TMI Tax Updates - e-Newsletter
July 6, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Central Excise

Articles

1. SEBI INTERMEDIARIES

   By: DR.MARIAPPAN GOVINDARAJAN

2. Rectification application rejected due to non-cooperation by assessee during assessment

   By: Bimal jain

3. Personal hearing cannot be denied without confirming from assessee

   By: Bimal jain

4. MODES OF RECOVERY UNDER GST LAW (PART-1)

   By: Dr. Sanjiv Agarwal

5. Goods and conveyance detained will be released upon payment of penalty and furnishing of a bank guarantee

   By: Bimal jain

News

1. Webinar on ‘DRC-01B online functionality for liability mismatch’

Notifications

SEBI

1. SEBI/LAD–NRO/GN/2023/137 - dated 3-7-2023 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA (ALTERNATIVE DISPUTE RESOLUTION MECHANISM) (AMENDMENT) REGULATIONS, 2023

2. SEBI/LAD-NRO/GN/2023/136 - dated 3-7-2023 - SEBI

Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2023

SEZ

3. S.O. 2937(E) - dated 4-7-2023 - SEZ

SEZ for IT (Knowledge Park) at Village Gaudakashipur and Arisal, Tehsil: Jatni, District: Khurda in the State of Odisha - denotification of 56.078 hectares from the above Special Economic Zone

4. S.O. 2936 (E) - dated 4-7-2023 - SEZ

Special Economic Zone for IT and ITES in the State of Karnataka - area of 1.530 hectares denotified at Devarabeesanahalli, Bhoganahalli and Doddakannahalli Villages, Varthur Hobli, Bangalore, in the State of Karnataka

5. S.O. 2938 (E) - dated 30-6-2023 - SEZ

Kandla Special Economic Zone Authority - Name of members notified - Amendment in Notification No. S.O. 1844(E) dated 10.05.2021

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/DDHS-PoD-2/P/CIR/2023/113 - dated 5-7-2023

Amendments to guidelines for preferential issue and institutional placement of units by a listed InvIT

2. SEBI/HO/DDHS-PoD-2/P/CIR/2023/114 - dated 5-7-2023

Amendments to guidelines for preferential issue and institutional placement of units by a listed REIT

Customs

3. Instruction No. 19/2023 - dated 4-7-2023

Implementation under India-Japan CEPA

4. NOTICE OF WITHDRAWAL OF DETENTION NOTICE - dated 12-6-2023

Withdrawal of 'Detention Notice' dated 15.05.2023 issued to the exporter M/s. P2P Services Works, (IEC-0304012246) -Reg.

5. PUBLIC NOTICE NO. 03/2023 - dated 22-5-2023

Zonal Jurisdiction for Filing of AEO applications – reg.

6. PUBLIC NOTICE NO. 30 / 2023 - dated 11-4-2023

Transmission of Shipping Bills from Systems’ backend to DGFT for MEIS benefits in certain cases -reg.

Highlights / Catch Notes

GST

• "Kandi Rave" GST Classification Reviewed: Unmanufactured Tobacco in 30-35 kg Bags Subject to 28% GST Rate.

  Case-Laws - AAR : Classification of goods - Kandi Rave - to be classified as unmanufactured tobacco without lime tube or not? - Since the applicant proposes to supply/supplies the said Kandi rave’ to their customers in 30-35 kg bags, without any brand name, labeling, etc, it is held that the applicant would be/is liable to pay GST 28% [14 % CGST and 14 % SGST] - AAR
  Visit to Get Source

  ---

• GST Exemption Denied for Loading and Unloading of Imported Pulses; Not Considered Agricultural Produce Service.

  Case-Laws - AAR : Exemption from GST - services relating to agriculture produce - service of loading and unloading of imported unprocessed ‘toor’ and ‘whole pulses’ and ‘black matpe’ - For the purpose of agricultural produce, the processes and services that are applied till the goods are at the farmer's hand to make it marketable for primary market is to be considered. Any services supplied for loading and unloading as supplied by the applicant after the goods left the primary market do not qualify for exemption - AAR
  Visit to Get Source

  ---

• GST Exemption for Wheat Crushing Services: Composite Supply Value Under 25% Qualifies for Relief Under Public Distribution System.

  Case-Laws - AAR : Exemption from GST - Valuation of supply - providing services of crushing wheat provided by the State Government, into fortified atta which in turn is supplied by the State Government through Public Distribution System - the total non-cash consideration for bi-products and gunny bags allowed to flower millers is to be included in value of supply - the value of goods involved in the instant composite supply stands at 23.03% of the total value of supply i.e., it does not exceed 25% of the value of the composite supply. - Benefit of exemption available - AAR
  Visit to Get Source

  ---

• GST Exemption Approved for Milling Food Grains Under West Bengal's Public Distribution System, Goods Value Below 25% Threshold.

  Case-Laws - AAR : Exemption from GST - composite supply of service by way of milling of food grains into flour to Food & Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System - the value of goods involved in the instant supply stands at Rs. 60/- against total value of supply of Rs. 260.48, thereby the value of goods involved in the instant composite supply stands at 23.03% of the total value of supply i.e., it does not exceed 25% of the value of the composite supply. - Benefit of exemption from GST available - AAR
  Visit to Get Source

  ---

• Sewerage Treatment Plant Construction Classified as Works Contract; GST Applied at 18% for Composite Supply.

  Case-Laws - AAR : Classification of supply - works contract or not - supply for construction of a sewerage treatment plant which involves supply of pumps as well as installation and commissioning work - The instant supply qualifies as a composite supply of works contract - liable to GST @18% - AAR
  Visit to Get Source

  ---

Income Tax

• ITAT rules payment for SAP system access not process royalty u/s 9(1)(vi), no income accrual in India.

  Case-Laws - HC : Accrual of income in India - Royalty receipt - consideration received by the Assessee from CPI for the use of the SAP system - the ITAT is correct in holding that the payment made by CPI to the Assessee for accessing the SAP system does not amount to process royalty under Section 9(1)(vi) of the Act. - HC
  Visit to Get Source

  ---

• Deemed Income Added u/s 56(2)(vii)(b) for Property Valuation Difference; No Exemption Available for Assessee.

  Case-Laws - AT : Addition of deemed income u/s 56(2)(vii)(b) - difference in purchase price and stamps authority valuation - Addition made by lower-authorities is mandated by section 56(2)(vii)(b) and in absence of a valid explanation by assessee, the same has to be made, there is no escape route. - Additions confirmed - AT
  Visit to Get Source

  ---

• Assessee Entitled to Section 10AA Deduction Despite Not E-filing Form 56F, Rules CIT(A.

  Case-Laws - AT : Deduction u/s. 10AA - assessee failed in E-filing form 56F along with return of income - CIT(A) has not erred in facts and in law in allowing the claim of the assessee that deduction u/s. 10AA of the Act cannot be denied simply on the ground that the assessee did not e-file form 56F along with the return of income - AT
  Visit to Get Source

  ---

• Revenue Must Prove "Make Available" Condition for Technical Services Fees; Evidence Lacking in Current Case.

  Case-Laws - AT : Fees for technical services (FTS) - Though, the departmental authorities have alleged that the make available condition stands satisfied, however, no material has been brought on record to support such finding. - The burden is entirely on the Revenue to prove that rendition of services by the assessee has made available technical knowledge, knowhow, skill etc. to the service recipient so as to enable the service recipient to utilize such technical knowledge, knowhow, skill etc. independently in future without the aid and assistance of the assessee. - AT
  Visit to Get Source

  ---

• Income from Drawings and Designs Supply Not Taxable in India as Fees for Technical Services.

  Case-Laws - AT : Taxability of an amount received from supply of drawings and designs - Accrual of income in India - Once the income from supply of plant and equipment is held to be not taxable in India, since, the sale transaction was completed outside India, the same logic applies even to the amount received from supply of drawings and designs. - the amount received by the assessee from supply of drawings and designs is not taxable in India as FTS - AT
  Visit to Get Source

  ---

• CIT(A) Deletes Additions: Fair Market Value of Shares Accurately Valued u/s 56(2)(viia)(ii) of Income Tax Act.

  Case-Laws - AT : Addition u/s 56(2)(viia)(ii) - determination of fair market value of shares - Method of valuation - Addition towards difference between FMV and actual amount paid for purchase of shares - CIT(A) deleted the additions - Since the valuation report is based on the method prescribed under the I.T. Rules and since the same has determined the fair market value at Minus 340.56, CIT(A) has rightly followed the same while deleting the addition - AT
  Visit to Get Source

  ---

• Court Rules Against Rejecting Books of Accounts Without Substantial Evidence in Alleged Bogus Purchases Case Over Three Years.

  Case-Laws - AT : Rejection of books of accounts - Estimation of income - bogus purchases - Mere certain discrepancy at the entry gate cannot be a basis of rejection of entire books results for three assessment years, when no other incriminating evidence was find at the time of search. Thus we do not approve the rejection of books of account. - AT
  Visit to Get Source

  ---

Customs

• Court Rules Exporter Entitled to IGST Refund; No Double Benefits from Higher Duty Drawback Detected.

  Case-Laws - HC : Refund of IGST paid in relation to the exports undertaken by it of goods - denial on the ground of claim of duty drawback at Higher Rate - the Petitioner is entitled to a refund of the IGST paid on the exports in question, as it is certain that this is not a case where the Petitioner is availing any double benefit that is of the IGST refund and a higher duty drawback. - HC
  Visit to Get Source

  ---

IBC

• Court Confirms Factoring Agreements as Financial Debt u/s 5(8)(e) of Insolvency and Bankruptcy Code.

  Case-Laws - AT : Initiation of CIRP - Financial Debt or not - Creditors were providing factoring services - Loan against Bill of exchange - the Financial Debt which is covered by Factoring Agreement is clearly covered within meaning of Section 5(8)(e) of the Code and the Financial Creditor was entitled to being recourse - AT
  Visit to Get Source

  ---

• GST Department Ordered to Release Attached Assets for Creditor Payments in Corporate Insolvency Resolution Process.

  Case-Laws - AT : Seeking to release the attachment of the tiles relating to the Corporate Debtor - Attachment of goods by the GST department before initiation of CIRP - The assets, which were attached were still the assets of the Corporate Debtor, which were in the ‘supurdagi’ of the Corporate Debtor. Respondent being unable to recover the amount from the attached assets, the RP has rightly filed the Application seeking a direction for release of the attachment, so that assets can be included in the assets of the Corporate Debtor for payment to the creditors. - Direction for release the attachment issued - AT
  Visit to Get Source

  ---

• Tribunal Rules Physical Review of Register of Members Not Mandatory u/s 59; Appellant's Shareholder Claim Rejected.

  Case-Laws - AT : Status of the appellant - Shareholder or Credit of the Corporate Debtor - A physical perusal of the Register of Members cannot be said to be a mandatory prerequisite for taking recourse under Section 59 of the Act. Be that as it may, this Tribunal is of the considered view that the documentary evidence on record establishes that the money was infused by the Appellant, vide the terms in the MoU, as an ‘Investment’ to be converted into ‘Equity’. - Claim rejected - AT
  Visit to Get Source

  ---

Central Excise

• Remission of Duty Granted for Arson Damage by Workers' Mob Under Unavoidable Incident Rule.

  Case-Laws - AT : Remission of duty - damage due to the arson indulged in by the mob of the workers - From a harmonious reading of the Rule would clarify that when the loss is caused by natural causes or unavoidable accident, the Assessee should be granted remission of duty. Coming to the factual matrix of this case, it is very clear that the arson indulged in by the mob of the workers was absolutely not an act which could have been avoided or controlled by the Management of the Appellant - Benefit of remission of duty allowed - AT
  Visit to Get Source

  ---

Case Laws:

• GST

• 2023 (7) TMI 190
  Blocking the available Input Tax Credit (ITC) without any show cause notice - violation of Rule 86A of the Central Goods and Services Tax Rules, 2017 - creating a negative balance being shown in the Electronic Credit Ledger of the petitioner - authority whatsoever to make such negative balance in the Electronic Credit Ledger. HELD THAT:- Rule 86A of the CGST Rules, 2017 makes a provision that reasons to be recorded in writing for not allowing debit of an amount equivalent to such credit in electronic credit ledger, for discharge of any liability under Section 49 or for claim of any refund of any unutilised amount. It is also envisaged that the Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of the electronic credit ledger no longer exist, allow such debit. In the present case the petitioner has not been furnished with any details much less reasons recorded in writing indicating in regard to the impugned action is the grievance of the petitioner. It is submitted that the impugned action on the part of the respondents is violative of the basic requirements of Rule 86A, and the same would be required to be set aside, being authority as also without jurisdiction. Matter adjourned.

  ---

• 2023 (7) TMI 189
  Classification of goods - Kandi Rave [tobacco waste] - to be classified as unmanufactured tobacco without lime tube or not? - HELD THAT:- HSN notes for tariff item 2401, reproduced supra, covers unmanufactured tobacco in the form of whole plants/leaves in natural state, cured or fermented leaves, whole, stemmed/stripped, trimmed/semi trimmed broken/cut, blended cased with a liquid of appropriate composition mainly to prevent drying and to preserve the flavour. It also covers tobacco refuse eg waste resulting from the manipulation of tobacco leaves, or from the manufacture of tobacco products [stalks, stems, midribs, trimmings, dust, etc). Though the applicant has undertaken the process of crushing tobacco refuse and thereafter mixing it with natural clay water, in terms of the HSN notes, it still remains an unmanufactured tobacco - This is more so because even in terms of section 2(72) of the CGST Act, 2017, which defines manufacture , since no new product emerges post the crushing of tobacco refuse mixing it with natural clay water, we find it appropriate that the product is classifiable under CTH 2401 as unmanufactured tobacco; tobacco refuse - It is held that the supply of applicant of kandi rave is classifiable under 24013000. The applicant has not disclosed the fact that as to whether they are using brand name for their product. The applicant was asked to provide additional submissions on the issue. The applicant, vide his additional submission received on 10.5.2023, has informed the they are not affixing any name or label on the packing, in which the packed goods are sold to their customers in 30-35 kgs bags - The photographs adduced by the applicant depicts that the goods are being sold without any brand name, labelling etc. In view of the foregoing, since the applicant proposes to supply/supplies the said kandi rave to their customers in 30-35 kg bags, without any brand name, labeling, etc, it is held that the applicant would be/is liable to pay GST 28% [14 % CGST and 14 % SGST] in terms of notification No. 1/2017-CT(Rate), Sr. No. 13, Schedule IV.

  ---

• 2023 (7) TMI 188
  Exemption from GST - services relating to agriculture produce - service of loading and unloading of imported unprocessed toor and whole pulses and black matpe - applicability of Sl No. 54(e) of the Notification No. 12/2017-Central Tax (Rate), Sl. No. 24 of notification No. 11/2017-Central Tax (Rate) both dated 28.06.2017 - charging of tax by the agents from applicant is in violation to the Notification No 12/2017 dated 28.06.2017 serial No 3 or not - services in relation to loading and unloading of imported unprocessed toor and whole pulses and black matpe are agricultural produce or not - covered under the circular No 16/16/2017-GST dated 15.11.2017 and the Circular is binding or not? HELD THAT:- The applicant is stated to be acting as a stevedore. In the instant case, the applicant has filed the application seeking an advance ruling whether services relating to loading and unloading of unprocessed toor and whole pulses and black matpe is eligible for exemption being loading and unloading services of agricultural produce as specified under serial number 54(e) of Notification No. 12/2017 - Central Tax (Rate) dated 28/06/2017 (corresponding State Notification No. 1136 F.T. dated 28/06/2017), as amended from time to time. As per serial number 54 of Notification No. 12/2017 -Central Tax (Rate) dated 28/6/2017, services relating to the cultivation of plants, inter alia, for agricultural produce are exempt and classified under SAC 9986. However, a conjoint reading of the aforesaid entry and the definition of agricultural produce delineates that the said services can be eligible for exemption where such services are supplied till the products are taken to the primary market for disposal. The expression makes it marketable for primary market in the definition of agricultural produce bears a significant importance. The term primary market has not been defined in the GST Act. However, on the basis of location or place of operation, such markets in relation to agricultural produce are located in towns near the centres of production of agricultural commodities. In these markets, a major part of the produce is brought for sale by the producer-farmers themselves. Transactions in these markets usually take place between the farmers and primary traders. In the case of T.P. Roy Chowdhury Co. (P.) Ltd [ 2020 (1) TMI 139 - APPELLATE AUTHORITY FOR ADVANCE RULING, WEST BENGAL] , the West Bengal Appellate Authority for Advance Ruling has observed The primary market in the instant case being located in foreign shores does not conform to the definition as stated above. Further there is no evidence that the grains have not undergone any type of treatment before leaving the foreign country from where they have been imported into India. Applicability of clarification given in circular No 16/16/2017-GST dated 15.11.2017 - HELD THAT:- Circular No. 16/16/2017-GST dated 15/11/2017 issued by CBIC clarifies that pulses (de-husked or split) are not considered as agricultural produce since the process of de-husking or splitting of pulses is usually not carried out by farmers or at farm level but by the pulse millers. It therefore appears that for the purpose of agricultural produce, the processes and services that are applied till the goods are at the farmer s hand to make it marketable for primary market is to be considered. Any services supplied for loading and unloading as supplied by the applicant after the goods left the primary market do not qualify for exemption under serial number 54 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Thus, services by way of loading and unloading of imported unprocessed toor and whole pulses and black matpe as involved in the instant case does not qualify for exemption under serial number 54(e) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

  ---

• 2023 (7) TMI 187
  Exemption from GST - Valuation of supply - providing services of crushing wheat provided by the State Government, into fortified atta which in turn is supplied by the State Government through Public Distribution System - rate of tax applicable on the value of supply - components to be included in calculation of the % of value of goods in the total value of composite supply for the purpose of Notification No. 2/2018- Central Tax (Rate). Whether the instant supply shall qualify as an exempt supply vide entry no. 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 (as amended vide Notification No. 2/2018- Central Tax (Rate) dated 25.01.2018) or the same shall be taxable @ 5% as clarified in para 3.2 of the Circular No. 153/09/2021-GST dated 17.06.2021 issued by the CBIC? HELD THAT:- It appears that the activities undertaken by them for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of composite supply under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply. Whether this composite supply is made in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution? - HELD THAT:- The agreement between the applicant and the State Government for supply of fortified Wholemeal Atta/Atta is found to be executed in terms of G.O. No. 2834-F.S. dated 6th September, 2017. The said Notification provides guidelines for the procedure of empanelment of flour mills/ attachakki to convert wheat into fortified atta/wholemeal atta in pursuance of clauses 36 and 37 of the West Bengal Public Distribution System (Maintenance Control) Order, 2013 and clauses 33 and 34 of the West Bengal Urban Public Distribution System (Maintenance Control) Order, 2013 - reference made to Para 3.1 of the Circular No. 153/09/2021-GST dated 17.06.2021 where it is stated that Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution. Hence, the instant composite supply made by the applicant is found to be in relation to any function entrusted to a Panchayat under article 243G of the Constitution. Valuation - inclusion of value of by-product - non-monetary consideration - Whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not? - HELD THAT:- value of by-products so retained by the appellant yielded during milling - value of supply shall be the consideration in money and shall also include all the components towards non-cash consideration - the non-monetary considerations include gunny bags, bran and refraction Department of Food Supplies, Government of West Bengal vide memo no. 569(3)-FS/Sectt./Food/4P-02/2016/2021 dated 18th February 2022 has explained that These bi-products are valued as per market price @ Rs. 20/kg of Bran and Re 1/kg of Refractor. So, consideration from sale of 4kg Bran and 1kg refractor comes to Rs. 81 only. 100 Kg wheat is supplied to flour millers in 2 gunny bags. The flour millers retained those 2 gunny bags, which are valued at Rs. 43 only. Thus the total non-cash consideration for bi-products and gunny bags allowed to flower millers is Rs. 124 only for each 100 kg wheat - So, in the instant case, the amount of Rs. 124 may be considered as equivalent to the consideration not in money for the purpose of determination of value of supply under clause (b) of rule 27 of the GST Rules and such amount is admittedly known to the applicant at the time of supply. We therefore find the total value of supply to be Rs. 260.48 out of which Rs. 136.48 is the cash consideration and Rs. 124 is the non-cash consideration, as it has been explained in the aforesaid memo. The value of goods involved in the instant supply stands at Rs. 60/- against total value of supply of Rs. 260.48, thereby the value of goods involved in the instant composite supply stands at 23.03% of the total value of supply i.e., it does not exceed 25% of the value of the composite supply. The instant supply of services by way of milling of food grains into flour (atta) to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System is eligible for exemption under serial no. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, since the supply satisfies all the conditions specified in the said entry.

  ---

• 2023 (7) TMI 186
  Valuation of supply - providing services of crushing wheat provided by the State Government, into fortified atta which in turn is supplied by the State Government through Public Distribution System - rate of tax applicable on the value of supply - components are to be included in calculation of the % of value of goods in the total value of composite supply for the purpose of Notification No. 2/2018- Central Tax (Rate). Whether the instant supply shall qualify as an exempt supply vide entry no. 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 (as amended vide Notification No. 2/2018- Central Tax (Rate) dated 25.01.2018) or the same shall be taxable @ 5% as clarified in para 3.2 of the Circular No. 153/09/2021-GST dated 17.06.2021 issued by the CBIC? HELD THAT:- The applicant has been selected for empanelment for crushing of wheat into wholemeal atta and fortify it by premixing of micro-nutrients containing Iron, Folic acid, Citrate, EDTA and Vitamins to a specific percentage. The agreement further requires the applicant to pack the crushed stock of wholemeal atta after fortification into properly labelled poly-packs having thickness of 50 microns or above. It, therefore, appears that the activities undertaken by them for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of composite supply under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply. Whether this composite supply is made in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution? - HELD THAT:- The agreement between the applicant and the State Government for supply of fortified Wholemeal Atta/Atta is found to be executed in terms of G.O. No. 2834-F.S. dated 6th September, 2017. The said Notification provides guidelines for the procedure of empanelment of flour mills/ attachakki to convert wheat into fortified atta/wholemeal atta in pursuance of clauses 36 and 37 of the West Bengal Public Distribution System (Maintenance Control) Order, 2013 and clauses 33 and 34 of the West Bengal Urban Public Distribution System (Maintenance Control) Order, 2013 - the instant composite supply made by the applicant is found to be in relation to any function entrusted to a Panchayat under article 243G of the Constitution. Whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not? - HELD THAT:- It is found from the agreement made between the applicant and the State Government that the applicant has been selected for empanelment for crushing of wheat into whole meal atta and fortify it by pre-mixing micro-nutrients and to pack it in 1Kg poly pouch/packet and to deliver the same to the nominated M.R. Distributors - such activities undertaken by the applicant for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of composite supply under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply. The State Government agrees to pay the applicant a total amount of Rs. 179.48 for crushing of 100 kgs of wheat which includes fortification cost of Rs. 10/- and packing charges of Rs. 50/- - Thus, in the instant case, the applicant receives Rs. 10/- and Rs. 50/- i.e., Rs. 60/- in total against fortification cost and packing charges respectively for crushing of 100 kgs of wheat which involves supply of goods. Department of Food Supplies, Government of West Bengal vide memo no. 569(3)-FS/Sectt./Food/4P-02/2016/2021 dated 18th February 2022 has explained that These bi-products are valued as per market price @ Rs. 20/kg of Bran and Re 1/kg of Refractor. So, consideration from sale of 4kg Bran and 1kg refractor comes to Rs. 81 only. 100 Kg wheat is supplied to flour millers in 2 gunny bags. The flour millers retained those 2 gunny bags, which are valued at Rs. 43 only. Thus the total non-cash consideration for bi-products and gunny bags allowed to flower millers is Rs. 124 only for each 100 kg wheat - So, in the instant case, the amount of Rs. 124 may be considered as equivalent to the consideration not in money for the purpose of determination of value of supply under clause (b) of rule 27 of the GST Rules and such amount is admittedly known to the applicant at the time of supply. It is found that the total value of supply to be Rs. 260.48 out of which Rs. 136.48 is the cash consideration and Rs. 124 is the non-cash consideration, as it has been explained in the aforesaid memo. The value of goods involved in the instant supply stands at Rs. 60/- against total value of supply of Rs. 260.48, thereby the value of goods involved in the instant composite supply stands at 23.03% of the total value of supply i.e., it does not exceed 25% of the value of the composite supply. The instant supply of services by way of milling of food grains into flour (atta) to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System is eligible for exemption under serial no. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, since the supply satisfies all the conditions specified in the said entry.

  ---

• 2023 (7) TMI 185
  Exemption from GST - composite supply of service by way of milling of food grains into flour to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System - rate of GST on such milling, if not exempt - Valuation - inclusion of non-cash consideration - HELD THAT:- The applicant, according to the agreement as produced, has been selected for empanelment for crushing of wheat into wholemeal atta and fortify it by premixing of micro-nutrients containing Iron, Folic acid and Vitamin to a specific percentage. The agreement further requires the applicant to pack the crushed stock of wholemeal atta after fortification into properly labeled poly-packs having thickness of 40 microns or above. It, therefore, appears that the activities undertaken by the applicant for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of composite supply under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply. Whether this composite supply is made in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution? - HELD THAT:- The agreement between the applicant and the State Government for supply of fortified Wholemeal Atta/Atta is found to be executed in terms of G.O. No. 2834-F.S. dated 6th September, 2017. The said Notification provides guidelines for the procedure of empanelment of flour mills/ attachakki to convert wheat into fortified atta/wholemeal atta in pursuance of clauses 36 and 37 of the West Bengal Public Distribution System (Maintenance Control) Order, 2013 and clauses 33 and 34 of the West Bengal Urban Public Distribution System (Maintenance Control) Order, 2013 - reference made to Circular No. 153/09/2021-GST dated 17.06.2021 where it is stated that Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution. Hence, the instant composite supply made by the applicant is found to be in relation to any function entrusted to a Panchayat under article 243G of the Constitution. Whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not? - HELD THAT:- The value of supply for providing milling services to convert 100 kgs of wheat supplied by the State Government into 95 kg of fortified atta, according to the applicant, comes at Rs. 136.48 + Rs. 124.00 [ Cost of 02 gunny bags : Rs. 43/- + Receipt from sale of bran and refractors : Rs. 81/-] = Rs. 260.48. We find that the value of goods involved in the instant supply stands at Rs. 60/- against total value of supply of Rs. 260.48, thereby the value of goods involved in the instant composite supply stands at 23.03% of the total value of supply i.e., it does not exceed 25% of the value of the composite supply. Thus, the instant supply of services by way of milling of food grains into flour (atta) to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System is eligible for exemption under serial no. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, since the supply satisfies all the conditions specified in the said entry. As a result, we are unable to accept the views expressed by the officer concerned from the revenue.

  ---

• 2023 (7) TMI 184
  Exemption from GST - composite supply of service by way of milling of food grains into flour to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System - entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - Valuation - inclusion of non-cash consideration - HELD THAT:- It appears that the activities undertaken by the applicant for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of composite supply under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply. Whether this composite supply is made in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution? - HELD THAT:- The agreement between the applicant and the State Government for supply of fortified Wholemeal Atta/Atta is found to be executed in terms of G.O. No. 2834-F.S. dated 6th September, 2017. The said Notification provides guidelines for the procedure of empanelment of flour mills/ attachakki to convert wheat into fortified atta/wholemeal atta in pursuance of clauses 36 and 37 of the West Bengal Public Distribution System (Maintenance Control) Order, 2013 and clauses 33 and 34 of the West Bengal Urban Public Distribution System (Maintenance Control) Order, 2013 - Para 3.1 of the Circular No. 153/09/2021-GST dated 17.06.2021 states that Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution. Hence, the instant composite supply made by the applicant is found to be in relation to any function entrusted to a Panchayat under article 243G of the Constitution. Whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not? - HELD THAT:- The value of supply for providing milling services to convert 100 kgs of wheat supplied by the State Government into 95 kg of fortified atta, according to the applicant, comes at Rs. 136.48 + Rs. 124.00 [Cost of 02 gunny bags : Rs. 43/- + Receipt from sale of bran and refractors : Rs. 81/-] = Rs. 260.48 - the value of goods involved in the instant supply stands at Rs. 60/- against total value of supply of Rs. 260.48, thereby the value of goods involved in the instant composite supply stands at 23.03% of the total value of supply i.e., it does not exceed 25% of the value of the composite supply. The instant supply of services by way of milling of food grains into flour (atta) to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System is eligible for exemption under serial no. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, since the supply satisfies all the conditions specified in the said entry.

  ---

• 2023 (7) TMI 183
  Classification of supply - transaction is in the nature of a works contract or not - supply to local authority - Rate of GST - supply for construction of a sewerage treatment plant which involves supply of pumps as well as installation and commissioning work - supply for the purpose of sewerage treatment or disposal - attracts GST rate of 12% in terms of Notification No. 11/2017-CT (Rate) dated 28/06/2017 read with of Notification No. 20/2017-CT (Rate) dated 22/08/2017 or not. Works Contract Service - HELD THAT:- As per the definition of Works Contract, the essential feature for a service to be a works contract service is that whether the service is in relation to an immovable property or not. Consequently, it needs to be examined whether the supply in this case could be considered as pertaining to immovable property - The pump in question could not be classified as land or benefits to arise out of land. On examining further, it could be observed that even though the term attached to the earth has not been defined in the General Clauses Act, 1897 - The civil structure in this case is a sewerage pumping station under KMC, the very purpose of which is pumping of sewerage for further treatment disposal. The pump is essential to this activity and is thus expected to be installed and fastened at its place of installation throughout its operational life, and is thus installed for the permanent beneficial enjoyment of the civil structure to which it is attached to. Thus, in light of the facts of the case, the pump on installation would be an immovable property, and thus the installation, repair and maintenance of pump at the sewerage pumping station would qualify to be works contact service as per Section 2(119) of GST Act. Supply to Local authority - HELD THAT:- The Notification would be applicable to supplies made to a local authority. In this case, the applicant is making supply to Kolkata Municipal Corporation, hereinafter also referred to as KMC - Kolkata Municipal Corporation (KMC) is a Municipality constituted under Article 243P of the Constitution; KMC is a local authority, as defined under Section 2(69) of the GST Act. The Notification would thus apply to this case, subject to other conditions being fulfilled. Purpose of sewerage disposal - HELD THAT:- The purpose of the pump in this case is pumping the sewerage from one location to other, which is an integral part of the process of sewerage disposal. Further, the applicant has also submitted a document issued by the Executive Engineer (Mech.) and Asst. Engineer (Mech.) from the S D department of KMC which states that: it is to confirm that the above mentioned contract is for disposal of drainage/sewage generated at the KMC area under the Kolkata Municipal Corporation and is in the nature of Composite supply of Works Contract - the contract is for the purpose of sewage disposal, and the Notification would apply to this case, subject to fulfilling other conditions. Applicability of serial no. 3(iii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended - HELD THAT:- This case is a composite supply of works contract services as defined under section 2(119) of the GST Act, 2017 and the supply is made to the local authority KMC for the purpose of sewerage disposal. Thus, the supply would be covered under entry 3(iii) of the Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 read with Notification No. 20/2017-Central Tax (Rate) dated 22th August 2017, which prescribes a rate of 12% (6% CGST and 6% SGST) for such supplies - This entry however, has been omitted vide Notification No. 03/2022-Central Tax (Rate) dated 13th July 2022, which has come into force with effect from the 18th July 2022. Consequent to this Notification, such supplies would attract tax rate of 18% (9% CGST and 9% SGST) on and from 18.07.2022. Time of supply - HELD THAT:- The applicant has not submitted any particulars regarding the extent of payment made by KMC against these two invoices, as submitted. No details have also been submitted regarding the extent of supply which has been made by the applicant to KMC under this works contract and nor have any details been made available regarding the mutual agreement between the applicant and KMC to the extent of supply which has been completed till 17th July 2022 after which the rate of tax has been changed - the time of supply as per the facts of the case, thus cannot be ascertained. Thus, the instant supply qualifies as a composite supply of works contract as defined in clause (119) of section 2 of the GST Act made to a local authority by way of erection, installation, and maintenance of a sewerage treatment plant and would be taxable at the rate specified in serial number 3(iii) of Notification No. 11/2017-CT (Rate) dated 28/06/2017 read with Notification No. 20/2017-Central Tax (Rate) dated 22/08/2017, as amended from time to time, subject to the provisions of section 14 of the GST Act.

  ---

• Income Tax

• 2023 (7) TMI 182
  Reopening of assessment u/s 147 - notice u/s 148 has been issued beyond six years after the end of the AY in question - as decided by HC impugned notice and the consequential orders/notices, if any, are hereby quashed - HELD THAT:- In terms of Circular No. 17/2019 dated 08.08.2019 issued by Government of India, Ministry of Finance, Department of Revenue, Central Board Direct Taxes, Judicial Section, since the amount of tax involved is low, we are not inclined to interfere with the impugned order. SLP dismissed.

  ---

• 2023 (7) TMI 181
  TP adjustment u/s 92C - ALP determination - international transactions relating to receipts in respect of investment advisory services - order passed by this Court in the case of M/s. SAP Labs India (P) Ltd. v. CIT [ 2023 (4) TMI 859 - SUPREME COURT] wherein this Court has set aside similar orders and remanded the matter to the High Court for fresh consideration. In that view without expressing any opinion on merits, the order impugned herein is set aside. The appeal is restored to the file of the High Court of Judicature at Bombay to re-hear on all aspects as indicated in the above referred judgment.

  ---

• 2023 (7) TMI 180
  Reopening of assessment u/s 147 - barred by limitation - Period of limitation to issue notice issued u/s 148A(b) - power to extend the time period under the first proviso to section 149(1) - scope of Taxation and Other Laws (Relaxation and Amendment of Certain Provision) Act, 2022 [TLA Act ] - HELD THAT:- Exemption from filing certified copy of the impugned judgment is granted. Issue notice, returnable on 10.07.2023. In the meantime, the impugned judgment and order passed by the High Court in 2023 (3) TMI 104 - GUJARAT HIGH COURT] shall remain stayed.

  ---

• 2023 (7) TMI 179
  Rectification u/s 154 - rectification beyond the period of 4 years - To give effect to ITAT s order in department s appeal - HELD THAT:- The settled position is that the AO, while giving effect to the ITAT s order cannot go beyond the directions of the ITAT and since in this case, the issue of calculation of book profit qua diminution in the value of an asset was not the subject matter of the appeal, the Revenue was not justified in contending that the order is within the time limit. We say this because u/s 154(1A) of the Act, the AO can rectify the order in respect of a matter other than the matter which has been considered and decided by the appellate/revisional authority. In the instant case, since the issue of diminution in value of an asset for calculating book profit was not a subject matter of appeal or revision, the original order u/s 143(3) of the Act dated 27/02/2004 is the order which can be rectified by the AO and since the order passed in 2004 cannot be rectified after a period of 4 years, the order passed under Section 154 of the Act dated 29/03/2014 is barred by Section 154(7) of the Act.

  ---

• 2023 (7) TMI 178
  Accrual of income in India - Royalty receipt - consideration received by the Assessee from CPI for the use of the SAP system - first reason given by the ITAT is that the said payment would not amount to equipment royalty and therefore cannot be taxed as royalty under the Act - HELD THAT:- In the present case, since, for the Assessment Year 1999-2000, the definition of royalty given in Explanation 2 to Section 9(1)(vi) did not include equipment royalty as Clause (iv a) was inserted into the said Section by the Finance Act 2001 only with effect from 1st April 2002, the Assessee was entitled to opt for taxation under the provisions of the Act. It is undisputed that the provisions of the Act, as far as they are applicable to Assessment Year 1999-2000, did not provide for equipment royalty. In these circumstances, in our view, the ITAT was correct in holding that the said payment of USD 11,80,500/- made by CPI to the Assessee could not have been brought to tax under the Act as equipment royalty. Further, in our view, for the aforesaid reasons, the submissions made by Mr. Suresh Kumar in the context of equipment royalty are totally devoid of merit. Payment made by CPI to the Assessee was not process royalty under Clause (iii) to Explanation 2 to Section 9(1)(vi) - Explanation 6 to Section 9(1)(vi) clarifies that the expression process includes and shall be deemed to have always included transmission by satellite, cable, optic fibre or by any other similar technology, whether or not such process is secret. As rightly submitted by Mr. Pardiwalla, and as rightly held by the ITAT, Explanation 6 includes within the definition of process live transmission of programmes such as channel feed and not access of the SAP system of the Assessee as done by CPI, which is a standard facility provided by the Assessee to CPI, and is used for input of data and generation of reports. In these circumstances, in our view, Explanation 6 also does not take the case of the Revenue any further. We are of the view that the ITAT is correct in holding, on facts, that the payment made by CPI to the Assessee for accessing the SAP system does not amount to process royalty under Section 9(1)(vi) of the Act. Payment made by CPI to the Assessee would also not be covered by Explanation 5 to Section 9(1)(vi) - The amount paid by CPI to the Assessee cannot be considered as royalty under Explanation 5. In the present case, as correctly held by the ITAT, the facts on record show that CPI had been granted a limited access to the SAP system by establishing a communication line at its own cost for use of data available in the SAP system. Hence, payment made by CPI cannot be regarded as payment for use of the system and therefore cannot amount to royalty under the said Explanation 5. The said payment made by CPI to the Assessee cannot be considered as royalty under clause (v) to Explanation 2 to Section 9(1)(vi) - In the present case, the facts on record clearly show that the Assessee has not transferred any right in respect of any copyright of any literary or artistic or scientific work to CPI. As stated earlier, the Assessee has only given access of the SAP system to CPI. Even if Explanation 4 to Section 9(1)(vi) is taken into consideration, the same provides that the transfer of all or any rights in respect of any right, property or information includes, and has always included, transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred. For Explanation 4 to apply again there has to be transfer of right to use a computer software. In the present case, the Assessee has not transferred to CPI the right to use any computer software. It has only allowed CPI to access the SAP system. For this reason, on facts, even Explanation 4 is not applicable. ITAT has correctly come to conclusion that clause (v) to Explanation 2 is not applicable in the present case. Whether the consideration received by the Assessee could at all be taxed in India? - Article 5 of the DTAA defines the Permanent Establishment as inter alia a place of management, a branch, an office, a factory, a warehouse, a workshop etc. Based on this definition, the ITAT has come to the conclusion that the Assessee does not have a Permanent Establishment in India. As the Assessee does not have a Permanent Establishment in India, by virtue of the provisions of Article 7 of the DTAA, the payment received by it from CPI, which would be business profit, is not taxable in India. No substantial question of law - Revenue appeal dismissed.

  ---

• 2023 (7) TMI 177
  Penalty u/s 271(1)(c) - revised return was submitted pursuant to the proceedings U/s 153A of the IT Act and the same was accepted - violation of principles of natural justice depriving the petitioner of personal hearing - HELD THAT:- It is true that in the instant case there is no complete deprival of principles of natural justice, inasmuch as, while initiating penalty proceedings, the respondent authorities indeed invited the reply from the petitioner to the show cause notices issued. Respondents have not considered the crucial and important pleas and contentions raised by the petitioner before passing the impugned penalty orders. Needless to emphasize that non consideration and discussion of the crucial pleas raised by a party would also amount to negation of principles of natural justice. That apart, though in the reply notice dated 31.05.2021 the petitioner sought for personal hearing, same was not accorded to the petitioner. If such a gracious act was done, we are sure, the petitioner would have been in a position to explain the substance of his contentions before the respondent authorities. Hence the conduct of respondents would depict there is a partial violation of principles of natural justice. Thus on a conspectus of facts, circumstances, law and conduct of both parties, we, in the interest of justice, are of considered view, the impugned orders can be set aside and the respondents can be directed to accord personal hearing to the petitioner in respect of the contentions raised and pass fresh orders on suitable terms. Accordingly, the writ petitions are allowed setting aside the impugned penalty orders passed by the 1st respondent and matters are remitted back to the 1st respondent with a direction to consider the reply notices submitted by the petitioner and after affording an opportunity of personal hearing to the petitioner pass appropriate orders in accordance with governing law and rules

  ---

• 2023 (7) TMI 176
  Assessment u/s 153A - whether addition can be made in respect of completed/ unabated assessment in absence of any incriminating material? - HELD THAT:- The decision of Saumya Construction [ 2016 (7) TMI 911 - GUJARAT HIGH COURT] to held that the case of completed assessment/unabated assessment in absence of any incriminating material will not permit making of addition by the AO and that the AO has no jurisdiction to reopen the completed assessment. Finally, the supreme court confirmed the view taken in Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] and of this Court in Saumya Construction [ 2016 (7) TMI 911 - GUJARAT HIGH COURT] laying down the law that no addition can be made in respect of completed assessment in absence of any incriminating material. The supreme court in laying down the proposition considered the object and purpose of insertion of section 153A of the Act. In view of the above decision of the supreme court in Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] there is no gainsaying that the issue sought to be raised and the substantial questions of law ought to be put forth in that context, are answered. No case is made out in this appeal. No substantial question of law could be said to be arising in view of law laid down by the supreme court in Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] .

  ---

• 2023 (7) TMI 175
  Penalty u/s. 271(1)(c) - treating the returned income in response to the notice u/s. 148 as concealment of income - HELD THAT:- There is no concealment of income or furnishing of inaccurate particulars of income attracting the provisions u/s. 271(1)(c) as the assessee made complete disclosure in the return of income and further offered the same for taxation, when that is the case we find the conditions stipulated under the provisions u/s. 271(1)(c) are not satisfied as there was no satisfaction by the AO that the assessee really concealed or furnished inaccurate particulars of income in the return of income. We find the ratio laid down in the case of SAS Pharmaceuticals [ 2011 (4) TMI 888 - DELHI HIGH COURT] which was followed by the Delhi Tribunal in the case of Meeta Gutgutia [ 2016 (5) TMI 339 - ITAT DELHI] holding no penalty is maintainable when there is no variation in the return of income and assessed income. Therefore, taking into consideration the case relied on by the AR and facts and circumstances of the case, we find the ratio of laid down in the case of SAS Pharmaceuticals [ 2011 (4) TMI 888 - DELHI HIGH COURT] which was followed by the Delhi Tribunal in the case of Meeta Gutgutia [ 2016 (5) TMI 339 - ITAT DELHI] are applicable to the facts on hand. Thus, the order of NFAC, Delhi is not justified and ground raised by the assessee is allowed.

  ---

• 2023 (7) TMI 174
  Addition of deemed income u/s 56(2)(vii)(b) - difference in purchase price and stamps authority valuation - HELD THAT:- Assessee has not made any explanation to AO when called upon to explain the difference in purchase price and stamps authority valuation. Even the assessee has not disputed the valuation done by stamps authority on any ground. Secondly, during first-appeal before the Ld. CIT(A), the assessee has simply mentioned the verdict of section 50C and made a simple rather vague claim that the valuation done by Stamp Authorities is very high. There is no iota of explanation or substantiation made by assessee as to why it is very high. Therefore, the claim of assessee is for the sake of claim only. Addition made by lower-authorities is mandated by section 56(2)(vii)(b) and in absence of a valid explanation by assessee, the same has to be made, there is no escape route. It is further observed that the assessee is not representing his case before us despite several opportunities. Therefore also, in absence of any assistance coming from assessee, we do not find any valid reason to interfere with the findings of lower authorities. Decided against assessee.

  ---

• 2023 (7) TMI 173
  Penalty proceeding u/s 271(1)(c) - mandation to mention charge of concealment of particulars or furnishing of inaccurate particulars - HELD THAT:- While passing assessment-order the AO has simply mentioned that penalty proceeding u/s 271(1)(c) is being initiated separately but nowhere mentioned any charge of concealment of particulars or furnishing of inaccurate particulars. Then came the next stage of issuing show-cause notice in terms of section 274. On perusal of the show-cause notice, we nowhere find that the AO has specified the kind of default committed by assessee, whether it is concealment of income or furnishing of inaccurate particulars. Therefore, in absence of any charge against assessee, the decision in Kulwant Singh Bhatia [ 2017 (8) TMI 1375 - ITAT INDORE] holds good. We are of the considered view that the penalty proceeding conducted in present case are not sustainable. Decided in favour of assessee.

  ---

• 2023 (7) TMI 172
  Revision u/s 263 - deduction u/s 80P(2)(a)(i) or 80P(2)(d) - Is assessment order is erroneous or prejudicial to the interests of the revenue? - HELD THAT:- As decided in [ 2022 (12) TMI 355 - ITAT PUNE] error in the assessment order should be one that it is not debatable or plausible view. In a case where the AO examined the claim, took one of the plausible views, the assessment order cannot be termed as an erroneous . Admittedly the interest income was earned from the cooperative banks, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s 80(P)(2)(d) of the Act. Such interest also qualifies for exemption u/s 80P(2)(a)(i) as held by the Co-ordinate Bench of Pune Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited [ 2021 (12) TMI 1259 - ITAT PUNE] The issue which is subject matter of revision is covered in favour of the assessee by judicial precedents. Therefore, it cannot be said that the assessment order is erroneous or prejudicial to the interests of the revenue. Thus the order of revision passed by the ld. PCIT u/s 263 of the Act cannot be sustained - Decided in favour of assessee.

  ---

• 2023 (7) TMI 171
  Reassessment proceedings u/s 147/148 - concept of change of opinion - Assessee received subsidy as financial support for encouraging setting up SHP Project from Government of Himachal Pradesh and Haryana - HELD THAT:- Assessee had disclosed details, nature and accounting of central subsidy sanctioned and released for setting up the small hydro project under Renewal Energy Scheme of the Ministry of New Renewal Energy, Government of India, but no addition was made by the A.O. after making detail examination of the documents. Thus, in our opinion, the reassessment proceedings are merely on the change of opinion of the Assessing Officer which the original assessment u/s 143(3) of the Act was completed after due consideration of the facts. It is well settled law that the Assessing Officer cannot invoke the provisions of Section 147 148 of the Act merely on the change of opinion wherein the original assessment u/s 143(3) of the Act was completed after due consideration of the facts. Thus reassessment proceedings initiated by the A.O. u/s 147/148 of the Act on mere change of opinion and review. Thus, we find merit in Ground No. 1 of the assessee. Applicability of amended provision of Section 2(24) sub-section (xviii) - HELD THAT:- As in the case of Pr. Commissioner of Income Tax Vs. Ankit Metal Power Ltd. [ 2019 (7) TMI 878 - CALCUTTA HIGH COURT ] held that the amendment to Section 2(24) w.e.f. 01.04.2016 is having prospective effect and held incentive subsidies are capital receipts and is not an income liable to be taxed in relevant assessment year 2010-11.

  ---

• 2023 (7) TMI 170
  Transfer Pricing adjustment - determination of Arm s Length Price ( ALP ) - DRP not allowing the extra-ordinary costs incurred by the assessee due to shut down of the plant while computing the operating net costs (NCP) mark up earned by the assessee - primary argument of the counsel for the assessee is that when the plant was shut down due to change in management, even though the assessee did not have to bear variable expenses, it was under obligation to incur fixed cost to maintain these plants - HELD THAT:- Assessee had to bear power and electricity expenses to maintain the plants so that they would be in working conditions once the same would be operative. We observe that the Hon ble DRP has been reasonable in its approach while allowing the capacity utilization adjustment to the assessee on account of one of the plant being non-operational and the assessee was operating at only 58% of its full capacity. DRP also allowed the assessee to make adjustment with respect to toll manufacturing charges on the ground that these charges were paid as extra-ordinary costs. Regarding excess power and electricity expenses, the TPO observed that the assessee in its calculation has not provided a bifurcation of power expenses into fixed and variable costs for the earlier year as well as year under consideration - DRP has not erred in facts and in law in not granting adjustment towards repairs and maintenance and excess power, electricity and store expenses. TPO not following the DRP direction for allowing tolling expenses while computing adjusted NCP mark up earned by the assessee - Hon ble DRP has agreed with the contention of the assessee that toll manufacturing charges were paid as extra-ordinary cost and had given a categorical direction to the TPO to exclude this expenditure from operating cost for the purpose of benchmarking - despite the same, no relief has been granted to the assessee in the final assessment order. We direct that toll manufacturing charges be excluded from operating costs for the purpose of benchmarking, as per directions of Hon ble DRP. TP adjustment to international transaction - whether the transfer pricing adjustment should be restricted to international transactions by the assessee with its associated enterprise or whether the adjustment is required to be computed at entity level? - HELD THAT:- In the case of Tara Jewels Exports (P.) Ltd.[ 2015 (12) TMI 1130 - BOMBAY HIGH COURT] held that adjustment to be done to arrive at arm s length price is only in respect of transaction with its associated enterprises. In the case of KHS Machinery (P.) Ltd. [ 2023 (4) TMI 1223 - ITAT AHMEDABAD] held that adjustment of PLI of comparables ought to be made at transaction level and not entity level. In the case of Kemrock Industries Exports Ltd [ 2022 (12) TMI 156 - ITAT AHMEDABAD] held that transfer pricing adjustment should be restricted only in respect of turnover of assessee-company relating to international transactions, sale of resins to its associated enterprises, and same should not be done in relation to all transactions. Thus Transfer pricing addition should be restricted only qua international transaction and not entity level transactions. Disallowance of contribution to gratuity fund - DRP held that the payment made towards gratuity fund which was not an approved fund created by the assessee for the exclusive benefit of the employees was not allowable in terms of section 36(1)(v) - HELD THAT:- In decided in case of Gujarat State Co-op. Marketing Federation Ltd. [ 2021 (6) TMI 252 - ITAT AHMEDABAD] since undisputedly approval under section 2(5) was granted to gratuity fund subsequently by Commissioner, deduction was to be allowed. In the case of Jaipur Thar Gramin Bank [ 2016 (11) TMI 794 - RAJASTHAN HIGH COURT] held that where assessee had filed application to competent authority for approving gratuity scheme and it had duly complied with conditions laid down for approval under section 36(1 )(v), Assessing Officer ought not to have disallowed assessee s claim for deduction under section 36(l)(v) merely because Commissioner had not granted approval to Gratuity Scheme. Thus assessee is eligible for claiming deduction u/s. 36(1)(v).

  ---

• 2023 (7) TMI 169
  Addition u/s 68 - unexplained credits - contention of the assessee has been rejected on the ground that the assessee has repeated the same figures for subsequent A.Y 2017-18 - HELD THAT:- Accountant of the assessee had taken the figure from the last year resulting into the repetition of the said mistake. Considering the above contentions of the assessee, the matter is restored to the file of the AO with a direction to adopt the correct figure of Rs. 96,00,000/- on account of FDR deposits in Bank of Maharashtra instead of Rs. 9,60,00,000/- as wrongly mentioned in the balance sheet by the accountant of the assessee. We direct the AO to consider the revised balance sheet of the assessee and assess the income of the assessee for A.Y 2016-17 accordingly, subject to the condition that the assessee has mentioned the correct figures in the subsequent assessment years i.e. A.Y 2018-19 and onwards and the assessee has not taken benefit of his own wrong. Appeal of the assessee is treated as allowed for statistical purposes.

  ---

• 2023 (7) TMI 168
  Addition u/s 36(1)(va) r.w.s. 2(24)(x) - delayed deposit of employees contribution to PF/ESI i.e. after the due date as provided under the respective welfare enactments - Who s duty to deposit contribution? - HELD THAT:- Once the employee has earned basic wages, the Act under Section 6 r/w Para 30, 32 38 of the Scheme casts a duty upon the employer to deposit the contribution with the Employees Provident Fund Organisation. As per Para 30 of the Scheme, the employer at the first instance has to pay both the contribution payable by himself and also on behalf of the member employed by him. Under Para 32, the employer is authorised before paying the member employee his wages to deduct the employee s contribution from his wages. As per para 38 of the Employees Provident Funds Scheme prescribes mode of payment, the employer is required to remit both the employees as well as the employer s share of contributions together with administrative charges thereon before the close of the 15th of every month electronically through internet banking of the authorised banks, portal etc. Para 38 of the scheme is to be read in consonance with the Para 30 and 32 of the Scheme along with relevant provisions of the EPF Act, 1952. The Employees Provident Fund and Miscellaneous Provisions Act, 1952 is a beneficial piece of legislation for providing social security to the employees and their families and casts an obligation upon the employer to make compulsory deduction for provident fund and to deposit in the workers account in the EPF office. The initial responsibility for making payment of the contribution of the employer as well as of the employee, lies on the employer, however, the employer is authorised before paying the member employee his wages in respect of any period or part of period for which contributions are payable, to deduct the employee s contribution from his wages. The issue is squarely covered against the assessee by the decisions of CHECKMATE SERVICES P. LTD. [ 2022 (10) TMI 617 - SUPREME COURT] and many High Courts of the country. There is no merit in the appeal of the assessee, the same is accordingly, hereby dismissed.

  ---

• 2023 (7) TMI 167
  Assessment u/s 153A - Addition u/s 68 - incriminating material found or not? - HELD THAT:- As original return was filed by the assessee on 30.09.2013. The time limit to scrutinize this return was expired much before the search, i.e. 17.09.2015. Department was unable to lay its hand on any incriminating material. AO is examining the loans shown by the assessee in the books of account. AO has observed that during the accounting year, assessee has taken unsecured loans from three companies. This part is already available in the regular books and must have been reflected in the return. If Department wish to undertake an exercise for examining, then, it ought to have scrutinised the return. AO has not made reference of any document seized during the course of search. He has examined the Bank accounts and already available amounts in the accounts. The only reference to the seized material made by the AO is that during the course of search and seizure action, Inspector of the Department was deputed to verify the existence of the above. This is only a passing reference in the assessment order the weightage to this observation could be made if AO has power to tinker with the completed assessment. An inquiry, which could be made in the regular assessment, cannot be construed as seized material for just bringing an item in the scope of section 153A - Case followed Abhisar Buildwell Pvt. Limited [ 2023 (4) TMI 1056 - SUPREME COURT] - Decided against revenue.

  ---

• 2023 (7) TMI 166
  Deduction u/s. 10AA - assessee failed in E-filing form 56F along with return of income - CIT(A) allowed deduction - HELD THAT:- Benefit of section 10AA should not be denied on account of a procedural/technical default by the assessee or his chartered accountant, if otherwise the assessee is eligible to claim deduction under the said exemption provision. In the instant case, the A.O. has denied sec 10AA benefit on account of an inadvertent error on the part of the assessee in not e-filing Form 56F along-with return of income. We are therefore of the view that there is sufficient compliance if the Form 56F has been filed during the course of assessment proceeding, since there is no material objective to be achieved by the assessee in not e-filing the same, once the same was already available with the assessee. CIT(A) has not erred in facts and in law in allowing the claim of the assessee that deduction u/s. 10AA of the Act cannot be denied simply on the ground that the assessee did not e-file form 56F along with the return of income, when the assessee furnished form 56F to the ld. Assessing Officer during the assessment proceedings when the claim of deduction u/s. 10AA of the Act was being examined by the ld. Assessing Officer. Net profit comparison of sister concern - AO held that the reasonable profit for the assessee should be restricted to 7.5% of the purpose of calculation of deduction u/s. 10AA - CIT(A) allowed the appeal of the assessee on the ground that there was no business transaction between the assessee and its sister concern - HELD THAT:- We observe that firstly the assessee s case is directly covered by order of Hon ble ITAT for assessee s own for assessment year 2012-13 2013-14 [ 2019 (7) TMI 126 - ITAT AHMEDABAD] . CIT(A) has correctly observed that the assessee has not arranged its affairs in a manner so as to artificially inflate its profit with a view to claim higher deduction u/s. 10AA and further, the Department has not been able to place any material on record to show that there was any transaction between the assessee and its sister concern. We are of the considered view that ld. CIT(A) has correctly allowed the appeal of the assessee

  ---

• 2023 (7) TMI 165
  Fees for technical services (FTS) - receipts from rendition of certain services to its Indian subsidiary - assessee has not offered them to tax claiming that they are not taxable in India - make available condition as per Article 13(4)(c) of India- UK DTAA - HELD THAT:- As most of the services rendered are routine management support services - some of the services like implementation of ERP patches, identify indirect tax issue that could arise on sourcing from India for a global project, guidance sought by Indian subsidiary on the terms and conditions to be proposed to one of its customer and preparation of global guidelines for use of power conversion entities, advice regarding increase the use of software in regular activities to increase the productivity, assistance given in opening the supplier code in their SAP etc., may fall within the ambit of either technical or consultancy services. Such services have to be specifically identified keeping in view the definition of FTS under Article 13(4) of India-UK DTAA. In the facts of the present case, the departmental authorities have not carried out that exercise before concluding that the entire variety of services rendered by the assessee comes within the sweep of technical or consultancy services. This, in our view, is unsustainable. Though, the departmental authorities have alleged that the make available condition stands satisfied, however, no material has been brought on record to support such finding. As discussed earlier, the burden is entirely on the Revenue to prove that rendition of services by the assessee has made available technical knowledge, knowhow, skill etc. to the service recipient so as to enable the service recipient to utilize such technical knowledge, knowhow, skill etc. independently in future without the aid and assistance of the assessee. Thus, in our view, the Revenue having failed to demonstrate the aforesaid aspect through cogent evidence, it has to be held that the make available condition under Article 13(4)(c) of India-UK treaty is not fulfilled. Thus we hold that the amount received by the assessee from Indian subsidiary towards rendition of various services do not qualify as FTS under Article 13(4) to India-UK DTAA read with India-France DTAA. Decided in favour of assessee.

  ---

• 2023 (7) TMI 164
  Accrual of Income in India - Fee for Technical Services (FTS) - taxability of an amount received from supply of drawings and designs - HELD THAT:- Undisputedly, though, AO has brought to tax the receipts from supply of plant and equipment by treating it as business profit of the assessee connected to the PE, however, learned first appellate authority has reversed the decision of the AO by holding that since the plants and equipments were supplied from outside India and the sale transaction has concluded outside India, the receipts cannot be taxed in India. Admittedly, against the aforesaid decision of the first appellate authority, the Revenue is not in appeal. Thus, when the supply of plant and equipment has been treated as sale transaction completed outside India, hence, not taxable in India, the sale and supply of drawings and designs being inextricably linked to sale and supply of plant and equipment has to be considered cumulatively and as a part of sale and supply of plant and equipment. Once the income from supply of plant and equipment is held to be not taxable in India, since, the sale transaction was completed outside India, the same logic applies even to the amount received from supply of drawings and designs. Thus, we hold that the amount received by the assessee from supply of drawings and designs is not taxable in India as FTS. This ground is allowed. FTS under Article 12 of India Switzerland DTAA - supervisory services relating to erection and commissioning - HELD THAT:- As assessee had entered into a contract for supply of electromagnetic stirrer. As per the scope of the contract, the assessee shall engineer, manufacture and deliver the plant and equipment. The scope of contract also included supervision, erection and commissioning of plant and equipment. As per assessee s own admission, technical personnel were deputed to supervise the erection and commissioning of the plant and equipment. Thus, it is quite clear, in course of such supervisory activity, the qualified technical personnel deputed by the assessee must have imparted technical services for erection and commissioning of the plant and equipment. Therefore, in our considered opinion, the amount received clearly falls within the definition of FTS, both under the domestic law as well as under the treaty provision. Once the receipts fall within the definition of FTS u/s 12(4) of the DTAA as well as the domestic law, it becomes immaterial whether the assessee has a PE in India or not. Therefore, amount in dispute having qualified as FTS, has rightly been brought to tax at the hands of the assessee. This ground is dismissed.

  ---

• 2023 (7) TMI 163
  Addition u/s 56(2)(viia)(ii) - determination of fair market value of shares - Method of valuation - Addition towards difference between FMV and actual amount paid for purchase of shares - CIT(A) deleted the additions - HELD THAT:- As gone through the remand report submitted by the AO on the valuation of fair market value as per Rule 11UA(1) of the Rules. We find that in the remand report, other than supporting the assessment, AO has not commented at all on the determination of fair market value as per book value prescribed u/r 11UA(1) of the I.T. Rules. No error or infirmity was pointed out by the AO in the said valuation report. Since the valuation report is based on the method prescribed under the I.T. Rules and since the same has determined the fair market value at Minus 340.56, CIT(A) has rightly followed the same while deleting the addition, which calls for no interference. Decided against revenue.

  ---

• 2023 (7) TMI 162
  Assessment u/s 153A - Bogus purchases - CIT(A) restricted the disallowance to the extent of 5% - incriminating material found in search or not? - HELD THAT:- The only incriminating evidence claimed the searched party relates to the inwards entry on the register maintained at the gate of factory for the period of August 2013 to February 2014 only. The assessing officer nowhere mentioned in the assessment orders passed under section 153A/143(3) for AY 201-11 2011-12 about any incriminating material found during search action on 18.02.2014. Discrepancy, if any in the inward register found at the gate for the period 2013 to 2014 only. Now it is settled position under law that no addition can be made in the unabated assessment u/s 153A in absence of incriminating material as has been held in Saumya Construction (P) limited [ 2016 (7) TMI 911 - GUJARAT HIGH COURT ] and .Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT ] Decided in favour of assessee. Rejection of books of accounts - Estimation of income - bogus purchases - HELD THAT:- Mere certain discrepancy at the entry gate cannot be a basis of rejection of entire books results for three assessment years, when no other incriminating evidence was find at the time of search. Thus we do not approve the rejection of books of account. The discloser made by director of the assessee has been honoured in its true spirit. The assessee disclosed Rs. 1.00 crore each for AY 2012- 13 2013-14 and Rs. 13.00 Crore for AY 2014-15 and if further addition by approving the rejection of books of account is sustained, the net profit would be unrealistic. Another reason to disapprove the action of AO in rejection of books result of assessee as same assessing officer completed the assessment of one of the purchase party u/s 153A r.w.s 143(3) and all their sale and purchase are accepted as genuine and no variation / addition in their return of income was made, thereby accepted their return income vide assessment order dated 18/11/2015. Thus addition sustained by ld CIT(A) to the extent of 5% of the impugned purchases will not survive. Assessee appeal allowed.

  ---

• 2023 (7) TMI 161
  Addition of on money - alternative plea of assessee that only percentage of profit can only be taxed from the alleged on-money ranging from 8% to 15% - CIT(A) deleted addition - HELD THAT:- CIT(A) by referring the decision of President Industries [ 1999 (4) TMI 8 - GUJARAT HIGH COURT ] and in Abhishek Corporation [ 1998 (8) TMI 110 - ITAT AHMEDABAD-C ] and took his view that assessee has offered more than 30% of on-money in its return of income. CIT(A) held that over and above of such 30% income cannot be sustained. The declared income of Rs. 1.003 crore is more than 30%. Thus, the ld. CIT(A) deleted the entire addition. We find that in Greenfield Reality P Ltd. [ 2021 (7) TMI 1134 - ITAT AHMEDABAD ] sustained the addition to the extent of 8% on similar issue. In ACIT Vs Shoppers Buildcon Pvt. Ltd. [ 2022 (5) TMI 459 - ITAT AHMEDABAD ] Tribunal upheld the order of ld. CIT(A) in making addition of 20% on similar issue. Considering the consistent view we do not find any infirmity of illegality in the order passed by the ld. CIT(A) which we affirm. Disallowance u/s 40(a)(ia) - assessee has incurred various expenses and made the payment thereof without deducting tax at source - HELD THAT:- CIT(A) after considering the remand report of AO held that during appellate stage, the assessee filed detailed written submissions, which were sent to AO for his comment. No adverse comment is made against the submission of assessee, by AO as found the submission of assessee in order. AO only objected that the assessee furnished additional evidence. CIT(A) held that once the AO is given opportunity to examine the nature of expenses and no adverse comment is made, accordingly, directed the Assessing Officer to delete the disallowance of cutting expenses, development expenses and professional fees. In our view, the ld. CIT(A) has passed the order after giving due opportunity to the AO which we affirm. In the result, ground No. 3 raised by the revenue is also dismissed. Admission of additional evidences by CIT(A) - allegation of violation of Rule 46A of the Income Tax Rules, 1962 - HELD THAT:- AO was given full opportunity to submit his remand report. The Assessing Officer furnished his detailed remand report. Remand report of Assessing officer is referred and considered by the ld. CIT(A) while passing the order on merit. As decided in Dharmdev Finance P Ltd. [ 2014 (4) TMI 1005 - GUJARAT HIGH COURT ] that once remand report was obtained from the AO by giving opportunity to both the parties, there is no violation of Rule 46. No merit in revenue allegation - Decided against revenue.

  ---

• Customs

• 2023 (7) TMI 160
  Refund of IGST paid in relation to the exports undertaken by it of goods - insulated cables - Export to a party based in Myanmar - claim of duty drawback at the higher rate of the IGST refund - HELD THAT:- It appears that there is no factual foundation for the Respondents to come to such conclusion and, in fact, such a conclusion is contrary to the record, subject matter of consideration by the authorities. This is also clear from the notification dated 31st October 2016 prescribing common duty at 2% in respect of the goods in question. In a similar situation where the claim of the assessee was not a claim to take a drawback at higher rate, the Gujarat High Court in Awadkrupa Plastomech (supra) in considering a prior decision in M/S AMIT COTTON INDUSTRIES THROUGH PARTNER, VELJIBHAI VIRJIBHAI RANIPA VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS [ 2019 (7) TMI 472 - GUJARAT HIGH COURT] , observed that is a situation when the claim made by the Petitioner was not to avail double benefit, that is of the IGST refund and the drawback, the Petitioner therein had become entitled to the IGST Refund. In the present case, the Petitioner is entitled to a refund of the IGST paid on the exports in question, as it is certain that this is not a case where the Petitioner is availing any double benefit that is of the IGST refund and a higher duty drawback. The Respondents are directed to refund to the Petitioner the IGST paid by the Petitioner in respect of the goods exported, i.e. zero rated supply, under shipping bills in question being an amount of Rs. 21,41,451/- with simple interest at 7% per annum with effect from 22nd February 2018 - the amounts be released within two weeks of the receipt of the authenticated copy of the present order by the concerned officer, authorised to release the amounts. The petition is allowed.

  ---

• 2023 (7) TMI 159
  Rejection of refund claim - plausible reason for the department to file the appeal since the refund application had been rejected by the Assistant Commissioner or not - HELD THAT:- What is more important to notice is that the appeal was filed by the department on 16.01.2017, much after the order was passed by the Delhi High Court on 08.11.2016 in the Writ Petition filed by Intex against the said order dated 22.09.2016 passed by the Assistant Commissioner. The reliefs that had been claimed by Intex in the Writ Petition were to declare the order dated 22.09.2016 as null and void and to quash it as it was in violation of the law declared by the Supreme Court in M/S SRF LTD., M/S ITC LTD VERSUS COMMISSIONER OF CUSTOMS, CHENNAI, COMMISSIONER OF CUSTOMS (IMPORT AND GENERAL) , NEW DELHI [ 2015 (4) TMI 561 - SUPREME COURT] . A further relief that was claimed by Intex was to direct the department to process the application for refund in accordance with the law declared by the Supreme Court in SRF. When the High Court had examined the correctness of the order dated 29.11.2016 passed by the Assistant Commissioner in the Writ Petition filed by Intex, the department could not have filed the appeal before the Commissioner (Appeals) to assail the same order dated 29.11.2016 before the Commissioner (Appeals). The said order, by necessary implication, stood set aside by the Delhi High Court. Further, the directions issued by the High Court had also been duly complied with by the Assistant Commissioner in the fresh order dated 29.11.2016 and payment had also been paid to Intex. The only course open to the department was to have challenged the order passed by the Delhi High Court on 08.11.2016 before the Supreme Court, which the department did by filing a Special Leave Petition in February 2017, but the Petition was dismissed by the Supreme Court on 07.07.2017. Thus, when the appeal was filed by the department before the Commissioner (Appeals) against an order the correctness of which stood decided against the department by the Delhi High Court, the order dated 26.06.2019 passed by the Commissioner (Appeals) on 26.06.2019 would be without jurisdiction. This appeal has been filed by the department to assail the order dated 26.06.2019 passed by the Commissioner (Appeals). The facts stated above would leave no manner of doubt that the department had not only unnecessarily filed the appeal before the Commissioner (Appeals), but this appeal has also been unnecessarily filed by the department before the Tribunal. Appeal dismissed.

  ---

• Corporate Laws

• 2023 (7) TMI 158
  Alleged illegal termination in respect of the Collaboration Agreement executed between the petitioner and the respondents - joint custody of the title deeds - HELD THAT:- The land/project in question has been excluded from the definition of Demerged Undertaking and the same has been directed to be retained by the petitioner herein (Demerged Company). As far as the Capital Towers Economic Benefit Agreement dated June, 2017 is concerned, a duly signed copy thereof has not been placed on record. Morover, a perusal of the same reveals that it contemplates that MGF Developments Limited would became a contributor in respect of the project pertaining to construction and development of the land in question, and in lieu thereof, it would be entitled to a share of the economic benefit arising out of the Developer Project Share . The said agreement also contains an arbitration clause. If at all the said agreement creates any rights in favour of MGF and/or warrants that MGF should have joint custody of the title documents in respect of the land in question, it is open for MGF to initiate appropriate proceedings seeking the same - Likewise, if at all, the Letter Agreement confers any right upon MGF, it is open to MGF to assert those rights in appropriate proceedings and seek appropriate order/s. In the present proceedings, there is no warrant to accede to the prayer/s sought in IA No. 7896/2023. In the circumstances, as jointly prayed by the petitioner and the respondents, the custody of the title deeds/documents are directed to be placed in the joint custody of the petitioner and the respondents. Application disposed of with the direction that the title deeds of the land in question, which are presently lying with the Registrar General of this court, be released to the petitioner and the respondents, who shall retain joint custody thereof.

  ---

• Insolvency & Bankruptcy

• 2023 (7) TMI 157
  Initiation of CIRP - Financial Debt or not - Creditors were providing factoring services - Loan against Bill of exchange - amount which is subject matter of Section 7 Application is a Financial Debt within the meaning of Section 5(8)(e) of I B Code, or not - HELD THAT:- The client as per Factoring Agreement is Arcons Infrastructures and Constructions Pvt. Ltd. The clause 12 in the definition of recourse clearly indicates that agreement between the parties was not any agreement which may be called as agreement of non recourse basis. Thus, the Financial Debt which is covered by Factoring Agreement is clearly covered within meaning of Section 5(8)(e) of the Code and the Financial Creditor was entitled to being recourse - there are no substance in the submission of Learned Counsel for the Appellant that Factoring Agreement was non-recourse agreement. The amount of Rs. 4,52,13,711/- was amount as due on 28.01.2019. The Adjudicating Authority found the said amount due and payable, there are no reason to take any different view - Financial Creditor will be entitled for payment of debt due along with interest at least till the insolvency commencement date i.e. 11.11.2022. The amount of Rs. 4,52,13,711.60/- under order of this Tribunal dated 07.12.2022 deposited, be paid to Respondent No. 1 - In addition to aforesaid payment of Rs. 4,52,13,711.60/-, the Appellant shall also make payment of simple interest at the rate of 14.50% p.a. till insolvency commencement date i.e. 11.11.2022 which payments shall be made to Respondent No. 1 within a period of 3 months from today. Appeal disposed off.

  ---

• 2023 (7) TMI 156
  Seeking to release the attachment of the tiles relating to the Corporate Debtor - Attachment of goods by the GST department before initiation of CIRP - whether RP was entitled for a direction from the Adjudicating Authority for release of the goods, which were under attachment of Respondent since 02.02.2018? HELD THAT:- The Respondent has filed a reply to the Appeal, where it has been stated that Respondent has auctioned the attached tiles, but it has to refund the money received from the auction purchaser under the orders of High Court, which amount has been refunded to auction purchaser and the end result is that the attachment by the Respondent for recovery of its excise dues still continues. The attachment was for the purposes of recovering the excise dues. After commencement of the CIRP, by virtue of Section 14 of the Code, no action to recover against the Corporate Debtor by any of the creditors can be undertaken. The Respondent has also filed their claim in Form-B, which has been accepted by the RP and revised claim has also been filed by the Respondent in Form-C, relying on judgment of the Hon ble Supreme Court in State Tax officer vs. Rainbow Paper Limited, which revised claim has not been accepted by the RP and an Application filed by Respondent with regard to revised claim is pending consideration before the Adjudicating Authority - In the present Appeal, we are not required to answer any question regarding nature of the claim of the Respondent. Only question which needs to be answered is that whether the Adjudicating Authority required to direct the Respondent to release the attachment so that assets of the Corporate Debtor can be used for the benefits of the creditors - In view of the Circular dated 23.03.2020 issued by Central Board of Excise and Customs, the Department itself has understood that when CIRP has been initiated for recovering any amount, the claim has to be filed and no recovery can be made since moratorium has been imposed under the Code. The Respondent after imposition of moratorium with effect from 27.04.2022 could not have recovered its dues. The attachment of the goods of the Corporate Debtor were made before initiation of CIRP. The assets, which were attached were still the assets of the Corporate Debtor, which were in the supurdagi of the Corporate Debtor. Respondent being unable to recover the amount from the attached assets, the RP has rightly filed the Application seeking a direction for release of the attachment, so that assets can be included in the assets of the Corporate Debtor for payment to the creditors. The Adjudicating Authority has committed error in rejecting Application filed by RP, by holding that Adjudicating Authority has no jurisdiction to issue direction to the State Authority, when the IRP is duty bound to take custody and control of the assets belonging to the Corporate Debtor, Application under Section 60, sub-section (5), sub-clause (c) was clearly maintainable and the Adjudicating Authority had ample jurisdiction to issue necessary direction. The order dated 07.02.2023 passed by the Adjudicating Authority - the Respondent are directed to release the attachment in question - appeal allowed.

  ---

• 2023 (7) TMI 155
  Status of the appellant - Shareholder or Credit of the Corporate Debtor - Transfer of shares or not - collation of claims - whether the Adjudicating Authority was justified in observing that the Appellant herein is a Shareholder of the Corporate Debtor Company? - HELD THAT:- This Tribunal is of the view that the ledger account is to be read with the statements in the balance sheets and the Financial Statements, together with the Auditor s Report filed with the RoC. It is settled Law that these aforenoted Financial Statements filed with the RoC have greater evidentiary value than that of a ledger statement which is an internal document. As regarding the Submission of the Learned Company Secretary that the RP had adjudicated the Claim, this Tribunal is of the considered view that in the facts of the present case, the RP has rightly rejected the claim of the Appellant based on the documentary evidence on hand. The duty of the RP is to collect and collate the claims and a mere rejection of the Claim by the RP cannot be construed to be an Adjudicatory function, keeping in view Regulation 13 of the CIRP Regulations 2016 - The Loan Agreement dated 27/12/2019 is also on the same date as that of the MoU which is said to have been revoked/cancelled by the Appellant. It is significant to mention that this Loan Agreement is silent about the MoU dated 02/08/2019. There is no evidence on record in terms of Statements of Accounts or Auditor s Report that the claim amount of Rs. 15,72,18,489/- has been disbursed pursuant to this Loan Agreement. The contention of the Learned Company Secretary appearing for the Appellant that the Register of Members was never produced before the Adjudicating Authority and therefore no steps could have been taken under Section 59 of the Act, is untenable as they themselves are relying on the letter dated 22/02/2020 in support of their argument that they had come to know that their amount was converted into Equity despite not having signed any Share Transfer Deed, then there are no substantial reasons for not having taken any effective steps under Section 59 of the Act. This Tribunal is of the earnest view that there are no substantial grounds to interfere with the order of the Adjudicating Authority - Appeal dismissed.

  ---

• Central Excise

• 2023 (7) TMI 154
  Permission for withdrawal of petition - Issue related to valuation - Section 35G of the Central Excise Act - HC [ 2016 (12) TMI 478 - GUJARAT HIGH COURT] - HC [ 2017 (9) TMI 1825 - GUJARAT HIGH COURT] - HELD THAT:- High Court dismissed the revenue appeal as not maintainable - Revenue permitted to request the High Court for restoration of appeal. Clandestine removal of goods - Valuation of goods [ 2015 (5) TMI 528 - CESTAT AHMEDABAD] - Valuation - undervaluation of goods - demand based on consumption of fuel, increase in price of goods after initiation of investigation etc [ 2019 (6) TMI 1350 - CESTAT AHMEDABAD] - HELD THAT:- Appeal admitted - List in the months of July, 2023.

  ---

• 2023 (7) TMI 153
  Remission of duty - valuation on account of damage by fire (finished goods and semi-finished goods lost) - correctness of value of stocks considered for claim by the Insurance Surveyor - Rule 21 of Central Excise Rules, 2001 - HELD THAT:- The Appellant s unit was undergoing severe labour unrest on 27.01.2012. A mob had gathered and violent incidents took place and huge damage was incurred for the assets of the Appellant. The mob had committed arson and also spread the fire within the factory premises which has resulted in total loss of more than Rs.300 Crores for the Appellant. The Appellant has filed the claim for more than Rs.300 Crores with the Insurance Company. The insurance valuer initially arrived at damage as only Rs.16.58 Crores. Being agitated by the same, the Appellants have approached the Arbitral Tribunal who have considered all these facts and then finally arrived at their damage for Rs.157 Crores and awarded this compensation to the Appellant. From a harmonious reading of the Rule would clarify that when the loss is caused by natural causes or unavoidable accident, the Assessee should be granted remission of duty. Coming to the factual matrix of this case, it is very clear that the arson indulged in by the mob of the workers was absolutely not an act which could have been avoided or controlled by the Management of the Appellant. The very fact that Appellant has lost assets worth about Rs.300 Crores (as per their estimate) for Rs.157 Crores (as estimated by the Arbitral Tribunal) shows that damage has been caused only on account of the situation which was completely unavoidable and was nowhere within the control of the Appellant - Though the Insurance Company has paid only a very paltry amount of Rs.16.5 Crores towards compensation, on Appeal before Arbitral Tribunal, which was headed by the eminent Ex-Supreme Court Judges, has come to a conclusion that the amount of damage caused to the extent was more than Rs.157 Crores. This is a fit case where the Appellant should have been granted the benefit of remission under Rule 21 of Central Excise Rules, 2002 and no Duty demand should have been confirmed - Appeal allowed.

  ---

• 2023 (7) TMI 152
  CENVAT Credit - exclusion clause in the definition of input service as defined under Rule 2(l) of the Cenvat Credit Rules, 2004 - renovation or repair of the factory premises - laptop insurance - HELD THAT:- The authorities below have specifically noted that the assessee has not provided any contract/ work order/ agreement with the service provider to identify the work done on behalf of the appellant. The appellant has only annexed certain copies of the invoices, which were not figuring in the annexure to the demand notice and the other invoices were found attached with the appeal though such invoices of the service provider were part of the annexure enclosed to the demand. The appellant has during the course of hearing submitted a compilation including several agreements as well as invoices of various companies. The matter needs to be reconsidered by the original authority. Therefore, it would be proper to remand the matter back to the Adjudicating Authority, who may examine the case in the light of the documents which may be submitted by the parties and the definition of input service , which comprises of three components, namely, the means clause, the inclusion clause and the exclusion clause. Appeal allowed by way of remand.

  ---

• 2023 (7) TMI 151
  Classification of goods - polished granite slabs - classifiable under tariff item no. 6802 23 90 or under tariff item no. 2156 1200? - HELD THAT:- The said issue has been decided by this tribunal in the case of M/S CLASSIC MARBLES VERSUS CCE VAPI [ 2013 (9) TMI 648 - CESTAT AHMEDABAD] wherein, the tribunal has held that the activities carried out by the appellants prior to 1-3-2006, would not amount to manufacture. From 1-3-2006, the goods in question are classifiable under Chapter 25 and benefit of Notification No. 4/2006-C.E., dated 3-2-2006 are admissible. Thus, the product in question i.e. Granite Slabs is correctly classified under 21561200 and not under 68022390 accordingly, the demand on this count is not sustainable hence, the same is set aside. Demand of Rs. 9,07,393/- - HELD THAT:- The appellant have made the submission that they had paid the duty on 30th June 2010 for the period April 2010 to June 2010 as a differential duty. However, the adjudicating authority may verify the said claim of the appellant and arrive at a correct computation of demand. Demand of Rs. 2,26,598/- in respect of clearance of marble slabs - HELD THAT:- The appellant has paid the duty of Rs. 2.24 lacs accordingly, the same may be verified by the adjudicating authority. Appeal allowed in part.

  ---