within the State of Bihar for the last 5 years - HELD THAT:- The petitioner refers to Annexure-P2 to establish that the petitioner was working for 5 years within the State of Bihar. Annexure-P2 indicates the name of the firm and also its Head Office address which is at Guwahati. The year of establishment is said to be on 13.03.1961 and the same is continuing as a partnership firm. The constitution of the firm under GST IAN is said to be 01.01.2019 but specifically with respect to the Head Office. The address of the Branch Office at Patna is also shown in the order but, however, there is nothing to indicate that as per ICAI Records the Branch Office was situated continuously in Bihar since more than 5 years. Annexure-D produced along with Supplementary Counter Affidavit dated 29.11.2023 indicates the specific reason for disqualification of the petitioner who figures at Serial No. 94. The reason stated is Proposal has been not evaluated due to last five year FCC has been not attached. The petitioner obviously had produced a Firm Constitution Certificate evidencing their presence in Bihar for only the past one year. There are no reason to entertain the writ petition and the same is dismissed.

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