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TMI Tax Updates - e-Newsletter
August 1, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Petitioner's reply to GST notice not considered, violating natural justice. Court orders fresh consideration of petitioner's own case.
Validity of notice issued u/s 73 of the U.P. Goods and Services Tax Act, 2017 challenged due to non-consideration of petitioner's reply, violating principles of natural justice. Court held petitioner's grievance valid as notice contained facts and figures relating to unrelated entity. Directed respondent to consider petitioner's reply regarding its own company and mismatch/deficiencies, if any. Petitioner granted one week to submit detailed reply to Section 73 notice referring only to its own returns, not unrelated entity's case. Petitioner allowed to deny liability regarding notice addressed to unrelated entity. Writ petition disposed of.
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Transit goods seizure requires Sec 129 CGST Act action first. Sec 130 confiscation invalid without it. DIN omission & lack of relied material violates natural justice.
The interplay between Sections 129 and 130 of the CGST Act was analyzed. Section 129 applies when goods are in transit, while Section 130 allows confiscation and penalty for specific violations. Proceedings u/s 130 without prior Section 129 action were deemed invalid. Non-affixture of DIN on confiscation order and violation of natural justice principles by not providing material relied upon were also discussed. The confiscation orders were set aside, and matters remanded for proper adjudication following natural justice principles.
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Impugned order passed sans considering petitioner's reply & denying personal hearing despite request, violating natural justice principles.
The impugned order was passed without considering the reply filed by the petitioner and without affording an opportunity of personal hearing, despite a request being made, thereby violating the principles of natural justice. The provisions u/ss 73(9), 73(10), and 75(4) of the Act, 2017 mandate the requirement of providing an opportunity of filing a reply and personal hearing, as the word used is 'shall'. The matter was remanded to grant another opportunity to the petitioner to participate and make out a reply to the show cause notice, as the substantive rights were involved. The petition was allowed, as passing the order without considering the reply and denying personal hearing amounted to a breach of fundamental rights and violation of principles of natural justice.
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Tax demand order set aside for lack of hearing. Remanded on condition of remitting 10% tax & replying to show cause.
Impugned assessment order violated principles of natural justice as petitioner was not provided further opportunity after show cause notice nine months prior. Petitioner's reply did not address show cause notice. Tax demand confirmed without hearing petitioner. Order set aside, matter remanded for reconsideration on condition petitioner remits 10% of disputed tax demand within two weeks and submits reply to show cause notice. Petition disposed of.
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Bail granted due to lack of evidence. Custody serves no purpose. Pending cases not a ground to reject bail.
Petitioner granted regular bail as no incriminating evidence collected against him during investigation. Offences triable by Magistrate's Court, final report already submitted. Keeping petitioner in custody serves no purpose. Pendency of other criminal cases not ground to reject bail as petitioner made out case for bail. Supreme Court held pendency of several criminal cases cannot be basis to refuse bail. Petitioner ordered to be released on furnishing bail/surety bonds to satisfaction of trial court.
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E-commerce operator liable for GST on app-based passenger transport services, even if payment goes directly to drivers.
E-commerce operator's scope and GST liability u/s 9(5) of CGST Act, 2017 - Applicant qualifies as Electronic Commerce Operator (ECO) as it owns 'Rapido' app platform for supply of passenger transportation services. Services by four-wheeler cab providers to passengers through applicant's app are notified u/s 9(5) as ECO supplies. Applicant is liable to pay GST on such supplies even if consideration is paid directly to drivers as ECO definition and Section 9(5) don't mandate ECO to collect consideration. Three/two-wheeler cab services through applicant's app also qualify as ECO supplies liable to GST.
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'Pushti' (powdered cereal, pulse & sugar mix) not covered under 'meal/powder of dried legumes' or 'flour of dried legumes' entries. Exemption for services inapplicable.
Entry No. 59 of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017, as amended by Notification 06/2022-Central Tax (Rate) dated 13.07.2022, mentions 'Meal and powder of the dried leguminous vegetables' but the applicant's product 'pushti' is a powdered mixture of cereals, pulses, and sugar, hence not covered under this entry. Entry No. 78 of Notification No. 02/2027 Central Tax (Rates) dated 28.06.2017, as amended by Notification No. 07/2022 Central Tax (Rate) dated 13.07.2022, mentions 'Flour of the dried leguminous vegetables' but the applicant's product 'pushti' is a powdered mixture of cereals, pulses, and sugar, hence not covered under this entry. Exemption under S.N.66 clause (b) (ii) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and Circular No. 149/05/2021-GST dated 17.06.2021 is not applicable as the applicant is supplying goods and not services. Clarification No. KSA/GST.CR-05/2019-20 dated 23.06.2021 issued by Karnataka is also not applicable.
Income Tax
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AO can make best judgement assessment if no return filed. Petitioner didn't pursue case. AO's action valid, favoring revenue.
Section 144 empowers the Assessing Officer to proceed with best judgment assessment if the assessee fails to file return. Petitioner appeared through counsel but did not pursue further. AO invoked Section 144 and made assessment on best judgment basis in petitioner's absence. Court held AO's action valid and did not interfere, answering in favor of revenue. Authorities below did not violate Section 145.
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Assessee's registration cancellation set aside; Board's rural development activities qualified as charitable purpose u/s 2(15).
ITAT allowed assessee/Board's appeal, setting aside cancellation of Registration, holding that Board constituted under Haryana Rural Development Act, 1986 carried out activities of general public utility as per Section 2(15) definition of "charitable purpose" by augmenting agricultural production, improving market sales, developing roads, establishing dispensaries, water supply, sanitation, converting notified rural market areas, constructing godowns, storage for agricultural produce, rest houses, utilizing fees prescribed under the Act, thus fulfilling new definition u/s 2(20); ITAT rightly concluded Commissioner wasn't justified denying Registration; no error in ITAT judgment, no substantial question of law.
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Mere profit on sale can't treat transaction as business. Disposal of investment property is capital gain, not income.
Assessee's intention was to hold landed property as investment, not for trade. Revenue failed to prove by reliable evidence that assessee indulged in activities typical of real estate traders like plotting, consolidation, obtaining permits, etc. Mere profit on sale cannot treat transaction as adventure in nature of trade. Disposal of investment property is capital gain, not business income. ITAT rightly held assessee's activities were on capital account based on facts and circumstances. Decided in assessee's favor.
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Stay of demand beyond 365 days allowed if delay not assessee's fault. Proviso limiting extension struck down. Apex court, Bombay HC upheld.
Tribunal extending stay of demand beyond 365 days u/s 254(2A) is permissible if delay in disposing appeal is not attributable to assessee. Delhi High Court in Pepsi Foods (P) Ltd. struck down proviso prohibiting extension beyond 365 days even if delay not caused by assessee. Supreme Court upheld Delhi High Court's decision. Bombay High Court in Fulford (India) Ltd. refused to entertain Revenue's appeals challenging Tribunal orders granting extension, in line with Pepsi Foods.
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Reopening validity: FAO jurisdiction, not JAO's. covers . JAO notice quashed, time-barred.
Reopening of assessment u/s 147 - Validity of approval u/s 151 - notice not issued by Faceless Assessing Officer (FAO) - There is no concurrent jurisdiction for Joint Assessing Officer (JAO) and FAO for issuing notice u/s 148 or passing assessment/reassessment order. When specific jurisdiction assigned to FAO under Scheme dated 29 March 2022 notified u/s 151A, it excludes JAO's jurisdiction. Section 151A contemplates formulation of Scheme for assessment/reassessment u/s 147 and issuance of notice u/s 148. Scheme covers both aspects. Only FAO can issue notice u/s 148, not JAO. Impugned notice issued by JAO hit by Section 151A for lack of jurisdiction. Impugned notice u/s 148 quashed and set aside as barred by limitation and contrary to Section 151A.
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Interim order allows Rs. 97cr royalty repatriation after TDS, citing deposits, no demand & delayed assessment. Expedite assessment by 31.12.2024.
Interim order modified to permit repatriation of Rs. 97 crores towards royalty, subject to TDS deduction, considering substantial deposits made, absence of crystallized demand, and delay in search assessment completion. Contractual obligations cannot be defaulted indefinitely. Respondents directed to expedite assessment by 31.12.2024. Petitioner to provide royalty repatriation details. Dividend payout consideration deferred. Matter listed for review on 14.02.2025.
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High Court affirmed 6% disallowance of bogus purchases by Income Tax Tribunal based on facts & evidence. No interference warranted.
The High Court upheld the Income Tax Appellate Tribunal's decision to restrict the disallowance of bogus purchases to 6%, considering the facts and figures analyzed by the Tribunal. The court found no reason to interfere with the Tribunal's conclusion, which was based on the material before it, and deemed the 6% disallowance appropriate.
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Interest on ICDs & FDs rightly treated as business income for leasing & financing firm despite no NBFC registration. Rule of consistency upheld.
Interest income on Inter Corporate Deposits (ICD) and Fixed Deposits (FD) treated as income under "Profits & Gains of Business or Profession" instead of "Income from Other Sources" upheld. Assessee engaged in leasing and financing business as per Memorandum of Association (MOA). Non-registration as Non-Banking Finance Company (NBFC) not a valid reason for changing head of income. Rule of consistency demands consistent treatment when accepted as business income in preceding and succeeding years. Disallowance of amortized preliminary expenses set aside, directed to allow amortization consistent with treatment in other years. Appeal partly allowed.
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Immovable property purchase: If consideration < stamp duty value by >Rs.50k/10%, addition u/s 56(2)(x) to buyer. 10% tolerance allowed.
Addition u/s 56(2)(x) arises when consideration paid for immovable property is less than stamp duty value by more than Rs. 50,000 or 10% of consideration. If agreement fixing consideration was prior to the relevant year, stamp duty value on agreement date is considered. Section 50C applies to seller, 56(2)(x) to buyer. 10% tolerance limit under 50C also applies to 56(2)(x). Assessee is allowed 10% tolerance limit benefit since inception of 56(2)(x) and 50C. Addition made by Assessing Officer not in accordance with law, directed to delete addition. Assessee appeal allowed.
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ALV of unsold housing stock added as income. High Court & SC upheld. CIT(A) deletions unsustainable. Vacant land taxability restored.
Annual letting value (ALV) of unsold residential units treated as stock-in-trade was added as income from house property. CIT(A) deleted the addition. High Court affirmed ALV addition in assessee's own case for earlier years. Supreme Court upheld High Court's view. CIT(A)'s deletion cannot be sustained. Issue of taxability of vacant lands restored to AO for verification. Regarding allocation of expenses for computing deduction u/s 80IB(10), CIT(A) rightly allocated advertisement expenses based on average of earlier years and allocated directors' meeting fees as no evidence showed no agenda related to eligible projects. CIT(A) correctly did not allocate interest on borrowed funds as projects were running in surplus. Setting off of losses against profits correctly allowed as losses already set off earlier cannot be notionally brought forward. Disallowance u/s 14A rightly deleted as no evidence of investments from borrowed funds or expenditure for earning exempt income. Allocation of retainership fees upheld in absence of evidence of non-rendering of services for eligible projects.
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Commission paid to director is allowable business expense. Substantial evidence of services & benefits provided. Weighted deduction claim u/s 35(2AB) allowed in full.
Commission paid to director is allowable business expenditure u/s 36(1)(ii) as assessee provided substantial evidence demonstrating services rendered and resultant benefits; AO failed to prove payment was made to avoid DDT. Weighted deduction claim u/s 35(2AB) allowed in full; AO cannot solely rely on DSIR report without considering assessee's books of accounts and chartered accountant's certification. Principles of natural justice require providing reasons for reducing claim and opportunity to respond.
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TDS not applicable on payments by Indian residents to non-resident software suppliers for standard software licenses.
TDS u/s 195 - payments by resident Indian end-user to non-resident computer software manufacturers/suppliers - payment for software licenses not royalty under Article 12 of India-UK Tax Treaty. As per AO, tax required to be withheld as payments chargeable u/s.9(1)(vi) r.w.s. 195 read with DTAA Articles. Assessee stated payment for use of standard software, without obtaining rights for creation, modification or adaptation. HELD: Based on royalties definition in DTAA Article-13, payments not royalties. EULAs do not create interest/right in distributors/end-users amounting to use of or right to use copyright. No obligation u/s 195 to deduct TDS. Provisions of s.9(1)(vi) and explanations, not more beneficial than DTAA, not applicable. Amounts paid by resident end-users to non-resident manufacturers/suppliers as consideration for computer software use through EULAs, do not constitute royalties payment for copyright use. Consequently, payments do not give rise to taxable income in India. Persons u/s 195 not liable to deduct TDS on these payments. Decided in favour of assessee.
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Inadequate scrutiny of loans, funds transfers, interest income & share sale profits led to erroneous assessment favoring assessee.
AO failed to examine details, relied solely on assessee's submissions, resulting in erroneous assessment prejudicial to Revenue's interests. Assessee borrowed substantial loans, advanced funds, sold shares with profits, received interest income. AO neglected scrutinizing reasons for borrowings, fund utilization, interest receipts, share sale profits' nature. Invoking section 263 justified as AO's order erroneous, prejudicing Revenue's interests due to inadequate examination.
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Overseas sales commission not "Fees for Technical Services" under Income Tax Act. Indigenous tech firm supplying patented products globally.
The overseas sales commission received from Associated Enterprises (AEs) does not constitute "Fees for Technical Services" (FTS) u/s 9(1)(vii) of the Income Tax Act, as the services rendered are neither managerial nor consultancy in nature. The assessee company is a champion of indigenously developed technology in India, supplying to global customers with locally developed and globally registered patents. The associated entity performs pure sales functions, connecting potential customers and introducing the assessee to them, while the assessee predominantly handles the remaining activities. The Assessing Officer erroneously treated the overseas sales commission as FTS without appreciating that the associated entity does not render services resulting in FTS or make available technical knowledge. Relying on the case of DCIT v. Welspun Corporation Ltd, it was held that commission paid to non-resident export commission agents for highly technical products does not change the character of the sales agent's activity, as the object is to sell, and familiarity with technical details is only towards that end. Consequently, the impugned payment received by the assessee is commission on sales and marketing services and cannot be treated as FTS u/s 9(1)(vii) of the Act. The levy of interest u/ss 234A and 234B is consequential and mandatory.
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Trust's income tax liability determined by last will, not max rate. AO & CIT(A) erred in applying Sec 164(1). Sec 160(iv) applies.
Trust's income tax liability determined based on last will provisions, not maximum marginal rate - assessee's appeal allowed. AO and CIT(A) erred in applying Section 164(1) to tax at maximum marginal rate when share and income already determined by last will. Tax to be computed at normal rate per Section 160(iv) treating Trust as AOP, as contended by assessee.
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Penalty u/s 271(1)(c) invalid for TP adjustment. AO relied on TPO without examining penalty imposition. Assessee computed ALP diligently.
Penalty u/s 271(1)(c) for furnishing inaccurate particulars of income - adjustment made u/s 92CA - penalty levied u/s 271(1)(c) on the adjustment made u/s 92CA is not legally valid. CIT(A) rightly deleted addition as AO relied on adjustment made by TPO without examining whether penalty was imposable. Explanation 7 to Section 271(1)(c) places onus on assessee to show ALP computed u/s 92C in good faith and due diligence. Assessee computed ALP per Section 92C, no dispute over MAM, PLI or timescale. AO/TPO adopted different comparables. AO did not allege lack of good faith and due diligence. AO failed to demonstrate specific act, fact or conduct proving lack of good faith and due diligence. Lack of due diligence in ALP determination not indicated or inferable. Conditions for invoking Explanation 7 to Section 271(1)(c) did not exist. Revenue's appeal dismissed.
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Appeal delay condoned. Rectification petition pending disposal justified delay. Appellant pursued alternate remedy bonafidely.
Delay of 1190 days in filing appeal against order u/s 143(1) was condoned. Appellant filed rectification petition u/s 154 against order u/s 143(1) which was pending disposal on date of affidavit seeking condonation of delay. Intimation received from CPC transferring return for necessary action justified appellant's contention of pending rectification application. Delay occurred due to appellant pursuing alternate remedy bonafidely. Appeal allowed, directing CIT(Appeals) to condone delay, provide opportunity of hearing, and decide on merits.
Customs
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Impugned public notices subject to private contracts between shipping lines & exporters/importers. Petition disposed.
Petitioners agreed to impugned public notices being read subject to contracts between shipping lines and exporter/importer, as per paragraph 24 of affidavit in reply, where it was averred that impugned notices do not interfere with private contracts shipping lines have with importers and exporters. Therefore, impugned public notices are subject to private contracts shipping lines have with importers/exporters. Petition disposed.
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Customs classification dispute resolved. No wilful suppression found. Correct classification accepted after examination. Differential duty paid.
Classification dispute for imported goods under Customs Tariff Act, 1975. Appellant declared details, goods physically examined. No wilful suppression of facts attributable for Section 28(4) applicability. Earlier, Customs authorities permitted clearance under appellant's classification. Commissioner held Section 28(4) invoking provisions inapplicable, being a case of misclassification only. Correct classification accepted, differential duty paid upon informing. Impugned order set aside by Appellate Tribunal, appeal allowed.
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Broker license revocation invalid; no subletting/overvaluation proved. Penalty/deposit forfeiture set aside due to lack of evidence.
Revocation of customs broker license invalid due to contradictory findings - forefeiture of security deposit and penalty levy set aside - no evidence of subletting license or overvaluation for higher drawback - violation of regulations not proved as broker's statement not recorded - lack of verification if broker filed shipping bill, advised exporter, or verified exporter's identity/functioning - impugned order unsustainable, appeal allowed.
DGFT
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Public notice extends deadline for modifying wastage & SIONs for precious metals exports till 31.08.2024. Interim restores previous norms.
Public notice abeyance extends deadline for modifying wastage norms and Standard Input Output Norms for Gold/Platinum/Silver content in exports until 31.08.2024. Interim period restores previous wastage norms under Para 4.59 and SIONs M1 to M7 prior to Public Notice No. 05/2024 dated 27.05.2024. Reassessment based on Gem & Jewellery Export Promotion Council's request.
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Govt allows 1,000 MT Non-Basmati White Rice export to Namibia through NCEL under FTP 2023.
Central Government permits export of 1,000 MTs of Non-Basmati White Rice under ITC(HS) code 10063090 to Namibia through National Cooperative Exports Limited (NCEL) in exercise of powers under Foreign Trade (Development & Regulation) Act, 1992 and Foreign Trade Policy 2023 pursuant to Notification 20/2023 dated 20.07.2023.
FEMA
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Secured creditors under SARFAESI Act take priority over FEMA dues. Secured creditor's claim prevails, FEMA dues payable to govt covered.
Debts due to secured creditors under SARFAESI Act have priority over debts under FEMA. SARFAESI Act being a later enactment prevails over earlier FEMA. SARFAESI Act overrides provisions of FEMA and secured creditor's dues prevail over FEMA dues. Section 37A of FEMA being prospective cannot apply to property already mortgaged before its enactment. Under RDBI Act, secured creditor's claim has priority over FEMA dues. FEMA dues payable to government covered under provisions granting priority to secured creditors. Availability of appeal remedy does not oust writ jurisdiction. Impugned order attaching mortgaged property for FEMA dues quashed. Property to be released to secured creditor.
Corporate Law
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Dissolution of company ordered u/s 481. Liquidation proceedings terminated. Official Liquidator discharged. Company dissolved.
Dissolution of company sought u/s 481 of Companies Act, 1956. Court opined liquidation proceedings warranted termination, company should be dissolved as Official Liquidator unable to proceed further with winding up. Relying on Supreme Court's decision in Meghal Homes and Section 481(1), considering facts and circumstances, liquidation proceedings warranted end. Company M/s. ARC Cement Ltd. dissolved, Official Liquidator discharged. Application allowed.
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Winding up company, land rights dispute. Court determined shares in lands, valuation-based compensation approach. Revised scheme verification ordered. Disbursements to resume.
The Court considered the winding up of a company, seeking release of lands and claiming rights in the land taken over by the Official Liquidator (OL). The Court estimated the company's share contribution and market value of the lands, determining that the company would be entitled to its respective shares of 50%, 37.5%, and 25% in the Talan, RSEB, and Gulab Bagh lands. A valuation-based approach on these shares was deemed a mode of compensating the company for the value of its share in these lands. The Court declined to direct any adjustment of the claimed amount of Rs. 47 lakhs, as it was not an admitted sum. Regarding the sanction of the revised scheme for compromise and/or arrangement u/s 391/394 of the Companies Act, 1956, the Court directed the OL to verify and file a response/report on the latest position of assets and liabilities, including details of fixed assets, shares, securities, unsecured creditors, and bond holders. The Court directed the Disbursement Committee to recommence disbursements to depositors and bond holders, as per the Supreme Court's order, and continue disbursement of the remaining 1,719 claims. The entire records were to be handed over to a new Committee by 30th April, 2024, which would start functioning from 1st May, 2024, and submit bi-monthly reports.
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Court can't set aside arbitral award for mere errors; must shock judicial conscience. 2015 amendment expanded public policy violation.
The court held that it can only set aside an arbitral award on the ground of patent illegality appearing on its face that shocks the judicial conscience, going to the root of the matter. Mere erroneous application of law or reappreciation of evidence is impermissible. While the 2015 amendment expanded the scope of violating public policy, the court cannot interfere with the award merely because another reasonable conclusion is possible from the merits. Finding the arbitrator's award correct and in accordance with law, the petition was dismissed.
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Respondents 1&2 ordered to act against Respondent 3 & sister firms for record manipulation & fund siphoning under Companies Act.
Respondent No.1 & 2 directed to initiate action under Chapter XIV of Companies Act, 2013 against respondent No.3 and sister group companies for manipulating records and siphoning funds to shell companies. Court finds inaction by respondents No.1 & 2 unfathomable despite information about financial affairs. Imperative to exercise statutory duties in arresting pilferage, safeguard interests of petitioner and others. Respondents No.1 & 2 conjointly directed to inspect affairs of respondent No.3 and related companies as per IRP reports, ensure compliance u/ss 206 to 210, submit Inspection Report within four weeks. Matter re-notified for hearing.
Bill
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Sec 194M: TDS rate reduced from 5% to 2% for payments to residents for contracts, commissions, etc. Effective Oct 1, 2024.
Income Tax: Section 194M mandates individuals or Hindu undivided families to deduct 5% TDS on payments made to residents for contract work, commissions, brokerage, or professional fees. The proposed amendment reduces this TDS rate from 5% to 2%, effective October 1, 2024.
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Tax deduction on e-commerce sales reduced from 1% to 0.1% from Oct 1, 2024. Parity with offline transactions.
Income Tax: Section 194-O of the Income Tax Act provides for deduction of tax at source (TDS) at the rate of 1% on the gross amount of sales or services facilitated by an e-commerce operator through its digital or electronic platform for an e-commerce participant. To bring parity with the TDS/TCS rates applicable on offline transactions, it is proposed to reduce the TDS rate u/s 194-O from 1% to 0.1%. The amendment will take effect from October 1, 2024.
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Mutual funds/UTI unit repurchase TDS of 20% abolished from Oct 1, 2024, simplifying capital gains taxation.
Income Tax: Section 194F relating to Tax Deducted at Source (TDS) on payments made by Mutual Funds or Unit Trust of India (UTI) on repurchase of units, attracting a TDS rate of 20%, is proposed to be omitted. This amendment, aimed at rationalizing and simplifying taxation of capital gains, will take effect from October 1, 2024.
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Amendment expands tax deduction scope for salaried employees, allowing credit for TCS/TDS paid under certain chapters, easing compliance.
Income Tax: Proposed amendment to sub-section (2B) of section 192 to expand its scope to include tax deducted/collected under Chapter XVII-B or Chapter XVII-BB for computing deduction of tax on salary income, easing compliance and avoiding cash flow issues for salaried employees by allowing credit for TCS/TDS paid. The amendment will take effect from October 1, 2024.
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Govt proposes interest rate hike from 1% to 1.5% per month on late TCS payment to align with TDS provisions from Apr 1, 2025.
Income Tax: Proposed amendment to increase simple interest rate from 1% to 1.5% per month or part thereof on late payment of tax collected at source (TCS) to government account u/s 206C(7) of Income Tax Act. This aligns interest rate with provisions for late deposit of tax deducted at source (TDS) u/s 201(1A). Amendment effective from April 1, 2025 to address difficulty faced by collectee due to late payment of TCS to government.
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Remuneration limit for working partners raised: 1st Rs. 6L book profit/loss - Rs. 3L or 90%, whichever higher; balance - 60%.
Income Tax: Limit of remuneration to working partners in partnership firms allowed as deduction increased - on first Rs 6,00,000 of book profit or loss, Rs 3,00,000 or 90% of book profit, whichever higher; on balance book profit, 60%. Amendment to Section 40(b)(v) effective from April 1, 2025 for assessment year 2025-2026 onwards. Existing limit Rs 1,50,000 or 90% of book profit on first Rs 3,00,000, 60% on balance.
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New tax provision allows parents to claim TCS credit on funds remitted to minors under RBI scheme, effective Jan 1, 2025.
Income Tax: The proposal aims to introduce a provision in Section 206C of the Income Tax Act to allow the Board to notify rules for cases where credit of tax collected at source (TCS) can be given to a person other than the collectee. Specifically, it permits the parent to claim credit for TCS on funds remitted to a minor under the RBI's Liberalized Remittance Scheme, where the minor's income is clubbed with the parent's income u/s 64(1A). This amendment will be effective from January 1, 2025.
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Buy-back of shares treated as dividend, capital loss allowed for shareholders. Nil consideration for capital loss. Effective Oct 2024.
Income Tax: Tax on distributed income of domestic company for buy-back of shares to be treated as dividend in hands of shareholders. Cost of acquisition of shares bought back to generate capital loss for shareholders, allowing set-off against subsequent capital gains. Deeming value of consideration for bought back shares as nil for computing capital loss. Amendments effective from October 1, 2024 for any buy-back on or after that date. Aims to widen tax base and prevent avoidance by aligning treatment of dividends and buybacks.
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STT hiked on options (0.1%) & futures (0.02%) trades. Delivery equity rates unchanged (0.1%). Exercised options 0.125% on intrinsic value.
Securities Transaction Tax (STT) rates revised - on sale of options in securities increased from 0.0625% to 0.1% of option premium, on sale of futures in securities increased from 0.0125% to 0.02% of traded price. Rates for delivery trades in equity shares unchanged at 0.1% on purchase and sale. For exercised options, purchaser pays 0.125% of intrinsic price. Amendments effective 1st October 2024 due to exponential growth of derivative markets.
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Residential house property letting income taxed under 'Income from house property', not 'Business income'. Section 28 amended for clarity from AY 2025-26.
Income from letting out residential house property by owner to be taxed under head 'Income from house property', not 'Profits and gains of business or profession'. Amendment to section 28 of Income-tax Act to clarify this, effective from assessment year 2025-26.
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Gifting shares by cos to face capital gains tax from FY25-26. Exemption under Sec 47(iii) to be limited to individuals & HUFs.
Income Tax: Section 47(iii) of the Income Tax Act, which exempts transfers of capital assets under gift, will or irrevocable trust from capital gains tax, is proposed to be amended. The amendment aims to limit the exemption to individuals and Hindu Undivided Families, effectively making such transfers by companies taxable. This move intends to curb tax avoidance and erosion of the tax base through gifting of shares by companies, which has been a litigated issue. The amendment will be effective from April 1, 2025, applicable for Assessment Year 2025-26 onwards.
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10% TDS on partners' income above Rs. 20K p.a. from April '25 for partnerships. Widening tax base & curbing avoidance.
Income Tax: Proposed insertion of new Section 194T mandates 10% TDS on payments exceeding Rs 20,000 annually by partnership firms to partners towards salary, remuneration, interest, bonus or commission, effective April 1, 2025, widening tax base and curbing avoidance. This provision currently does not exist.
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Tax Collection at Source on luxury goods over Rs. 10 lakh to widen tax base & track high-value expenses. Effective 01/01/2025.
Income Tax: Section 206C(1F) of the Income Tax Act is proposed to be amended to levy Tax Collection at Source (TCS) on sale of any other goods exceeding Rs. 10 lakh, in addition to motor vehicles, as may be notified by the Central Government. The amendment aims to widen the tax base and track expenses on luxury goods by high net worth individuals. The notified goods would be in the nature of luxury goods. The amendment will take effect from January 1, 2025.
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TDS on property transfer based on aggregate payment to all sellers, not individual payments below Rs. 50L. Prevents misinterpretation. Effective 1/10/2024
Income Tax: Amendment to section 194-IA of Income Tax Act clarifies that for TDS on transfer of immovable property, the consideration shall be aggregate of amounts paid by all transferees to all transferors, irrespective of individual payments being below Rs. 50 lakh. This aims to prevent interpretation limiting TDS obligation only when individual payment exceeds Rs. 50 lakh. The amendment takes effect from October 1, 2024.
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TDS applicable on interest over Rs. 10,000 from FRSB 2020 & specified securities from Oct 1, 2024 as per Income Tax Act Sec 193 amendment.
Income Tax: Section 193 of the Income Tax Act is amended to allow deduction of tax at source when interest exceeding Rs 10,000 is paid on Floating Rate Savings Bonds (FRSB) 2020 (Taxable) and any other security specified by the Central Government. The amendment takes effect from October 1, 2024.
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Income Tax Act amended to disallow inadmissible expenses for life insurers' profits from Apr'25. Actuarial surplus to include such expenses.
Income Tax: Section 44 of the Income Tax Act provides for computing profits and gains of life insurance business based on the First Schedule. Rule 2 of the First Schedule states that profits shall be the annual average surplus from actuarial valuation, excluding surplus from earlier periods. To prevent misuse and ensure disallowance of inadmissible expenses u/s 37, it is proposed to amend Rule 2 to add back such expenses to the profits of life insurance business. The amendment is effective from April 1, 2025, applying from assessment year 2025-2026 onwards.
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Amendment widens tax base, deems foreign taxes withheld as income to curb double deduction & tax avoidance. Effective 1st April 2025.
Income Tax: The proposed amendment to section 198 aims to widen the tax base and address tax avoidance by deeming all sums deducted as tax in India and abroad, for which credit is allowed against payable tax in India, as income received for computing the total income of an assessee. This addresses the issue of under-reporting total income by excluding foreign taxes withheld while claiming credit for the same, resulting in double deduction. The amendment takes effect from April 1, 2025.
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Amendment excludes sums paid u/s 194J from TDS u/s 194C for professional/technical services. Deduct tax u/s 194J instead of 194C. Effective 10/1/2024.
Income Tax: Proposed amendment explicitly states that any sum referred to in sub-section (1) of section 194J does not constitute "work" for TDS u/s 194C, thereby excluding sums paid u/s 194J from section 194C. This clarifies that deductors should deduct tax u/s 194J instead of 194C for professional or technical services. The amendment takes effect from October 1, 2024.
State GST
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Transfer of ESOP/ESPP/RSU by foreign holding co. to employees of domestic subsidiary co. sans fee/markup is GST-exempt.
Transfer of ESOP/ESPP/RSU by foreign holding company to employees of domestic subsidiary company does not attract GST where no additional fee, markup or commission is charged. Securities/shares are neither goods nor services under GST law. Reimbursement by domestic subsidiary to foreign holding company on cost-to-cost basis for transfer of securities/shares is not import of services. However, if foreign holding company charges additional amount over cost for facilitating/arranging transaction, GST is leviable on such additional amount payable by domestic subsidiary on reverse charge basis as import of services.
Indian Laws
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Appellant bank's SARFAESI proceedings upheld; can issue Sec 13(4) notice to guarantor for recoverable loan amounts.
Challenge to proceedings initiated under SARFAESI Act by appellant bank. Court held: Appellant entitled to proceed under SARFAESI Act given mortgage and recoverable loan amounts. Guarantor's liability joint and several with principal debtor. Impugned judgment set aside, allowing appellant bank to proceed under SARFAESI Act, including Section 13(4) notice previously quashed. Appeal allowed.
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Real estate promoters must deposit interest amount per MahaRERA Order as pre-condition for appeal entertainment, subject to COVID-19 period deduction.
Requirement of pre-deposit towards compliance with proviso to Section 43 (5) of RERA - liability of Appellant to pay interest is not in praesenti but in future - direction to deposit entire interest amount when proviso permits 30% of penalty. Proviso applicable only when promoter files appeal, not flat purchaser/allotee. Total amount means payable on Order date, not future. Deferment of interest payment doesn't mean no liability. Pre-deposit objective is deterrent against endless litigation. Deferment for project interest, not exemption from pre-deposit. Appellant must deposit interest per MahaRERA Order as pre-condition for appeal entertainment, subject to COVID-19 period deduction. MahaRERA direction is interest, not penalty, so entire interest amount must be deposited. Appeals partly allowed for COVID-19 period interest deduction. Appellate Tribunal Order modified accordingly.
SEBI
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Securities contracts rules revised: Exchanges to disclose shareholding quarterly. Core fund omitted. Schedules trimmed. Investment policy updated.
Securities Contracts Regulation amended: Recognized stock exchanges and clearing corporations to disclose shareholding pattern quarterly as per listed company norms. Omission of Core Settlement Guarantee Fund from member committee clause. Deletion of certain paragraphs from Schedules. Revision in guidelines for investment policy and omission of provisions related to Default Waterfall.
Service Tax
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Call Option Fee not liable for service tax, being derivative under SCRA, not service as per Finance Act. SC discussed it in Vodafone case.
Detailed legal analysis regarding levy of service tax on 'Call Option Fee' during 2007-08 to 2013-14. Held that 'Call Option' is a derivative or right in securities under Securities Contracts (Regulation) Act, 1956 (SCRA), hence a transaction in goods not subject to service tax under Finance Act, 1994. Supreme Court in Vodafone case discussed 'Call Options' without indicating illegality. Consideration for Call Option, not for ancillary requirement of holding shares. Call options fall under activities excluded from 'service' definition u/s 65B(44). Extended period of limitation wrongly invoked without evidence of intent to evade tax. Penalty wrongly imposed as no deliberate deception to evade duty. Order set aside, appeal allowed.
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Tribunal rules surcharge not insurance premium. No policy issued. Not licensed insurer. Surcharge pre-1.7.2012 not premium. Stage carriage exempted from service tax.
The tribunal held that the insurance scheme and surcharge charged by the appellant did not amount to premium as there was no insurance policy issued mentioning conditions and circumstances for indemnifying passengers. To issue an insurance policy, the appellant must be licensed by the Insurance Regulatory and Development Authority (IRDA). The surcharge collected prior to 1.7.2012 was not in the nature of premium, and the activity was not covered under 'general insurance' as per the Finance Act, 1994. The transportation of passengers as stage carriage was exempted from service tax. The surcharge was inseparable from the ticket cost, and the main service of stage carriage was not taxable. Consequently, no service tax, penalty, or interest was payable. The impugned order was set aside, and the appeal was allowed.
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No service tax liability for unapproved long courses until 2011. Exemption reinstated from 1.7.2012. No suppression or malafide intent.
Appellants providing long duration courses not approved by AICTE were exempted from service tax liability u/s 65(105)(zzc) of Finance Act, 1994 until Finance Act, 2011 removed the exemption. However, Finance Act, 2012 reinstated the exemption from 01.07.2012. Thus, appellants had no tax liability for the impugned period. The department wrongly alleged suppression of facts and invoked extended period of limitation despite absence of tax evasion or malafide intent. CESTAT set aside the impugned order and allowed the appeal.
Central Excise
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Subsidy received under Rajasthan Investment Promotion Scheme 2010 not included in assessable value of goods cleared in 2016-17.
Subsidy received by the appellant under Rajasthan Investment Promotion Scheme 2010 from the State Government cannot be included in assessable value of goods cleared during 1.4.2016 to 31.03.2017 u/s 4(3)(d) of Central Excise Act. Following latest decision in M/S HARIT POLYTECH PVT. LTD. VERSUS COMMISSIONER, CENTRAL EXCISE & CGST- JAIPUR I and other cases, where subsidy does not reduce sales tax required to be paid by assessee, subsidy amount cannot be included in transaction value for central excise duty levy. VAT amount paid by assessee using VAT 37B challans construed as actual VAT payment, not included in transaction value u/s 4(3)(d). Impugned order set aside. Appeal allowed.
Case Laws:
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GST
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2024 (7) TMI 1515
Validity of notice issued u/s 73 of the U.P. Goods and Services Tax Act, 2017 - non-consideration of petitioner's reply - violation of principles of natural justice - HELD THAT:- The petitioner's grievance is with regard to non consideration of its earlier reply where it had pointed out that the notice was issued giving facts and figures relating to M/s Paridhee Creation with which the petitioner has no relation at all. The interest of justice would be served if the respondent considers the reply of the petitioner given earlier with regard to its own company and mismatch/deficiencies, if any found in its reasons - petitioner is directed to submit a detailed reply to notice under Section 73 within a week from today. It shall refer only to its own returns and not to the case of M/s Paridhee Creation. It is open to the petitioner to deny its liability so far as notice under Section 73 addressed to M/s Paridhee Creation is concerned. The writ petition is disposed off.
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2024 (7) TMI 1514
Challenge to order whereby demand in excess has been raised - petitioner was completely denied opportunity of oral hearing before the Assessing Authority - violation of principles of natural justice - HELD THAT:- The view taken by the coordinate bench in BHARAT MINT AND ALLIED CHEMICALS VERSUS COMMISSIONER COMMERCIAL TAX AND 2 OTHERS [ 2022 (3) TMI 492 - ALLAHABAD HIGH COURT] is completely agreed upon - It has been laid down by way of a principle of law that a person/assessee is not required to request for opportunity of personal hearing and it remained mandatory upon the Assessing Authority to afford such opportunity before passing an adverse order. Even otherwise in the context of an assessment order creating heavy civil liability, observing such minimal opportunity of hearing is a must. Principle of natural justice would commend to this Court to bind the authorities to always ensure to provide such opportunity of hearing. It has to be ensured that such opportunity is granted in real terms - the impugned order itself has been passed on 19.04.2024, while reply to the show-cause-notice had been entertained on 19.01.2024. The stand of the assessee may remain unclear unless minimal opportunity of hearing is first granted. Only thereafter, the explanation furnished may be rejected and demand created. Not only such opportunity would ensure observance of rules of natural of justice but it would also allow the authority to pass appropriate and reasoned order as may serve the interest of justice and allow a better appreciation to arise at the next/appeal stage, if required. The matter is remitted to the respondent no.2/Assistant Commissioner, State Tax, Sector - 1, Prayagraj to issue a fresh notice to the petitioner within a period of two weeks from today - petition disposed off by way of remand.
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2024 (7) TMI 1513
Challenge to tax demand in order in original - petitioner did not have a reasonable opportunity to contest the tax demand on merits - violation of principles of natural justice - HELD THAT:- On examining the petitioner's reply, it is clear that the petitioner merely attached the GSTR 3B returns and stated that all taxes were paid. The petitioner was under an obligation to submit all relevant documents such as tax invoices, documents to establish movement of goods, bank statements with regard to payments made by the petitioner and proof, if any, of payment of taxes by the supplier. It is also, however, noticeable that only the summary of the order has been uploaded and such order indicates that the tax proposal was confirmed because no reply was filed. In these circumstance, reconsideration is necessary after putting the petitioner on terms. The impugned order dated 30.12.2023 is set aside and the matter is remanded for reconsideration on condition that the petitioner remits an additional 5% of the disputed tax demand within 15 days from the date of receipt of a copy of this order - petition disposed off by way of remand.
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2024 (7) TMI 1512
Interplay between Section 129 and 130 of the CGST Act - Taking action under Section 130 of the CGST Act only on initiation of action under Section 129 of the CGST Act - action taken under Section 130 of the CGST Act, without a prior invocation of Section 129 of the Act would render the proceedings under Section 130 of the CGST Act invalid or not - non affixture of DIN Number on the order of confiscation - invalid order or not - violation of principles of natural justice. HELD THAT:- The question of the interplay between Section 129 and 130 of the CGST Act was considered, by a Division Bench of the High Court of Gujarat and Ahmadabad, in a case of Synergy Fertichem Pvt. Ltd Vs. State of Gujarat [ 2019 (12) TMI 1213 - GUJARAT HIGH COURT] . This judgment was followed by the High Court of Gujarat in the case of Siddhbali Stone Gallery Vs. State of Gujarat [ 2020 (3) TMI 697 - GUJARAT HIGH COURT] - In Synergy Fertichem Pvt. Ltd Vs. State of Gujarat, the Division Bench of the Hon ble High Court of Gujarat was considering a similar question of whether proceedings under Section 130 of the CGST Act can be initiated without any prior proceedings under Section 129 of the CGST Act. Section 129 applies only when goods are being transported. The provisions of Section 129 would not apply in relation to a situation where the goods are not in transit. The language of Section 129(1) specifically states that detention or seizure of goods can be carried out while the goods are in transit, in contravention of the Provisions of the Act or the Rules made there under. In the case of Section 130 confiscation of goods or conveyances and levy of penalty can be done subject to any of the five conditions enumerated in Section 130 (1) being available. In the present case, the conveyances and goods were stopped and detained on 27.04.2024. Thereafter, a statement was taken from the driver of the conveyances, in FORM GST MOV-01 on 27.04.2024. After recording the statement, the 2nd respondent issued FORM GST MOV-10 dated 01.05.2024, invoking the provisions of Section 130 of the CGST Act. In this notice, the discrepancies which were noticed by the 2nd respondent, were set out, and it was stated that these discrepancies lead to a prima facie conclusion that the transport of goods was done with an intention to evade tax. It is a settled principle of law that a show cause notice would have to set out the entire case against the noticee and noticee should be given an opportunity to rebut the same. In that process, the noticee can always ask for the material on the basis of which the show cause notice has been issued - In the present case, the order of confiscation contains various details which were not placed before the petitioners in the show cause notices of 01.05.2024. The 2nd respondent did not choose to respond to the request of the petitioners for supply of the material on the basis of which the show cause notice has been issued would also amount further violation of the principles of natural justice. The confiscation orders are set aside and the matters are remanded back to the 2nd respondent for proper adjudication following principles of natural justice - petition allowed by way of remand.
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2024 (7) TMI 1511
Jurisdiction exceeded in demanding the tax amount along with interest and penalty - demand made without even considering the documents submitted in a proper perspective and without affording even a personal hearing - violation of principles of natural justice - HELD THAT:- It is well laid down principle of law that when the revenue issues a show cause notice, opportunity has to be given to the taxpayer to submit reply and thereafter an opportunity of hearing is also contemplated under the Act, 2017. In the present case on hand, it is the case of petitioner s that after issuance of show cause notice, he has filed the reply and after the audit report, he has filed the objections and an explanation. However, the same was not taken into account and despite making a request for personal hearing, the same was not granted and hastily respondent No. 3 has proceeded to pass the impugned order by imposing tax, interest and penalty. In the present case on hand, it is the case of respondents that despite providing suitable opportunity, the petitioner/taxpayer has not filed reply in Part-B and he has not filed objections with explanation instead the taxpayer has submitted several documents. He has not filed the reply on time despite granting sufficient opportunity and reminders requesting and insisting the petitioner/taxpayer to file his reply on or before the relevant date stipulated therein and subsequently adhering to the request, provided an opportunity of personal hearing on 22.01.2024 and thereafter again a further reminder to file the reply for DRC-01 and to make use of the opportunity of personal hearing which was scheduled on 27.02.2024. Apparently, it is seen from the impugned order that the response to the show cause notice has not been adverted to and the personal hearing which was sought for by the letter dated 12.03.2024 was also not provided to the petitioner and an impugned order came to be passed on 30.03.2024 under Section 73 (9) and (10) of the KGST Act, 2017. In this background, it is to be seen whether the opportunity of filing reply and the opportunity of personal hearing is mandatory in nature as canvassed by the learned counsel for the petitioner. This Court has already dealt with the provisions of Section 73 (9) and (10) and Section 75 (4) of the Act, 2017 which is unambiguous with regard to a mandatory requirement as the word being used is shall . Reliance placed upon the Judgment of a coordinate Bench of this Court in the case of Breakbounce India (P.) Ltd., vs. Commissioner of Commercial Taxes, [ 2024 (6) TMI 888 - KARNATAKA HIGH COURT] , wherein it is held ' It is noticed that the order passed is an ex-parte order without the say of the petitioner. Though the electronic mode of service may be sufficient, however, in the peculiar facts of this case, taking note of the substantive rights involved, it would serve the interest of justice by remanding the matter and granting another opportunity to the petitioner to participate and make out his reply to the show cause notice dated 27.09.2023.' The petitioner ought to have availed this remedy to challenge the order passed by the respondents/authorities. But, in the present case on hand, the petitioner has filed the reply and the same having not been considered, while passing the impugned order and an opportunity of personal hearing having not been provided, in my humble opinion would be a breach of the fundamental rights of the petitioner and also it would fall within the category of violation of principles of natural justice. Petition allowed.
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2024 (7) TMI 1510
Time barred writ petition - petitioner has not filed statutory appeal in time - HELD THAT:- This Court is of the view that the issue regarding merits cannot be decided under Article 226 of the Constitution of India. At best, the petitioner can be given a liberty to file statutory appeal before the Deputy Commissioner (GST) (Appeals)(State Tax), Madurai and Tirunelveli, although the limitation is expired as on date. This Court is, therefore, inclined to exercise its discretion in favour of the petitioner, considering the fact that the petitioner is facing severe financial constraints and is being proceeded with under the provisions of SARFAESI Act, 2002 and its account had become a non-performing asset - Since the Deputy Commissioner (GST) (Appeals)(State Tax), Madurai and Tirunelveli, is not a party in this proceedings, the Deputy Commissioner (GST) (Appeals)(State Tax), Madurai and Tirunelveli is suo motu impleaded as second respondent. Petition disposed off.
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2024 (7) TMI 1509
Challenge to assessment order - violation of principles of natural justice - the impugned order was issued about nine months after the show cause notice without providing any further opportunity to the petitioner - HELD THAT:- A reply dated 04.02.2023 is on record. Such reply does not address the issue raised in the show cause notice. Since the tax proposal was confirmed without the petitioner being heard, the interest of justice warrants that an opportunity be provided to the petitioner to contest the tax demand on merits after putting the petitioner on terms. On instructions, learned counsel for the petitioner submits that the petitioner agrees to remit 10% of the disputed tax demand as a condition for remand. The impugned order dated 06.10.2023 is set aside and the matter is remanded for reconsideration on condition that the petitioner remits 10% of the disputed tax demand as agreed to within a period of two weeks from the date of receipt of a copy of this order. Within the aforesaid period, the petitioner is permitted to submit a reply to the show cause notice - Petition disposed off.
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2024 (7) TMI 1508
Violation of priniciples of natural justice - Petitioner had filed a detailed reply however, the impugned order does not take into consideration the reply submitted by the Petitioner and is a cryptic order - excess claim Input Tax Credit (ITC) - under declaration of ineligible ITC - ITC claimed from cancelled dealers - return defaulters and tax nonpayers - HELD THAT:- The observation in the impugned order dated 28.12.2023 is not sustainable for the reasons that the reply dated 23.10.2023 filed by the Petitioner is a detailed reply. Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply is not satisfactory nor any substantial documents were submitted by the taxpayer which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the Petitioner. Further, if the Proper Officer was of the view that any further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details. The order cannot be sustained, and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 28.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication - Petition disposed off by way of remand.
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2024 (7) TMI 1507
Cancellation of GST registration of petitioner - petitioner was unaware of SCN - petitioner agrees to remit 10% of the disputed tax demand as a condition for remand - HELD THAT:- Since the GST registration of the petitioner appears to have been cancelled, it stands to reason that the petitioner would not monitor the portal on an on going basis. By reply dated 21.12.2023, the petitioner requested for two weeks' time to respond to the notice. The show cause notice was issued on 30.09.2023 and it is likely that the limitation period was expiring in December 2023. In these circumstances, while the petitioner deserves an opportunity to contest the tax demand, it is also necessary to put the petitioner on terms. The impugned order dated 22.12.2023 is quashed subject to the condition that the petitioner remits 10% of the disputed tax demand within three weeks from the date of receipt of a copy of this order. The petitioner is also permitted to submit a reply to the show cause notice within the aforesaid period - Petition disposed off.
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2024 (7) TMI 1506
Seeking grant of regular bail - petitioner contends that the petitioner was not named in the FIR nor any incriminating evidence was collected against him during the course of investigation - admissible evidence or not - HELD THAT:- In the present case, the petitioner was arrested on 21.01.2021 and is in custody since then. The offences are triable by the Court of Magistrate and the final report under Section 173 Cr.P.C. has already been presented before the competent Court. Thus, no purpose would be served by keeping the petitioner behind bars, in the present case. Moreover, the pendency of the other criminal cases is no ground to reject the bail application of the petitioner as he has been able to make out a case for grant of bail in the peculiar facts and circumstances of the present case. The Hon'ble Supreme Court in the matter of Prabhakar Tewari Vs. State of U.P., and another [ 2020 (1) TMI 1528 - SUPREME COURT ] has held that the pendency of several criminal cases against the accused cannot be the basis to refuse the prayer of bail. Similar observations have been made by the Hon'ble Supreme Court in the matter of Maulana Mohd. Amir Rashadi Vs. State of U.P., and another [ 2012 (1) TMI 407 - SUPREME COURT ]. The petitioner is ordered to be released on bail subject to his furnishing bail bonds/surety bonds to the satisfaction of the trial Court/Duty Magistrate/Chief Judicial Magistrate, concerned - Petition allowed.
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2024 (7) TMI 1505
Scope of an e-commerce operator - nature of supply as conceptualized in Section 9 (5) of CGST Act, 2017 r/w notification No 17/2017 dated 28.06.2017 - supply by the independent four-wheeler cab service provider (person who has subscribed to Rapido app) to his passengers (who do not pay any subscription feel on the app platform amounts to supply by the Applicant - liability to pay GST on the supply of services provided by the independent four-wheeler cab service provider (person who has subscribed to applicant s Rapido app) to his passengers on the Applicant s app platform - rate at which GST shall be collected on the ride monitoring fee and the SAC code that shall be applicable - liability to pay GST on the supply of services provided by the independent three/two-wheeler cab service provider (person who has subscribed to applicant s Rapido* app) to his passengers on the Applicant s app platform. Whether the applicant qualifies to be an e commerce operator or not and whether they are liable to discharge tax liability in terms of Section 9 (5) of the CGST Act 2017? - HELD THAT:- Electronic Commerce Operator (ECO) means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce i.e. for the supply of goods or services or both, including digital products over digital or electronic network. In the instant case the applicant owns digital platform ( Rapido APP). for the supply of services. Thus the applicant squarely fits into the definition and qualifies to be an Electronic Commerce Operator. Charging section i.e. Section 9 (5) of the CGST Act 2017 - HELD THAT:- In the instant case the services of transportation of passengers are provided by a four-wheel car. which is a motor vehicle adapted to carry maximum four passengers excluding driver and thereby it can carry not more than six passengers excluding the driver and hence qualifies to be a motorcab . Titus the first two conditions viz., (a) and (b) are satisfied in the instant case, in as much as the category of services of Intra-state supplies are notified by the Government covering services by way of transportation of passengers by motor cab. It is apparent that App not only generates leads about customers to the drivers, but also provides a platform for fare negotiation between the customer and driver. Once ride fare is finalized, the location of customer pick up point is shared by the App: start of ride, route taken for ride, end of ride are captured and notified to customer by the App. Thus effectively the services of transportation of passenger by the driver is supplied through the Applicant s App/portal from beginning to end and during the entire period of the ride. Thus the condition that the services are supplied through electronic commerce operator is also satisfied. The applicant contends that they are not involved in collection of the consideration pertaining to the ride, on behalf of the driver. The passenger pays the consideration to the driver directly. It is pertinent to mention here that neither the definitions of electronic commerce under Section 2 (44) or electronic commerce operator under Section 2 (45) nor the charging Section 9 (5) of the CGST Act 2017 stipulates that the e-commerce operator has to collect the consideration - Here the supply of such service refers to the supply of services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle; as notified vide Notification 17/2017-Central Tax (Rate) dated 28.06.2017 issued under Section 9 (5) of CGST Act, 2017, and supplied through the electronic commerce operator. The applicant is squarely covered in the definition of electronic commerce operator and the supply of services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle is supplied through them. Further, by virtue of Section 9 (5) the applicant is liable to pay tax on the supply of the services of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle. Thus, three wheeler is covered under Motorcab, i.e, any motor vehicle adapted to carry not more than 6 passengers: and two wheeler is covered under Motor Cycle definition. In view of the discussion in para 20 21, the applicant is liable to pay GST on the services supplied through them.
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2024 (7) TMI 1504
Exemption as per S.N.66 clause (b) (ii) of notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - circular No. 149/05/2021-GST dated: 17.06.2021 and Entry 66 clause (b) (n) of notification No. 12/2017-Central tax (Rate) dated 28.06.2017 - services provided to an educational institution by way of catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union Territory - applicability of the entry to pre-school and schools - Product Pushti supplied by the applicant not considered as pre-packaged and labeled product and not taxed as per Notification No.07/2022 Central Tax (Rate) dated: 13th July 2022 read with entry No. 78 of Notification No. 02/2027 Central Tax (Rates) dated 28th June 2017. Whether the product Pushti can be considered as pre-packaged and labeled product and taxed as per entry No. 59 of Notification No. 01/2017 Central Tax (Rate) dated:28.06.2017 further amended aide Notification 06/2022-Central Tax (Rate) dated: 13.07. 2022? - HELD THAT:- Entry No. 59 of Notification No. 01/2017 Central Tax (Rate) dated:28.06.2017 further amended aide Notification 06/2022-Central Tax (Rate) dated: 13.07. 2022 mentions Meal and powder of the dried leguminous vegetables but, the Applicant s product pushti is a powdered mixture of cereals, pulses and sugar. Hence the same is not covered under the above-mentioned entry. Whether product Pushti is not considered as pre-packaged and labeled and not taxed as per entry No. 78 of Notification No. 02/2027 Central Tax (Rates) dated:28.06.2017 further amended vide Notification No. 07/2022 Central Tax (Rate) dated: 13.07.2022? - HELD THAT:- Entry No. 78 of Notification No. 02/2027 Central Tax (Rates) dated:28.06.2017 mentions Flour, of the dried leguminous vegetables but, the Applicant s product pushti is a powdered mixture of cereals, pulses and sugar. Hence the same is not covered under the above-mentioned entry. Whether exemption is available to them as per S.N.66 clause (b) (ii) of Notification No. 12/2017-Central Tax (Rate) dated:28.06.2017 and as per circular No. 149/05/2021-GST dated 17.06.2021 and as per clarification No. KSA/GST.CR-05/2019-20 Dated:23.06.2021? - HELD THAT:- The applicant states that that they are supplying the goods mentioned in para 9 supra to the CDPO and CDPO in turn supplies the same to Anganwadis. As explained, the applicant is purchasing and supplying only goods and not into supply of any service. Since Notification No. 12/2017-Central Tax (Rate), dated: 28.06.2017 deals with supply of services which are exempted, the same cannot be applied to supply of goods as in the case of the applicant - Since the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 is not applicable to the applicant s case, Circular No. 149/05/2021-GST, dated: 17.06.2021 also is not applicable to the applicant s case. Clarification No. KSA/GST.CR-05/2019-20 Dated:23.06.2021 is same as Circular No. 149/05/2021-GST, dated: 17.06.2021 but issued by the State of Karnataka and hence the same is not applicable to the applicant s case.
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Income Tax
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2024 (7) TMI 1503
Review petition - inordinate delay of 1067 days in filing each of the review petitions - Addition u/s 37 and 40A - distribution of profit in the guise of excessive price paid to the members against purchase of sugarcane - excessive and unreasonable cane purchase price paid to the members of the sugarcane Co-operative Society - HELD THAT:- As no satisfactory explanation has been given. Thus, the review petitions are liable to be dismissed on the ground of delay having not been explained satisfactorily. We have considered the review petitions on merits as well. We have perused the Judgment and Order [ 2019 (3) TMI 321 - SUPREME COURT] which has been sought to be reviewed. There is no error apparent on the record. Even otherwise, there is no ground for review. Review Petitions are dismissed on the ground of delay having not been explained satisfactorily as also on merits.
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2024 (7) TMI 1502
Maintainability of SLP on low tax effect - Reopening of assessment - addition u/s 68 - as decided by HC [ 2018 (3) TMI 2043 - GUJARAT HIGH COURT] reasons recorded by the AO and found discrepancies in linking the unsecured loans to subsequent share capital conversion. The lack of a clear connection between the transactions led to the setting aside of the notice. HELD THAT:- The submission of learned senior counsel for the petitioner is placed on record. In the circumstances, the Special Leave Petition is dismissed owing to low tax effect vide Notification dated 08.08.2019.
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2024 (7) TMI 1501
Reopening of assessment u/s 147 - reasons to believe - tangible material with the AO justifying reopening of the assessment - As decided by HC [ 2023 (3) TMI 418 - BOMBAY HIGH COURT] once the facts and claims were enquired into during the original assessment, a notice on the same would be construed as a change of opinion, for the purposes of reopening of the assessment - HELD THAT:- Delay condoned. Application for exemption from filing certified copy of the impugned judgment is allowed. Leave granted.
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2024 (7) TMI 1500
Validity of Revision u/s 263 - non adhering to procedural requirements and non considring reply and the documents of assessee submitted - HELD THAT:- Section 263 gives power to the Principal Chief Commissioner or the Officer as it is been prescribed that he may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the AO is erroneous, in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order. The order of the Pr. CIT, therefore, necessarily would require to explain i.e. record reasons to exercise the power under Section 263 of the Act, 1961 to say that the order was prejudicial to the interest of Revenue. However, in case in hand after that proceedings were initiated, the enquiry was conducted and during such enquiry the reply and the documents were placed by assessee. Section 263 makes it incumbent to the Pr. CIT to conduct enquiry. The enquiry means not to shelve the reply and the documents but to deliberate upon it and the same cannot be set aside on the ground that the Officer is not satisfied with reply. The reasons for satisfaction or non-satisfaction are required to be recorded. In the instant case, after going through para 5 of the order, which is the substratum of the entire issue, it is manifest that the said procedure has not been followed. We allow the appeal and answer the question of law in favour of the assessee and remand back the case to the Pr. CIT to reconsider the reply and the documents of assessee.
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2024 (7) TMI 1499
Best judgment assessment u/s 144 - Whether action of the authorities below in holding the assessment made by the AO is in violation of Section 145 of the Income Tax Act - HELD THAT:- From the perusal of the aforesaid provision, it is apparent that the petitioner having not further pursued after having been appeared through his counsel, the AO had no other option, but to invoke the provisions of Section 144 above, which provides that if any person fails to make return, AO shall proceed on best judgment assessment basis in the absence of the answered assessee. Keeping in view above, the action taken by the AO does not warrant any interference. Question is accordingly answered in favour of the revenue.
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2024 (7) TMI 1498
Validity of Faceless assessment of income escaping assessment - Challenge to notice u/s 148 as non-compliance with Section 151A of the Act - notices issued by JAO instead of FAO - HELD THAT:- Similar issue came up for consideration before a Division Bench of Bombay High Court in Hexaware Technology Ltd.( 2024 (5) TMI 302 - BOMBAY HIGH COURT] discussed the issue at length and held that notice u/s 148 after introduction of Finance Act, 2021, cannot be issued by Jurisdictional AO. Revenue is not in compliance with the Scheme notified by the Central Government pursuant to Section 151A (2) of the Act. The Scheme has also been tabled in Parliament and is in the character of subordinate legislation, which governs the conduct of proceedings under Section 148A as well as Section 148 of the Act Thus, as there is no dispute that the JAO had no jurisdiction to issue the impugned notice, the Writ Petition is accordingly allowed and the impugned notice as well as order are hereby quashed and set aside. So also consequential demand notices or penalty notices will also stand quashed and set aside.
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2024 (7) TMI 1497
Exemption u/s 11 - definition of charitable purpose under Section 2(15) - ITAT allowed the appeal filed by the assessee/Board setting aside the canceling the Registration of the respondent-Board - HELD THAT:- ITAT has considered the objects for enactment of the Haryana Rural Development Act, 1986. The Board was constituted in terms of the said Act with the purpose of augmenting agricultural production and improving market sales. The activities have been enumerated to improve development of roads, establishment of dispensaries, water supply sanitation and other public facilities, conversion of notified market areas falling in rural areas by utilizing technical know-how, construction of godowns and storage places for agricultural produce, construction of rest houses for the visitors in the market area. The Board earnings are the fee prescribed under the Haryana Rural Development Act, 1986 to be made as a per centum of the sale proceeds of the agricultural produce. It has, on the said basis, reached to the conclusion that the said Board is carrying out activities of general public utility in terms of the new definition of Section 2 (20) of the Act. Upon reaching the factual findings as above, it proceeded to observe that the Commissioner was not justified in denying the Registration to the assessee. No error in the judgment passed by the ITAT. No substantial question of law.
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2024 (7) TMI 1496
Correct head of income - profits from the sale of lands - business income or capital gain - Intention of assessee - Revenue contends that though the primary business activity of the assessee is that of running medical shops under the Trade name Sevana , he had during the relevant assessment years indulged in buying and selling of landed property with a view to earn profit - HELD THAT:- When a property kept not for trade, but for an investment purpose is sold, the gain has to fall under head 'capital gains' and such transaction is only taxable under capital gain and not under adventure of trade. If the Revenue intends to prove the contrary, then the burden is upon it to prove it by reliable evidence. Merely because the assessee makes some profit in a particular transaction, it can not be treated as an adventure in the nature of trade so long as the initial intention or a reason investing money was to hold the property and utilise it for a different purpose. Having understood the term adventure in the nature of trade used in Section 2 (13) of the Income Tax Act as above and that the burden of proving it is on the Revenue, we now proceed to consider whether the the assessee s investments in real estate, factual details of which were unearthed during the search would justify terming his involvements in real estate transactions as one on capital account or whether the Revenue has sufficient evidence to prove that the activities of the assessee constituted an adventure in the nature of trade. As noted by the ITAT that the assessee had never treated the properties as stock in trade and the search in the residential and business premises of the assessee had not revealed any material to suggest that the assessee had advertised the sale of properties or that he had made any efforts towards creating or submitting a development plan before any authorities with the objective of developing the property and thus augmenting its value in real estate market. ITAT has noted that no evidence has been procured to reveal that the assessee had done activities such as plotting, consolidation, laying of roads, preparation of development plans, obtaining permits for piling, excavation etc, or preparation of reports for external financing which are typical activities indulged in by real estate traders. As the asseesse had held the landed property as investment and disposal of the same would not convert, what was a capital accretion, to an adventure in the nature of trade. The finding arrived at by the ITAT based on the facts and circumstances available at hand, that the assessee had treated the landed property as an investment acquired over the years and did not choose to carry on any commercial activity with reference to such land and had upon noticing favourable market conditions, sold the land and fetched a good price, does not justify the action of the AO to treat the activities of the assessee as adventure in the nature of trade. Decided in favour of assessee.
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2024 (7) TMI 1495
Tribunal extending stay of demand beyond 365 days in the light of the provisions of Section 254 (2A) - HELD THAT:- The appeals before Tribunal in which the impugned interim order was passed granting extension of the stay of demand have been adjudicated, and therefore, for such reason these appeals have become infructuous. Be that as it may, even otherwise the question of law which has fallen for consideration in the present Appeals filed by the Appellant-Revenue, is no more res integra in view of the decision of Pepsi Foods (P) Ltd. [ 2015 (5) TMI 655 - DELHI HIGH COURT ] in which the Delhi High Court considered the validity of the provisions of the third proviso to Section 254 (2A) and the amendment incorporated to the said provision by Finance Act, 2008 (with effect from 1 August 2008), by the words even if delay in disposing of appeal is not attributable to assessee were added. The Delhi High Court, held that the proviso to be illegal and had struck down the impugned part of the third proviso to Section 254 (2A) of the Act, which did not permit extension of stay of the said order beyond 365 days, even if the assessee was not responsible for delaying the disposal of appeal. The decision of the Delhi High Court was confirmed by the Supreme Court in the case of Deputy Commissioner of Income Tax Vs. Pepsi Foods Ltd. [ 2021 (4) TMI 369 - SUPREME COURT ]. Thus in view of the authoritative pronouncement (supra), no fault can be found in the impugned order passed by the Tribunal. These appeals would not give rise to the question of law, as sought to be raised on behalf of the Appellant-Revenue. We may observe that similar issue had arisen for consideration of this Court in Fulford (India) Ltd. [ 2024 (6) TMI 1029 - BOMBAY HIGH COURT ] in which considering such position in law as held by the Delhi High Court and confirmed by the Supreme Court in the case of Pepsi Foods (P) Ltd. (supra), this Court had refused to entertain Appeals filed by the Appellant- Revenue, assailing the orders passed by the Tribunal.
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2024 (7) TMI 1494
Reopening of assessment u/s 147 - Validity of the approval granted under Section 151 - notice not issued by JAO - HELD THAT:- There is no question of any concurrent jurisdiction to be exercised by the JAO and the Faceless Assessing Officer ( FAO ) for issuance of notice u/s 148 of the Act or even for passing an assessment or reassessment order. As observed that when the specific jurisdiction has been assigned to the FAO in the Scheme dated 29 March, 2022 notified in pursuance of the said provision, in such event, it excludes the jurisdiction of the JAO. As held that as Section 151A of the Act itself contemplates formulation of the Scheme for both assessment, reassessment or recomputation under Section 147, as well as for issuance of notice u/s 148 of the Act, and that the Scheme framed by the CBDT covered both such aspects of the provisions of Section 151A of the Act. It was observed that the Scheme as framed was clearly applicable for issuance of notice u/s 148 of the Act and accordingly, only the FAO can issue the notice u/s 148 of the Act and not the JAO. In our opinion, there is merit in the contention as raised on behalf of the Petitioner that for the aforesaid reasons, as well, the impugned notice would also be hit by the provisions of Section 151A of the Act insofar as the issuance of notice is by the JAO who has acted without jurisdiction. The impugned notice issued u/s 148 of the Act is quashed and set aside as being barred by limitation and also being contrary to the provisions of Section 151A.
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2024 (7) TMI 1493
Validity of reopening of assessment - non providing reasonable opportunity of hearing as per Circular dated 22.08.2022 of the Central Board of Direct Taxes - HELD THAT:- This Court has found that such reasonable opportunity of hearing was not given before Order u/s 148(d) was issued. In our considered opinion, there is no dispute regarding explanation given under Section 148 regarding information that can be relied upon by the Assessing Officer to reopen assessment of escaped income. Revenue Audit Objections can be considered as a valid ground for opening assessment that has concluded. This Court is of the considered opinion that the reply of the petitioner had specifically asked for documents to be supplied including complete case proceedings and for personal hearing, which was not given. AO has acted in undue haste. The orders passed u/s 148A(d) and u/s148 are set aside. The respondents shall provide all relevant documents that have been asked for by the petitioner in his representation by making payment of necessary fees to the department, within a period of one week from today. The petitioner shall submit his reply within one week, thereafter. WP allowed.
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2024 (7) TMI 1492
Attachment orders - additional affidavit on record pointing out specific financial constraints on its business operations on account of the interim order - Restraining repatriating royalty or dividend abroad during the pendency of the search assessment proceedings - application oved for modification of Clause 7(iv) in order [ 2022 (9) TMI 1150 - DELHI HIGH COURT] - HELD THAT:- We note that while restraining the petitioner-applicant from repatriating royalty and dividend abroad, we had reserved liberty to it to approach the Court in case the need so arise. Both learned senior counsels, submit that since more than two years have elapsed and the search assessment is yet to be completed, there exists no justification for the continuation of that condition. As submitted by learned senior counsels that repatriation of royalty is a contractual obligation and in the absence of any crystallized demand, the conditions as imposed by Clause 7 (iv) are liable to be lifted. The facts and circumstances warrant the applicant being permitted to repatriate Rs. 97 crores which represents the royalty subject to deduction of tax. The applicant is thus permitted to repatriate moneys payable towards royalty less TDS in the interim and till the matter is taken up for consideration again. We further direct the applicant to provide full and complete details in respect of the royalty repatriation which is proposed to be undertaken to the respondents. This we so provide since substantial deposits have already been made by the applicant and a demand is yet to be formulated. We also take into consideration the fact that Clause 7(iv) was clearly intended to be a temporary measure liable to hold the field till such time as the search assessment is completed. We had at that time proceeded on the premise that the assessment would conclude shortly or at least within a reasonable period of time. However, almost two years have passed since then. The assessee, thus, cannot be compelled to default on its contractual obligations. We consequently request the respondents to make all end eavours to ensure that the search assessment is completed with due expedition and preferably by 31 December 2024. The applicant petitioner shall render full cooperation towards that end. Insofar as the declaration of dividend and its pay-out is concerned, we defer consideration of that issue at this stage. Let the matter be called again to review progress on 14.02.2025
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2024 (7) TMI 1491
Deduction claimed in respect of amounts deposited as Swachh Bharat Cess - as per the admitted case of the appellant, the aforesaid payments were placed in the category of write off of sundry balances - ITAT held as assessee has failed to demonstrate that the amount was actually paid during the year in terms of section 43B(a), therefore we uphold the disallowance Appellant contends that although the Swachh Bharat Cess was shown under the category of write off of sundry balances , it essentially related to amounts paid as cess by the assessee / appellant in the year in question and ITAT has for the first time proceeded to advert to Section 43B(a) and allowed the disallowance altogether. HELD THAT:- Bearing in mind the aforesaid stand raised, we are of the considered opinion that insofar as this aspect is concerned, it would merit reconsideration by AO. We, accordingly allow the instant appeal in part and set aside the findings of the ITAT insofar as this aspect is concerned. The matter shall stand remitted to the AO for considering the claim of the appellant afresh.
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2024 (7) TMI 1490
Estimation of income - Bogus purchase s - ITAT restricted the disallowance at 6% - HELD THAT:- The view taken and the conclusion arrived at by the appellant Tribunal are based on material before it and after analysing the facts and figure available before it. When the Tribunal has thought it fit to reduce the disallowance at 6% from 12.5%, the Tribunal had before it the facts which were duly analysed by it. No interference is called for in the said conclusion and findings of the Tribunal in the present appeal by this court.
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2024 (7) TMI 1489
Validity of initiation of reassessment proceedings - reason to believe - petitioner had reiterated the contention that it had no transaction with Fortune Graphics Limited and that the entries as appearing in GSTR-1 were made unilaterally - HELD THAT:- As submissions do not appear to raise a substantial jurisdictional challenge and pertain principally to allegations of fact. The petitioner has failed to provide any plausible explanation for the transaction which stood reflected in the GSTR-1 forms. As is evident from a reading of the order issued u/s 148A(d) AO has taken into consideration facts which would clearly be germane for the purposes of examining whether there was material to suggest that income of the petitioner had escaped assessment. We take note of the principles which would govern a challenge to the initiation of reassessment proceedings in Article 226 of the Constitution as laid down in Experion Developers P. Ltd [ 2020 (2) TMI 1061 - DELHI HIGH COURT] and Synfonia Tradelinks Pvt. Ltd [ 2021 (3) TMI 1177 - DELHI HIGH COURT] held that the expression reason in section 147 of the Act means a cause or justification . The Assessing Officer can be said to have reason to believe that income has escaped assessment, if he has a cause or justification to know, or suppose, that income has escaped assessment.the reasons for the formation of opinion should have a rational connection with the formation of the belief that there has been an escapement of income chargeable to tax. WP dismissed.
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2024 (7) TMI 1488
Appeal against order of National Faceless Appeal Centre - Appeal dismissed by CIT(A) being barred by time - CIT(A) who dismissed the appeal on account of delay of 184 days in filing the appeal - HELD THAT:- As in view of the decision of the Hon ble Supreme Court in suo moto writ petition [ 2022 (1) TMI 385 - SC ORDER] the learned CIT(Appeals) was not justified in dismissing the assessee s appeal being barred by time, without discussing the issue on merit. Accordingly, considering the facts and circumstances of the present case and to sub serve the principles of natural justice, we are constrained to set aside the order of learned CIT(Appeals) and restore the matter to the file of learned CIT(A) for decision afresh on merits after affording adequate opportunity of being heard. Grounds are allowed for statistical purposes.
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2024 (7) TMI 1487
Correct head of income - interest income on Inter Corporate Deposits (ICD) and Fixed Deposits (FD) - income of the assessee under the head Profits Gains of Business or Profession OR Income from Other Sources - HELD THAT:- The assessee is engaged in the business of leasing financing. To substantiate nature of business carried out by the assessee, the assessee has placed on record copy of Memorandum of Association (MOA). A perusal of main objects of MOA shows that one of the main objects of the assessee is to carry business of leasing financing. In the impugned assessment year AO has changed the head of income from profits gains from business profession to income from other sources. Primary reason for changing head of income by the AO is, that the assessee is not a registered non banking finance company. The findings of the AO have been upheld by the CIT(A). We do not find merit in the reasons for changing head of income. The object clause of Memorandum of Association clearly defines the objects of the company for which it is incorporated and the business it intends to carry. Merely, for reason that the company is not a registered NBFC cannot be reason for changing the head of income. It is an admitted fact that in preceding assessment year and succeeding assessment year the Department has accepted interest income as Business Income of the assessee. The assessee has been consistently showing interest income as business income. The rule of consistency demands that the nature of assessee s income should not be disturbed in one of the intervening assessment years when in the past and in the subsequent assessment years, the Revenue has already accepted the nature of income as Business Income. Thus, in the light of above observations, the ground no. 1 of appeal is allowed. Disallowance claimed as business expenditure - disallowance of amortized preliminary expenses - AO disallowed assessee s claim of amortization of expenses in the impugned assessment year only - HELD THAT:- In the subsequent assessment years the Department has again accepted amortization of expenditure. We find no valid reason for disallowing amortization of expenditure in the impugned assessment year when the same has been allowed in the preceding and succeeding assessment years. The AO is directed to allow amortization of preliminary expenses in the impugned assessment year as well. Ground of appeal is thus allowed pro tanto.
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2024 (7) TMI 1486
Addition u/s 56(2)(x) - Difference between consideration and Stamp duty value of property - HELD THAT:- According to the provisions of section 56(2)(x) of the act where any person receives from any person on or after the first day of April 2017, any immovable property for a consideration whereas the Stamp duty value of such property exceeds such consideration by more than ₹ 50,000 or amount equal to 10% of the consideration than such amount should be considered as an income chargeable to income tax under the head income from other sources. If the parties have agreed to an agreement prior to the year where the amount of consideration is fixed, and consideration is paid in a specified manner, then stamp duty value on the date of agreement should be considered for the purpose of computing the income of the assessee. Provisions of section 50C will also apply to such provision. Thus, it is apparent that provisions of section 50C are applicable to the seller and provisions of section 56(2)(x) applies to the buyer. At present the benefit of 10% of the tolerance limit is provided under section 50C and the same tolerance limit also applies to provisions of section 56(2)(x) of the act. Therefore, in the present case the benefit of 10% of the tolerance limit should be allowed to the assessee as if it has operated since the inception of the provisions of section 56(2)(x) and section 50C of the act. In view of this, the addition made in the hands of the assessee is not in accordance with the law and hence the learned assessing officer is directed to delete the addition. Assessee appeal allowed.
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2024 (7) TMI 1485
ALV of residential units held as stock-in-trade - Addition on account of notional ALV in respect of unsold spaces/ flats - CIT(A) deleted addition treating the same as income from house property - HELD THAT:- There is no dispute that under the identical facts in the assessee s own case pertaining to Assessment Years 1988-89 to 1998-99, the Hon ble Jurisdictional High Court. [ 2012 (11) TMI 323 - DELHI HIGH COURT ] has decided the issue against the assessee. The contention of the assessee that the flats were not habitable therefore, notional ALV could not have been computed. It is seen that no such contention was made before the authorities below. Moreover, no material is placed before this Tribunal, supporting the contention. Since, under the identical facts, the Hon ble Delhi High Court has already decided the issue against the assessee and the view of the Hon ble High Court of Delhi has been affirmed by the Hon ble Supreme Court [ 2013 (7) TMI 1111 - SC ORDER ] therefore, the finding of Ld. CIT(A) cannot be sustained and same deserved to be reversed. CIT(A) has deleted the impugned addition without giving specific finding regarding the properties being vacant farm land and there was no construction of house property by the assessee. Therefore, the issue of taxability of properties claimed as being vacant farm lands needs verification by the AO for ascertaining the correctness of the claim that no house/building was constructed on such lands. Thus the issue is hereby, restored to AO. If it is found true that during the relevant time, no house property/commercial space were constructed thereon. No addition would be called for. Thus, Ground No.2 of the Revenue s appeal is partly allowed. Allocation of various expenses to eligible projects on the basis sales ratio for computing allowance of deduction u/s 80IB(10) - preliminary objections of the assessee against allocation of expenses is that the assessee company has been maintaining separate books of accounts, qua the eligible projects which is duly supported by the audit report in Form No.10CCB - HELD THAT:- We find that Ld. CIT(A) has deeply considered the facts and submissions of the assessee in respect of the allocation of advertisement and publicity expenses and returned finding on fact that the expenditure incurred in current year could not be compared for allocation purpose, the average expenses on advertisement incurred during AYs 2005-06, 2006-07 2008-09 should be taken into consideration. We are of the considered view that this finding of CIT(A) is correct because the benefit of advertisement by the assessee in earlier years i.e. 2005-06, 2006-07 2008-09, would also certainly pass on to the year under consideration. Therefore, CIT(A) has rightly allocated expenditure on pro-rata basis in the sale ratio u/s 80IB(10) of the Act - Hence, no interference is called for on this issue. Disallowance of interest on the borrowed capital - CIT(A) has given a finding on fact that most of the projects are eligible for deduction u/s 80IB(10) of the Act, are more than 90% completed prior to 01.04.2006 and were running in surplus. Therefore, no allocation should have been made qua the interest on borrowed funds on all projects where section 80IB(10) of the Act, was claimed as internal accrual being higher than the investment. This finding of CIT(A) is not rebutted by the Revenue by bringing any contrary material therefore, we do not see any reason to interfere in the same. Decision of the CIT(A) in allocating the expenses of meeting fee of Directors - As we are of the view that Ld.CIT(A) has rightly given a finding that such fee related to meetings of the Directors and such meeting issues related to eligible projects would also be subject matter. The assessee has not furnished Minutes of Board meeting to support its contention that no agenda related to the eligible projects was discussed in these meetings. In the absence of such evidence, we do not see any merit in the contention of the assessee. CIT(A) in respect of Director s travelling has given a finding that foreign travelling by the Directors was not related to any eligible projects. This finding is not rebutted by the Revenue by placing any contrary material on records - Ground of appeal of Revenue against deletion of allocation of expenses to eligible project are dismissed. Allowing setting off losses against profits of succeeding years - Losses of earlier years which had already been set off against other income in earlier years, could not be notionally set off again while computing current income admissible for deduction u/s 80IB(10) of the Act during relevant year. In the light of binding precedent cited by assessee wherein it has been held that loss if already absorbed against the profit of other eligible project could not be notionally brought forward . Revenue has not brought any contrary material to rebut the contention that losses of earlier year which had already been set off against the income of the eligible projects in earlier years could not be notionally brought forward. Therefore, we do not see any reason to disturb the findings of CIT(A), the same is hereby affirmed. Thus, Ground No.7 raised by the Revenue is dismissed. Addition u/s 14A of the Act r.w. Rule 8D - CIT(A) deleted addition - HELD THAT:- CIT(A) was of the view that no disallowance u/s 14A should be made in the case of the assessee company as the AO was unable to establish any link between fund borrowed from public deposits and the fund that was used for the purpose of earning of exempt income. We do not find fault with this finding of CIT(A), even before this Tribunal, no material is furnished suggesting that the investments were made out of borrowed fund and/or any expenditure related to earning of exempt income is debited to profit and loss account by the assessee. In the absence of such evidence, we do not see any merit in the grounds of appeal raised before us. Hence, the same is hereby rejected. Allocation of retainership fee - As contended this expenditure ought not to have been attributed to the eligible projects as the assessee has been maintaining separate books of accounts for each eligible projects - HELD THAT:- We do not see any merit into the contention of the assessee that no services were rendered qua the eligible projects. No detail has been filed regarding nature and scope of services rendered to the assessee by the retainers. In the absence of such evidences, we do not find fault in the finding of Ld.CIT(A), the same is hereby affirmed. Ground No.2 of the cross-objection raised by the assessee, is rejected. Allocation of Director s meeting fee - Undisputedly, the assessee has not furnished any evidence supporting its contention that no agenda related to eligible projects was discussed. In our considered view, it is highly improbable that no agenda related to eligible projects was discussed in Director s meeting. The assessee has not furnished any register recording minutes of Director s meeting. Therefore, in the absence of the same, it cannot be definitely concluded that no agenda was discussed related to eligible projects. Therefore, Ground raised by the assessee in the cross-objection is rejected.
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2024 (7) TMI 1484
Disallowance u/s 14A - assessee has not received any exempt income - HELD THAT:- The settled legal position is that no disallowance u/s 14A is called for where there is no exempt income earned during the year. We note that the Ld. CIT(A) has failed to consider the submissions made by the assessee and dismissed the appeal in a very casual manner. Addition confirmed by the Ld. CIT(A) is not justified and cannot be sustained. In view of the fact that no disallowance is called for where there is no exempt income. As decided in R. M Commercial Pvt .Ltd. [ 2022 (2) TMI 1456 - CALCUTTA HIGH COURT] no disallowance u/s 14A is called for as the assessee has not received any exempt income during the year. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Appeal of the assessee is allowed.
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2024 (7) TMI 1483
Exemption u/s. 11 - Charitable activity - as per DR income derived by the assessee in the nature of trade or business when the gross receipts exceeds Rs. 25 lakhs - claim of the assessee that the sale of welfare funds stamps to its members are even to the general public would render the activity to be advancement of other object of general public utility in terms of section 2(15) - HELD THAT:- It is an admitted fact that the Tamilnadu Advocate s Welfare Fund Act, 1987 was created by the State Legislature dated 07.12.1987 (Act No. 49 of 1987) for providing death benefits to the family members of the deceased advocates, who have joined as member in the said scheme. The source of income for the said scheme is income generated through sale of welfare fund stamps, life time subscription from members, interest on corpus deposits and Government grant. Section 16 of the Advocate s Welfare Act, 2001 deals with the Recognition of the Association by the State Bar Council and nothing has been mentioned therein regarding the prior approval from the Bar Council of India before forming a welfare fund. Since, the assessee fund is enacted prior to the formation of the Central Act namely Advocate s Welfare Fund Act, 2001 and the saving clause is provided u/s. 38 by the Advocate s Welfare Fund Act, 2001, there is an exemption for the applicability of the Central Act of the State of Tamilnadu. Since, section 23 of the Central Act provides for exemption of Income-tax to the Advocates Welfare Fund of the State against the provisions of section 11 and section 2(15) of the Act is not applicable to the Tamilnadu Advocates welfare Fund. Therefore, we are of the considered view that the assessee is exempted from income-tax and uphold the order of the ld.CIT(A) and hence, dismiss the appeal of the revenue.
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2024 (7) TMI 1482
Addition for unexplained/unreconciled deposits - Estimated addition of 21% was made for alleged difference between the deposits appearing in the Bank statement, vis- -vis the books of account - HELD THAT:- AO has grossly erred in simply matching the net decrease under the head loans and advances appearing in the balance sheet with the credits or receipts of Bank statement. Since there is no difference as alleged by AO in the assessment order framed after directions of the ld. PCIT, we are inclined to set aside the finding of ld. CIT(Appeals) and delete the addition (addition made by the ld. Assessing Officer in the order under section 143(3) of the Act, which was further added by the ld. Assessing Officer in the order framed under section 143(3) r.w.s. 263 of the Act). Thus effective grounds of appeal raised by the assessee are allowed.
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2024 (7) TMI 1481
Disallowance of commission paid to the Director u/s 36(1)(ii) - AO rejected the submission of the assessee on the ground that it is only an arrangement to avoid dividend distribution tax and deduction cannot be allowed - as per AO board resolution cannot be considered as evidence of extra service provided by the director as the board is constituted by the director employee to whom payment is made - HELD THAT:- AO primarily relied on the case of Dalal and Broacha Stock Broking Pvt. Ltd. [ 2011 (6) TMI 251 - ITAT, MUMBAI ] which is factually distinguishable. In the present case, the assessee has provided substantial evidence demonstrating the services rendered by Shri Girish Chovatia/Director and the resultant benefits to the company. The case laws cited by the assessee before the Ld.CIT(A), particularly M/s Nat Steel Equipment Pvt. Ltd. [ 2018 (6) TMI 750 - ITAT MUMBAI ] and M/s.Marks Shipping Pvt. Ltd. [ 2016 (10) TMI 805 - ITAT MUMBAI ] support the view that commission paid for actual services rendered cannot be disallowed merely on the presumption of tax avoidance. AO did not provide concrete evidence to show that the payment was made to avoid DDT. The assessee has clearly distinguished the judgement relied upon by the AO and the Ld.CIT(A). Thus, we hold that the commission paid to director/Shri Girish Chovatia is an allowable business expenditure u/s 36(1)(ii). Disallowance of weighted deduction claimed u/s 35(2AB) - claim denied relying upon Form 3CL issued by DSIR - HELD THAT:- AO's reliance solely on the DSIR report, without considering the detailed books of accounts and certification by a Chartered Accountant, is not justified. The principles of natural justice require that any reduction in the claim should be substantiated with clear reasons and the assessee should be given an opportunity to respond. Following the judgment in Bosch Ltd. vs. Secretary, DSIR [ 2016 (4) TMI 1294 - KARNATAKA HIGH COURT ] we hold that the restriction of the weighted deduction u/s 35(2AB) of the Act by the AO is not sustainable. Accordingly, the disallowance made by the AO and confirmed by the Ld.CIT(A) is deleted, and the assessee's claim is allowed in full. Assessee appeal allowed.
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2024 (7) TMI 1480
TDS u/s 195 - payments made by resident Indian end-user to non-resident computer software manufacturers/suppliers - payment for software licenses as royalty under Article 12 of the India-UK Tax Treaty - As per AO tax was required to be withheld as the payments are chargeable to tax u/s.9(1) (vi) r.w.s. 195 read with corresponding Articles of relevant DTAA - assessee stated that it made a payment for use of the standard Mycom software, without obtaining any rights towards creation of copies or modification or adaptation of the particular standard software HELD THAT:- Based on the definition of royalties contained in Article-13 of the relevant DTAA, it is evident that these payments do not fall under the purview of royalties. The EULAs do not create any interest or right in the distributors/end-users that would amount to the use of or right to use any copyright. Therefore, there is no obligation on the persons mentioned in section 195 to deduct tax at source. The provisions of section 9(1)(vi) and its explanations, not being more beneficial to the assessee than the DTAA, are not applicable in these cases. Revenue also argues that the amounts paid to non-resident computer software manufacturers/suppliers are taxable in India as they constitute income arising from the use of copyright, which should be taxed as royalties. The amounts paid by resident Indian end-users to non-resident computer software manufacturers/suppliers, as consideration for the use of the computer software through EULAs, do not constitute the payment of royalties for the use of copyright in the computer software. Consequently, these payments do not give rise to any income taxable in India. Therefore, the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS on these payments. Decided in favour of assessee.
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2024 (7) TMI 1479
Revision u/s 263 - as per CIT AO has not made efforts to examine any details and in this case simply the details furnished by the assessee only examined and passed the assessment order, thus order passed by AO is erroneous and prejudicial to the interest of Revenue - Addition of loans and advances, sale of shares and profit on sale of share of SMS Infrastructure Ltd. and receipt of interest and interest payment - HELD THAT:- The assessee has borrowed huge loans and also made advances. The assessee also made various sales and he received profit on sale of share of SMS Infrastructure Ltd. He received interest also. The Assessing Officer has not examined any of the issues and not called for any details from the assessee. The assessee filed some details about borrowed funds which were given to certain parties out of which the assessee himself has disallowed @ 12%, and for the remaining parties, the Assessing Officer has added. The assessee himself has claimed huge interest and also filed loss return of income. It was the duty of the Assessing Officer to call for the details such as what is the reason for borrowing such huge amount; what is the amount of money utilised for the purpose of business; why he has given loans to various parties; what is the receipt of interest; the quantum of shares have been sold by the assessee and what is the ratio of profit he received whether long term capital gain / short term capital gain. All such details have were required to be examined by the Assessing Officer and he has examined nothing. For the reasons stated above, we are of the opinion that it is a fit case for invoking the provisions of section 263 of the Act. We find that the order passed by the Assessing Officer is erroneous inasmuch as it is prejudicial to the interests of Revenue
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2024 (7) TMI 1478
Taxability of overseas sales commission - FTS - receipt from Associated Enterprises (AEs) towards commission on sales though it will not take up the nature of fee for technical services u/s 9(1)(vii) of the Act as it is neither managerial nor consultancy services - HELD THAT:- It is clear that services rendered by 'Guangzhou Usha' are clearly different from activities of Steer America and therefore, services of Steer America cannot be considered in nature of technical, managerial or consultancy in nature as referred under the Income Tax Act or 'Fees for technical services' as per India USA DTAA. SEPL India is a Champion of technology developed indigenously in India and with strong manufacturing presence in India supplies to global customers, brings in made in India Flavor with locally developed and globally registered Patents. Steer America Inc, performs pure sales function with connecting potential customers from United States of America by performing pre sales activity of introducing SEPL India to potential customers rest of the activity is predominantly taken care by SEPL India as evident from the services and functions listed. AO in the impugned order under surmise and conjectures have made out list of reasons to treat overseas sales commission as Fee for Technical Services, without appreciating the fact that Assessee Steer America Inc, does not render services resulting in provision 'Fee for Technical Services' (FTS) or Make available Technical Knowledge to Steer India. In the case of DCIT v. Welspun Corporation Ltd [ 2017 (1) TMI 1084 - ITAT AHMEDABAD] wherein it was observed and held that Assessee paid commission to non-resident export commission agents for highly technical products. As held that just because a product is highly technical does not change the character of activity of the sale agent. The object of the salesman is to sell and familiarity with the technical details, whatever be the worth of those technical skills, is only towards the end of selling. Payment to non-resident commission agents was for securing orders and not for rendering any managerial, technical or consultancy services per se. The commission paid to non-resident export commission agents is not taxable in India whether or not the non-resident is tax resident of a jurisdiction having a tax treaty and whether or not the tax treaty has an FTS clause. We hold that the impugned payment received by present assessee from Steer Engineering SCL, Bangalore is commission on sales and marketing services and cannot be treated as FTS in the hands of present assessee in terms of section 9(1)(vii) of the Act and accordingly, we allow all the grounds raised by the assessee. Levy of interest u/s 234A 234B are consequential and mandatory in nature to be computed accordingly.
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2024 (7) TMI 1477
Denial of approval u/s 80G(5) - approval being sought as being u/s. 12AA as already obtained - approval u/s. 80G(5) can be denied to an applicant is on the ground of non-satisfaction of the conditions set out in s. 80G(5)(vi) - HELD THAT:- The impugned order is clearly is a cryptic order. Apart from the fact that it refers to s. 12AB of the Act, reference to sec 80G or the rules there-under in conspicuous by its absence. There is no reference therein to the provisional approval u/s. 80G(5)(iv) on 17/3/2022. It is only a perusal of the application that one discovers that the same is qua an application for approval u/s. 80G(5) r/w r. 11AA of the Rules. It is perhaps for the reason that both the provisions provided for application in the same format that led to it being construed by the competent authority as for another. Whatever may be the cause, it is indeed very unfortunate that an application by a charitable institution is treated in such a careless and cavalier manner, which in fact deserves imposition of cost. There is, resultantly, no question of the assessee s application being decided on merits, i.e., qua the said grant or otherwise of the approval under s. 80G(5)(iv), which an order granting approval or, as the case may be, denying it, is to specify in clear terms along with reasons therefor. We, accordingly, have no hesitation in, setting aside the impugned order, direct (re)adjudication by the competent authority on merits, per a speaking order, and in accordance with law, allowing the assessee a reasonable opportunity of being heard. Assessee s appeal is allowed.
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2024 (7) TMI 1476
Condonation of delay in filing of appeal before Tribunal - appeal filed by the assessee is delayed by 357 days - As submitted that CA of assessee was not aware of the provisions of direct appeal to ITAT against the order u/s 263 of the Act - HELD THAT:- The simple and bland statement in the affidavit that CA, Shri Varun Agarwal was not aware of the provisions of direct appeal to ITAT against the order u/s 263 of the Act is unbelievable. How would a practicing CA not know about appealable order and the proper appellate forum for filing appeal arising from orders passed by different income-tax authorities? No supporting evidence in the form of confirmation letter or affidavit of Shri Varun Agarwal has been enclosed to substantiate its claim. It is clear that assessee waited for the fresh order u/s 143(3) r.w.s. 263 of the Act and when it found that no relief was granted on the issue of unsecured loans, he has filed appeal before both Ld. CIT(A) and the ITAT. The reasons given by the assessee are therefore general, self-serving and not convincing. It is settled law that condonation of delay should not be granted only on the ground that ordinarily a litigant does not stand to benefit by lodging an appeal late.Condonation of delay should not be granted only on the ground that ordinarily a litigant does not stand to benefit by lodging an appeal late. The reason given by the assessee in the present case is not adequate or enough and also looks bonafide on its part. It is thus crystal clear that assessee was grossly negligent, inactive and casual in filing of appeal. Such negligent, casual and lackadaisical approach to file appeal cannot constitute sufficient cause within the meaning of section 253(5) of the Act. Appeal filed by the assessee in dismissed.
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2024 (7) TMI 1475
Determination of tax liability for a Trust u/s 164(1) - AO and CIT(A) held that the share of income of the Trust is unknown and in determinative, so relevant income shall be taxed at maximum marginal rates - assessee main contention is that there is a family Trust and at the creation of the family Trust income has been determined as it appears from the last will of the executor Savita Gouri Malani. HELD THAT:- There was a Trust namely Savita Gouri Malani Grand Children Trust. From perusal of the order of ld. CIT(A) it appears to us that he took the assistance of Section 164(1) of the Act in calculation of the tax by saying that in the present case share of the income of the Trust is unknown and not determinative. The submission of ld. Counsel for the assessee is that in the present case determination of the tax should be as per the 2nd proviso to Section 164(1) of the Act treating the assessee as an AOP and to tax it in conjunction with Section 160(iv) of the Act. Share and income of the trustees have already been determined in the last will. So, we find substance in the arguments of the ld. Counsel for the assessee that tax should be computed at normal rate and not at the maximum marginal rate in short MMR. Appeals filed by the assessee allowed.
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2024 (7) TMI 1474
Penalty u/s 271(1)(c) - furnishing inaccurate particulars of its income - adjustment made u/s 92CA - whether the penalty levied u/s 271(1)(c) on the adjustment made u/s 92CA is legally valid or not? - HELD THAT:- CIT(A) rightly deleted addition as held AO while imposing the penalty, simply relied on the addition/adjustment made by the TPO and did not examine in detail as to whether penalty was imposable on such adjustments or not. The scheme of Explanation 7 to section 271(1)(c) of the Act makes it clear that the onus on the assessee is only to show that the ALP was computed by the assessee in accordance with the scheme of section 92C of the Act in good faith and with due diligence. It is not in dispute here that the ALP was computed in accordance with the scheme of section 92C in as much as there was no dispute over the MAM, PLI or timescale of data used. AO/TPO only adopted a different set of comparables to determine ALP. There is no allegation by the AO in the penalty order that the actions of the appellant lack good faith and due diligence. AO has not been able to demonstrate any specific act, fact or conduct of the affairs of the appellant which proves that it was lacking in good faith and was done without due diligence. No such argument has been raised nor suggested otherwise. Therefore, lack of due diligence in determining the ALP is neither indicated nor can be inferred. In such a situation, it cannot be said that the appellant had not determined the ALP in accordance with the scheme of section 92C of the Act in good faith and with due diligence and accordingly, the conditions precedent for invoking Explanation 7 to section 271(1)(c) did not exist on the facts of the instant case. Appeal of the Revenue is dismissed.
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2024 (7) TMI 1473
Condonation of delay in filing appeal against the order u/s 143(1) - delay on 1190 days in filling the appeal - conclusion of the learned CIT(Appeals) leading to the dismissal of the appeal is that the appellant s rectification petition u/s 154 of the Act against order u/s 143(1) dated 14/01/2016 was already discharged by the AO and rejected by the order dated 14/03/2016 - HELD THAT:- As in order u/s 154 appellant has furnished the Application for Rectification u/s 154 dated 20.06.2016. Since this application under Section 154 of the Act was pending as on the date of the affidavit in support of the prayer for condonation of delay, the appellant was fully justified in contending that the application for rectification u/s 154 of the Act is pending. In fact subsequently, the appellant has received an Intimation dated 19.03.2020 from the CPC saying that the Return of Income for the above year is transferred to the jurisdictional Assessing Officer for necessary action. This justifies that condonation of delay the application supported with affidavit. It is also to be noted that the said Application for Rectification u/s 154 of the Act is still pending with the learned jurisdictional AO. Thus we are of considered opinion that the delay in filing the appeal was for good and sufficient reasons as the appellant was pursuing another remedy with all bonafides. Appeal allowed. CIT(A) shall condone that delay in filing the appeal and after giving, an opportunity of hearing on merits, decide the issue on merits.
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2024 (7) TMI 1472
Deductibility/legality of expenditure - assessee s claim for expenditure on repossession charges - assessee receives remuneration by way of commission from banks and financial institutions for repossessing assets pledged with them by the defaulting borrowers, enabling, either by way of disposal of those assets or otherwise, settlement of their dues. The assessee states of engaging influential people of the locality, without good social background though, to identify and repossess assets, using force where necessary - HELD THAT:- We have, at this stage, two options, i.e., to restore the matter back to the AO for examining the deductibility of the expenditure from the standpoint of Explanation to sec.37(1), qua which there is no finding; there being no estopple against law. The second, which we would prefer, is to examine the expenditure from the limited standpoint of the reasonability of the disallowance. The Tribunal is to decide matters based on the material on record. While nothing has been produced before us, it is an admitted fact that the only material furnished is an unverifiable list of about 400 persons, stated to be influential persons of the locality, without as much as a proof of their identity. Why, for all one knows, these persons may not exist. Unless each of the said persons falls in a different locality, a person once identified for the purpose would normally be engaged for another property in the area/locality, while there is no repetition at all. No one goes searching for such persons, found satisfactory, all over again and, further, how many such influential people one could find in a locality, being, rather, a few for the entire area. This refrain by the Revenue is understandable and, thus, valid. The detail furnished is sketchy, and its non-verifiability, admitted. It is, as we see it, only a make-believe, with no evidentiary value, given only for the sake of it, presumably to pre-empt disallowance u/ss. 40(a)(ia) 40A(3). Limiting deduction to 50% of that claimed, is, under the circumstances, not unreasonable. As regards the charge of it being ad hoc, the same misses the point that it is only where not verifiable which in the instant case extends to the entire sum claimed, that that estimated as reasonable is saved, disallowing the balance. As explained in CIT v. Durga Prasad More[ 1971 (8) TMI 17 - SUPREME COURT] science has yet not invented any instrument to measure the reliability of evidence, while here we find it to be not even qualifying as one. Estimation is integral to assessment, of which disallowance of expenditure is a part. Why, we see it all the time, as for personal purposes; again, in the absence of proper record. It is well-settled that it is permissible for the tax authorities to consider disallowing the sum estimated as incurred in excess (Swadeshi Cotton Mills Co. Ltd. [ 1966 (9) TMI 30 - SUPREME COURT] ; Lakshmiratan Cotton Mills Co. Ltd [ 1968 (9) TMI 13 - SUPREME COURT] ; Lachminarayan Madan Lal [ 1972 (9) TMI 4 - SUPREME COURT] . Reference in this context may also be made to CIT v. Eastern Condiments P. Ltd. [ 2009 (10) TMI 452 - KERALA HIGH COURT] ; Pr. CIT v. Rimjhim Ispat Ltd. [ 2016 (1) TMI 374 - ALLAHABAD HIGH COURT] . The AO has, in the absence of any material, viz. property-wise details; basis for payment, itself unevidenced, estimated the expenditure liable for disallowance at 50%, which we find as reasonable. Appeal filed by the assessee is dismissed.
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2024 (7) TMI 1471
Validity of reopening of assessment - reasons to believe - notice beyond period of four years - as argued AO has failed to point out the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year - HELD THAT:- Admitted facts are that the original assessment was completed by the AO u/s. 143(3) of the Act on 30.03.2015. The assessment year involved is AY 2012-13 and notice u/s. 148 of the Act was issued on 25.03.2019 and admittedly, it is beyond 4 years. Once the notice is beyond 4 years, we have to see whether there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year 2012-13. It cannot be inferred or there is no iota or word about the escapement of income, how the income has escaped due to the failure on the part of the assessee to file fully and truly all material facts necessary for its assessment. Once this is a fact, this issue is fully covered by the decision of Foramer France [ 2003 (1) TMI 101 - SC ORDER] wherein the Hon ble Supreme Court has affirmed the decision Foramer France [ 2000 (8) TMI 45 - ALLAHABAD HIGH COURT] wherein as held it is the new Section 147 which will apply to the facts of the present case. In the present case, there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. Hence, the proviso to the new Section 147 squarely applies, and the impugned notices were barred by limitation. In the absence of any failure on the part of the assessee to disclose fully and truly all material facts and assessment framed u/s. 143(3) of the Act and reopening is beyond 4 years, the issue is squarely covered in favour of the assessee
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Customs
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2024 (7) TMI 1470
Notices for payment of Terminal Handling Charges (THC) levied by Port Terminals - HELD THAT:- The petitioners are agreeable to the Impugned Public Notices No. 14 of 2020 dated 28th January 2020 and 11 of 2020 dated 17th January 2020 being read subject to the contracts between the Shipping lines and exporter/importer. This is on account of paragraph No.24 of the affidavit in reply at page no.127 of the Writ Petition No. 2914 of 2021 wherein it is averred that the Impugned Public Notices dated 28th January 2020 and 17th January 2020 do not interfere with private contracts that the shipping lines have with the importers and exporters. Therefore, the Impugned Public Notices No. 14 of 2020 and 11 of 2020 dated 28th January 2020 and 17th January 2020, respectively, are subject to the private contracts which shipping lines have with importers/exporters. Petition disposed off.
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2024 (7) TMI 1469
Classification of imported goods - to be classified under Customs Tariff Item [CTI] 6102 30 10, CTI 6202 9390 and CTI 6210 5000 of the First Schedule to the Customs Tariff Act, 1975? - wilful suppression of facts or not - HELD THAT:- It is clearly a case of interpretation of the Tariff entries and willful suppression of facts cannot be attributed in such a situation for section 28 (4) of the Customs Act to be applicable. The appellant had declared the details of the imported goods which were also physically examined. It is also stated that earlier the Customs Authorities had also examined the previous classification of subject goods on several occasions and permitted clearance under the classification adopted by the appellant. The appellant has placed on record the order dated 24.02.2023 passed by the Commissioner in respect of a show cause notice dated 01.10.2022 issued to the appellant for the past consignment of goods imported from September 2015 in which invoking the provisions of section 28 (4) of the Customs Act were also invoked. The Commissioner, however, not only held that the provisions of section 28 (4) could not have been invoked, but also held that sections 111 and 114A could also has not been invoked - The Commissioner has noted in the order that there was nothing to suggest presence of willful suppression of facts so as to enable the department to take recourse to the provisions of section 28 (4) of the Customs Act as it was a case of mis-classification only. The Commissioner also noted that once informed, the correct classification was accepted and the differential duty was paid. In view of the findings recorded by the Commissioner in the order dated 24.02.2023, which findings would be applicable in the present case, the impugned order dated 21.06.2021 passed by the Commissioner (Appeals) cannot be sustained and is set aside - Appeal allowed.
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2024 (7) TMI 1468
Revocation of Customs Broker License - forefeiture of entire security deposit - levy of penalty - overvaluation of export goods to claim higher drawback - violation of Regulation 1(4), 10(d), 10(e) and 10(n) of CBLR - HELD THAT:- It is found that the finding of the Commissioner that the appellant had sublet his licence to M/s Planet World Cargo and thereby violated Regulation 1(4) is contrary to his finding that the appellant had violated Regulations 10(d), (e) and (n). While holding that the appellant had sublet his licence the Commissioner presumed that the M/s Planet World Cargo acted as the customs broker using the licence sublet by the appellant. He also presumed that Shri Tilak Raj who processed the documents was working for M/s Planet World Cargo. On the contrary, while holding that the appellant had violated Regulations 10(d), (e) and (n), the Commissioner presumes that the appellant was the customs broker in the matter and in that capacity failed to fulfill certain obligations. At any rate, in the entire investigation, even a summon was not issued to the appellant to record his statement to determine if the shipping bill was filed by the appellant or by M/s Planet World Cargo and if it was filed by the appellant then what it had advised the exporter and what information it had imparted to the exporter and how it had verified the identity and functioning of the exporter as required under the Regulations. The impugned order cannot be sustained. The appeal is allowed.
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Corporate Laws
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2024 (7) TMI 1467
Lack of territorial jurisdiction - petition seeking initiation of investigation into the affairs of M/s Vikram Structures Pvt. Ltd. (VSPL) and its related parties by the SFIO dismissed on the ground of lack of territorial jurisdiction - HELD THAT:- This Court is of the view that the foundation for approaching the Ministry of Corporate Affairs, Government of India is the order passed by NCLT, Bengaluru. Moreover as the registered office of VSPL is situated in the state of Karnataka, the High Court which would have the jurisdiction to deal with the issues arising out of the order passed by NCLT, Bengaluru would be the Karnataka High Court. The learned Single Judge has rightly refused to exercise its discretionary jurisdiction by invoking the Doctrine of Forum Conveniens and directed the Appellant to approach the Karnataka High Court instead. Appeal dismissed.
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2024 (7) TMI 1466
Seeking dissolution of the respondent/company - Section 481 of the Companies Act, 1956 - HELD THAT:- This Court is of the opinion that these liquidation proceedings warrant a quietus, and the company (in liquidation) should be dissolved as the Official Liquidator cannot proceed any further with the winding up process. Relying on the decision of the Supreme Court in Meghal Homes [ 2007 (8) TMI 447 - SUPREME COURT] as also the import of Section 481 (1) of the Act, besides the facts and circumstances of the present case, these liquidation proceedings warrant to be brought to an end. The company (in liquidation) M/s. ARC Cement Ltd., stands dissolved and the Official Liquidator is hereby discharged as its Liquidator - the present application is allowed.
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2024 (7) TMI 1465
Winding up of company - seeking release of lands and claiming rights in the land taken over by the OL - manner in which the contribution made by the CRB Group is to be reversed in favour of CRB Group i.e., the OL, as the company is currently under provisional liquidation - HELD THAT:- The Court has taken an estimate of the share contributed, as also the market value placed on record. At best, the company would have been entitled to its own share which is 50%, 37.5% and 25% in Talan, RSEB and Gulab Bagh lands, respectively. Applying a valuation-based approach on these shares would be one of the modes of compensating the company for value of its share in these lands. In view of the valuations seen and the amount of Rs. 25 crores which has been determined as payable to the OL, this Court is not inclined to direct any adjustment of the said amount of Rs. 47 lakhs being claimed, as the same is not an admitted sum. Application disposed off. Sanction of the revised scheme for compromise and/or arrangement under Section 391/394 of the Companies Act, 1956 - Rule 9 of the Company (Court) Rules, 1959 - HELD THAT:- An affidavit has now been filed by the Ex-Management setting out the latest position of the assets and liabilities. The assets and liabilities of the company have been attached with the application Co. App. 384/2024, as per which the projected fund flow statement has also been given. Details of fixed assets, shares and securities, the list of unsecured creditors, bond holders, etc., have all been provided in the form of a full set of documents. Copies of the said documents have been served upon the OL. The OL may verify the same and file a response/report by the next date of hearing. Directing the Disbursement Committee to recommence disbursements to the depositors and bond holders - HELD THAT:- The Court has been supervising the above disbursements through the Disbursement Committee for the last several years. The above order passed by the ld. Division Bench was considered by the Supreme Court, which has directed that the directions in the interim order dated 15th December, 2010 of the ld. Division Bench, shall remain operative but the payments would be subject to further orders of the Company Judge - Considering the number of claims that are now pending, in accordance with law, it is deemed appropriate to direct that the Disbursement Committee ought to continue disbursement of the remaining 1,719 claims. As of today, according to the Committee s report, there is approximately Rs .9 crores in the Committee s account. Accordingly, let the disbursement in respect of 1719 claims be continued. Let the entire records be handed over to the new Committee on or before 30th April, 2024. The said new Committee shall start functioning from 1st May, 2024 - The disbursements shall be re-commenced by the new Disbursement Committee and a further report shall be placed on record. Committee shall submit a report every two months in the present company petition.
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2024 (7) TMI 1464
Challenge to arbitral award - non-consideration of the facts - rights of the petitioner bank against whom the same recovery is sought by the committee of creditors in the IBC proceedings - Section 34 of the A C Act - HELD THAT:- The Supreme Court in PSA SICAL Terminals (P) Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin, [ 2021 (7) TMI 1456 - SUPREME COURT ], inter-alia held that ' It is only such arbitral awards that shock the conscience of the court, that can be set aside on the said ground. An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter. However, an illegality with regard to a mere erroneous application of law would not be a ground for interference. Equally, reappreciation of evidence would not be permissible on the ground of patent illegality appearing on the face of the award.' It is important to remember that the position with respect to the limited interference of the courts has changed slightly in light of the 2015 Amendment to Section 34 of the A C Act. The scope of violating Indian public policy has been expanded to include fraud or corruption in the award-making process, violating Sections 75 or 81 of the Act, violating the fundamental policy of Indian law, and going against the most fundamental ideas of justice or morality as a result of the addition of Explanation 1 to Section 34(2). Furthermore, Section 34 now contains sub-section (2-A), which states that in the event of domestic arbitrations, patent illegality appearing on the face of the verdict also constitutes a breach of Indian public policy. This court at the stage of challenge under section 34 has to only prima facie see if there is a patent illegality in the impugned award which shocks the conscience of the court. Further, this court cannot appraise the evidence or merits in a challenge under section 34 of the A C Act. The mere fact that another reasonable conclusion can be drawn from the case s merits does not give the power to this court to interfere with the arbitral award. The award passed by the learned arbitrator is found to be correct and in accordance with the law. Petition dismissed.
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2024 (7) TMI 1463
Fraudulent siphoning/diversion of funds - Initiating and carrying out appropriate inquiries and investigation against the management of Three C Shelters Private Limited , i.e., respondent No.3 and sister group of companies - manipulating of records and siphoning off funds of the said company to certain shell companies based in Kolkata - HELD THAT:- This Courts finds it unfathomable that the information about the state of affairs of respondent No.3 and its group of companies have not reached the ears of respondent No.1 2, and yet shockingly no action has been taken in terms of Chapter XIV of the Companies Act, 2013. It is but imperative that they must exercise their statutory and public duties in arresting pilferage, siphoning off of the assets of respondent company (in liquidation)/respondent No.3 and its group of companies and safeguard the legitimate interests and rights of the petitioner and those similarly placed. It is surprising that despite issuance of advance notice and having a battery of lawyers on their panel, no one has bothered to even appear for respondent No.1 and 2 today during the hearing. There is no gainsaying that Chapter XIV of the Act provides for a detailed mechanism to inspect, call for the accounts and record of the company, inquire and investigate into the financial affairs of the company. Further, where the Registrar or inspector has reasonable grounds to believe that the books or documents with regard to the company under investigation are likely to to be destroyed, mutilated, altered, falsified or secreted, an order can be prayed for from the Special Court for the seizure of such books and papers in the manner provided vide section 209 of the Act and proceed for freezing of the accounts of the company under investigation. Considering the prayer made in the interim application moved on behalf of the petitioner, unhesitatingly there are compelling and justifiable grounds to pass certain directions so as to safeguard the paramount interests of the petitioner and those who are similarly placed in larger public interest . Respondent Nos. 1 and 2, are hereby conjointly directed to initiate action and ensure step-wise compliance in terms of Section 206 to 210 of the Companies Act, 2013 and other analogous provisions in Chapter XIV of the Companies Act, 2013, and thereby inspect the affairs of Three C Shelters and the related companies of Three C Shelters in terms of the Status Reports of the IRP before the NCLT as brought out in his reports dated 9th August, 2023 and submit an Inspection Report within four weeks from today before this Court. Re-notify for hearing on 14th March, 2024.
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Insolvency & Bankruptcy
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2024 (7) TMI 1462
Clarification of judgment regarding the term unsecured creditor in a civil appeal - HELD THAT:- The word unsecured creditor referred to in paragraph 20 of the judgment be now read as secured creditor . Judgment dated 12.09.2023 is corrected to the above extent only - Miscellaneous application is disposed of accordingly.
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FEMA
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2024 (7) TMI 1461
Priority of debts due to any secured creditor - priority of SARFAESI Act versus FEMA - HELD THAT:- Debts due to any secured creditor shall be paid in priority over all other debts, dues and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or other local authority; it follows therefrom that the provisions of the SARFAESI Act would prevail over the provisions of other earlier enactments, under which, amounts are allegedly due to the Central Government; it is well settled that if there are two special Acts / enactments, it is the later enactment that shall prevail; in the instant case, it cannot be gainsaid that the FEMA (a special law / Act) is an earlier enactment, while the SARFAESI Act (a special law / Act) is a later / subsequent enactment which would prevail over FEMA in the light of the principles laid down by the Apex Court in several judgments including Solidaire India s case [ 2001 (2) TMI 968 - SUPREME COURT] So also, in SBICAP s case [ 2023 (3) TMI 1509 - BOMBAY HIGH COURT] held that the provisions of the Prevention of Money Laundering Act, 2002 (for short the PMLA ) would be subservient to the rights of a secured creditor under the SARFAESI Act which would prevail and override the provisions of the PMLA. In the instant case, in the light of the undisputed fact that the SARFAESI Act, 2002 is a later Act / law, the same would prevail over the earlier Act / law, i.e., FEMA, 1999 and having regard to the language employed in Section 26E of the SARFAESI Act, the provisions contained therein would have a overriding effect over the provisions of the FEMA and the SARFAESI Act would prevail over FEMA; as a natural corollary, the dues payable in favour of the petitioner Bank which is a secured creditor would prevail over the dues allegedly payable to the respondents 1 and 2 by the 3rd respondent under FEMA and consequently, the impugned order purporting to seize / attach the schedule property for alleged dues under FEMA are clearly without jurisdiction or authority of law, inasmuch as since the schedule property had already been mortgaged in favour of the petitioner Bank by the 3rd respondent, prior to the impugned order, the 2nd respondent was neither entitled to nor empowered to pass the impugned order of seizure / attachment of the property which had already stood mortgaged in favour of the petitioner prior to the impugned order. Section 37A, under which the impugned order has been passed by the 2nd respondent being prospective in nature and operation, the said provision could not have been invoked by the 2nd respondent for the purpose of passing the impugned order of seizure / attachment in relation to the schedule property which had undisputedly stood mortgaged in favour of the petitioner Bank prior to Section 37A coming into force and consequently, the said provision was not applicable to the schedule property and the 2nd respondent did not have jurisdiction or authority of law to invoke or apply Section 37A of the FEMA for the purpose of passing the impugned order which deserves to be quashed on this ground also. Priority of secured creditors under Section 31B of the RDBI Act - A perusal of Section 31B of the RDBI Act and the principles laid down by the Full Bench of the Madras High Court supra, is sufficient to come to the conclusion that in the proceedings sought to be initiated by the petitioner Bank under SARFAESI Act, which would be governed by the procedure prescribed under the RDBI Act, the petitioner Bank being a secured creditor would have priority and the claim of the petitioner would prevail over the alleged dues payable under the FEMA as directed in the impugned order in the light of the overriding effect of the RDBI Act over the FEMA and consequently, viewed from this angle also, it is of the view that the impugned order deserves to be quashed. Insofar as the contention urged by the respondents that the dues payable to them under FEMA are not specifically covered by either Section 26E of the SARFAESI Act or by Section 31B of the RDBI Act is concerned, in the light of the express language employed in both the provisions which contemplate debts, government dues, revenues, taxes, cesses and rates due to the Central Government etc., the alleged dues under FEMA being payable to the respondents 1 and 2 who represent the Central Government, the same are covered by the aforesaid provisions and as such, the said contention urged by the respondents 1 and 2 cannot be accepted. Insofar as the contention as regards availability of equally efficacious and alternative remedy by way of an appeal under Section 37A (5) of the FEMA is concerned, in the light of the findings recorded by me hereinbefore that the impugned order is without jurisdiction or authority of law and the same is not only illegal and arbitrary but also contrary to the provisions contained in the SARFAESI Act and RDBI Act and consequently, mere availability of a remedy by way of an appeal cannot be construed or treated as denuding this Court of its jurisdiction under Article 226 of the Constitution of India and the said contention of the respondents 1 and 2 in this regard cannot be accepted. Petition is hereby allowed. The impugned order at Annexure-A dated 31.03.2022 passed by the 2nd respondent insofar as it relates to the schedule property mortgaged by the 3rd respondent in favour of petitioner Bank is hereby quashed.The 2nd respondent is hereby directed to release the schedule property mortgaged to the petitioner
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Service Tax
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2024 (7) TMI 1460
Levy of service tax - income in the form of Call Option Fee - support service of business or commerce or not - period 2007-08 to 2013-14 - extended period of limitation - penalty - HELD THAT:- The Call Option is a derivative or a right in securities. Both of which are specifically included in the definition of securities in section 2 (h) 2 (d)of the Securities Contracts (Regulation) Act, 1956 (SCRA). Securities are otherwise regarded as goods under normal parlance. Therefore, it is held that a grant of Call Option is a transaction in goods hence cannot be subject to levy of service tax. The imposition of service tax on goods is beyond the scope of Finance Act, 1994. In Vodafone [ 2012 (1) TMI 52 - SUPREME COURT ] case Hon ble Supreme Court has considered involving almost same companies as are involved herein. Though the department has taken plea that it is only in 2013 that SEBI granted validity to contracts providing for pre-emptive rights, right of first offer, tag along right, drag-along right and call put options by revoking notification of year 2000. Hence for the period in question the Call Options were not legalized. However, it is observed that in Vodafone case, Hon ble Supreme Court has discussed and analyzed Call Options at length and there seems not even a whiff that the Call Option was illegal or not a valid contract. The judgment is prior amendment of 2013 in SCRA, 1956. The Framework Agreement contemplated the transfer of SBP Shares upon exercise of the Call Option granted to GSPL, the requirement/ obligation on the Appellant to hold the underlying shares which were the subject of the Call Option was ancillary and necessary for the Call Option to be enforceable. Accordingly, the consideration could not be attributed, and was not paid, for such an ancillary requirement as it had no separable commercial value. Therefore, the consideration was not for the restriction contemplated under clause 4.1 but for the grant of the Call Option. The SCRA further defines securities to include both rights in securities and derivatives , The grant of call option by the Appellant to GSPL results in the transfer of Appellants right in securities, and the creation of a derivative contract which derives its value from underlying securities. Rights in securities and derivatives are specifically included in the definition of securities in the SCRA. Therefore, call options clearly fall within the activities excluded from the scope of the definition of 'service' in Section 65B (44). Extended period of limitation - HELD THAT:- There is no discussion regarding any specific act on part of appellant which may establish the intent to evade tax. There is no discussion regarding which of the situation listed in clause (a) to (e) of the proviso to section 73 (1) of Finance Act is attracted - it is clear that granting call option is not an activity of rendering service. The appellant was of this bonafide belief only, which is why the service tax on call option fee was not paid by the appellant. In view of these apparent facts on record and absence of any evidence about the positive act of the appellant to evade duty, the department has wrongly invoked the extended period of limitation. Penalty - HELD THAT:- The penalty has wrongly been imposed. Reliance placed upon the decision of Hon ble Supreme Court in the case of UOI vs. Rajasthan Spinning and Weaving Mills [ 2009 (5) TMI 15 - SUPREME COURT ] wherein it has been held that the evidence of deliberate deception by the assessee with an intent to evade duty is necessary for imposing penalty, same has been the observation of Supreme Court in the subsequent decision in the case of CCE, Chandigarh vs. Pepsi Food Ltd. [ 2010 (12) TMI 15 - SUPREME COURT ]. The appellant has wrongly been held to have been a service provider while receiving call option fee . The demand of service tax has wrongly been confirmed. The Finance Act has wrongly been invoked and the penalty has also wrongly been imposed. For these reasons the order under challenge is hereby set aside - appeal allowed.
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2024 (7) TMI 1459
Taxability - Goods Transport Operator - Consulting Engineer Services - Department formed the opinion that the effective control and possession of the machines, given on hire by the appellants, remain completely with the appellants, the activity of appellant is covered under the taxable category of Supply of Tangible Goods which is not covered under Section 66D - Section 124 and 129 of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and the Circular No. 1071/4/2019 dated 27.08.2019 - HELD THAT:- The relief as mentioned under the SVLDRS scheme is available to the declarant i.e. only to the person who applies under the scheme and declares as required. Everyone, whether company or its directors are eligble to apply to be called as declarant under the scheme - the discharge certificate shall also be issued to the declarant and after the discharge certificate it is declarant only who is given the benefit of no more being liable to pay any further duty, interest or penalty nor shall be liable to be prosecuted with respect to the matter in time covered in his declaration. Perusal of the circular reveals that it fixes timelines for the various processes involved which are to be strictly adhered to so that the entire process of filing of declaration to communication of Department s decision and to payment gets completed within 90 days. Once the declarant produces the proof of payment and withdrawal of appeal, Scheme provides for deemed withdrawal of appeal, a discharge certificate will be issued indicating a full and final closure of the proceedings in question for both the department and the taxpayer. It shall be the declarant only who shall be not be liable to pay any further duty, interest or penalty - the circular itself requires that once the duty demand stands discharged by the main noticees, the co-noticees also have to apply under the scheme to avail the similar benefit of waiver of penalty. Since the appellant personally has not applied under SVLDRS, 2019, he cannot be called as declarant under the scheme. Hence the benefits flowing out of said amnesty scheme cannot be made available to the appellant. It is an established principle that the company is a separate legal entity and so are the Directors. In light of these observations we do not find any infirmity in the order under challenge. The order under challenge is hereby upheld - Appeal dismissed.
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2024 (7) TMI 1458
Valuation - Passenger and Third Party Accidental Compensation Policy-2000 - whether the insurance scheme and the surcharge charged by the appellant amounts to premium? - levy of interest and penalty - HELD THAT:- According to popular understanding, insurance is a legal agreement between an insurer (insurance company) and an insured (individual), in which an insured receives financial protection from an insurer for the losses he may suffer under specific circumstances. Under an insurance policy, the insured needs to pay regular amount of premiums to the insurer. The insurer pays a predetermined sum assured to the insured if an unfortunate event occurs, such as death of the life insured, or damage to the insured or his property. In the instant case, there is no insurance policy issued by Appellant mentioning any conditions and circumstances under which its passengers are assured for its liability to indemnify in case of any loss. In order to issue an insurance policy, the appellant should have to be licensed with the Insurance Regulatory and Development Authority (IRDA), in order to run business of insurance in India. The IRDA is an autonomous statutory body responsible for managing and regulating insurance re-insurance industry. In the instant case, there is no insurance policy issued by Appellant mentioning any conditions and circumstances under which its passengers are assured for its liability to indemnify in case of any loss. In order to issue an insurance policy, the appellant should have to be licensed with the Insurance Regulatory and Development Authority (IRDA), in order to run business of insurance in India. The IRDA is an autonomous statutory body responsible for managing and regulating insurance re-insurance industry - It has to be noted that such a victim/third party has not paid any amount of such 'surcharge'. Consequently, we hold that for the period prior to 1.7.2012, the accident surcharge collected by the appellant is not in the nature of premium and such activity of the appellant is not covered by the term general insurance , as defined in Section 65(49) of the Finance Act, 1994. Further, the transportation of passengers as stage carriage, was exempted Vide Notification No. 20/2009-ST dated 7th July 2009, for inter-state or intrastate transportation of passengers, excluding tourism, conducted tours, charter or hire service. Hence, no service tax was payable on such service as well. The main service of stage carriage can be provided by the appellant with or without charging accidental compensation surcharge, which is not the case. It has been submitted before us that these two viz, Cost of Ticket Accident surcharge are always charged together. There is no option available to the passenger, to not pay and travel - the service of stage carriage being essential character is the main service offered by the appellant, which is not taxable due to its coverage under negative list u/s 66D of the Finance Act, 1994. As the demand does not survive, no penalty or interest is leviable. The impugned order is set aside - appeal allowed.
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2024 (7) TMI 1457
Denial of exemption under Section 66D of Finance Act, 1994 - providing long duration courses which are not approved by AICTE - Extended period of limitation - HELD THAT:- It is observed that as per Section 65(105)(zzc) of the Finance Act only such institute rendering Commercial Coaching or Training Centre Services were liable to service tax which were imparting the services and collecting fees as a profit motive as it was clarified by the Department s Circular No. 86/4/2006 dated 01.11.2006. However, the Finance Act, 2011 has taken away the said exemption by incorporating clause 27 to Section 65 to cover all training centres giving training/coaching for a consideration irrespective of the profit motive of the centre were made liable to tax - there was a service tax liability upon the fee received for rendering education services w.e.f. 01.07.2003 itself, however, only till 01.07.2012 when came into existence the Finance Act, 2012. For the impugned period irrespective the tax liability was introduced retrospectively, the said liability remained exempted w.e.f. 01.07.2012, the situation stands corroborated for the year 2016. Resultantly, there are no basis for the confirmation of the impugned demand as already - the show cause notice has wrongly been issued and that the appellant has no tax liability. Invocation of extended period - HELD THAT:- The suppression of facts is wrongly alleged against the appellants, the appellants are already held to have no tax liability towards fees collected by them for imparting PG courses. There remain no possibility of tax evasion that too malafide intent for the same. Accordingly, it is held that the extended period of limitation has wrongly been invoked by department while issuing the impugned both the show cause notices. The impugned order is set aside - appeal allowed.
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Central Excise
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2024 (7) TMI 1456
Clandesine Removal - CTD bars and TMT rods - seizure of cash - addition based on the statements of the employees - discrepancy as regards the excess supply over and above the invoice to Raasi Traders - whether the Department has established the clandestine removal as alleged and upheld in the impugned order?. Cash seized - addition based on the statements of the employees - HELD THAT:- The cash found and seized from the 1st Appellant has been explained to be the advance received from M/s. Nagaraja Agencies, which is also supported by the statements of the employees as well as the proprietor of M/s. Nagaraja Agencies and hence, the said cash was not attributable to the alleged clandestine sale. In any case, the addition was made solely based on the statements of the employees which statements have been retracted on a later point of time. Thus, a reasonable belief that the said amount did not represent the sale proceeds of the clandestinely removed goods has to be drawn because no incriminating evidence was found during the search, and nor is there any supporting evidence to this effect. Alleged discrepancy as regards the excess supply over and above the invoice to Raasi Traders - HELD THAT:- The Department has not denied the contention of the 2nd appellant that in the book seized from Raasi Traders, name of the first appellant is not reflected, even in their letter dated 28.8.2012 they have clarified that they did not purchase any goods without invoice from the first appellant. The document seized from Raasi Traders does not contain or show the appellant s name as alleged by the Revenue and in any case, there is also no corroborative evidence to support the Revenue s case. The said letter is clearly a retraction to the earlier statement of the Partner and apart from this, there is absolutely no other evidence, much less any incriminating evidence placed on record, that was unearthed by the search team. The department has nowhere denied the facts as explained by the 2nd appellant that the document alleged to be seized from their premises did not show anywhere the name of the first appellant who is alleged to have supplied goods in excess. It also remains undisputed about the clarification offered by the 2nd appellant as regards the alleged excess stock found vis- -vis the actuals found in their book and hence, the alleged excess stock was nothing to do with the 1st appellant. The department has not established clandestine removal or clandestine sale by the 1st appellant and nor has the department succeeded in corroborating the alleged excess supply to Raasi Traders to be of clandestinely sold goods. Hence, there was nothing on record to justify even the levy of penalties and interest and therefore, the interest charged on the appellants and the penalties imposed on them cannot sustain. The impugned order is set aside - appeal allowed.
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2024 (7) TMI 1455
CENVAT Credit - transportation of goods from their factory to the buyer's premises as well as to their own units which were further used in the manufacture - Disallowance of credit of service tax paid on freight charges incurred by appellant up to the buyer's premises. CENVAT Credit - transportation of goods from their factory to the buyer's premises as well as to their own units which were further used in the manufacture - Department was of the view that the transportation was beyond the place of removal and therefore, the appellant is not eligible for Cenvat credit of the service tax paid on such freight charges incurred for transportation - periods from July 2011 to November 2011, December 2011 to March 2012, April 2012 to December 2012, January 2013 to September 2013 and October 2013 to September 2014 - HELD THAT:- The very same issue was considered by the Hon ble High Court, Madras in the appellant's own case in [ 2019 (9) TMI 328 - MADRAS HIGH COURT] . As per judgment dated 20.08.2019, the Hon ble High Court categorically held that the appellant is eligible for credit. Following the decision of the Hon ble High Court in the appellant's own case, it is held that the credit availed on service tax paid for freight charges incurred for transportation of goods to the appellant's unit at Jamshedpur and Uttarakhand is eligible. The impugned order disallowing the credit, and confirming the demand, interest and imposing penalties on this issue is set aside. Disallowance of credit of service tax paid on freight charges incurred by appellant up to the buyer's premises - HELD THAT:- The appellant is eligible for credit if the freight charges has been included in the assessable value for payment of central excise duty. The Larger Bench in the case of M/S. THE RAMCO CEMENTS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY [ 2023 (12) TMI 1332 - CESTAT CHENNAI-LB] , has held that the place of removal has to be ascertained on the basis of the decisions passed by the apex court in the case of COMMISSIONER CENTRAL EXCISE, MUMBAI-III VERSUS M/S. EMCO LTD. [ 2015 (8) TMI 200 - SUPREME COURT ] and COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. [ 2015 (4) TMI 857 - SUPREME COURT ]. The Board s Circular issued in 2018 also clarifies the same. In such circumstances, this issue requires to be remanded to the adjudicating authority, who is directed to ascertain the place of removal. The appellant is to be given personal hearing and is at liberty to furnish documents to establish their contention. In case the appellant has included the freight charges in the assessable value for payment of central excise duty, they would be eligible to avail credit of service tax on such freight charges. The impugned order is modified to the extent of allowing the credit of service tax for outward transportation to the appellant's own unit. The demand, interest and penalties imposed in this regard is set aside - The issue of availment of credit on outward transportation up to the buyer's premises is remanded to the adjudicating authority for fresh consideration. Appeal allowed in part and part matter on remand.
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2024 (7) TMI 1454
Valuation - incusion of amount of subsidy received by the appellant under the Rajasthan Investment Promotion Scheme, 2010 from the State Government in the assessable value of the goods cleared during the period in dispute - Section 4(3)(d) of Central Excise Act - period during 1.4.2016 to 31.03.2017 - HELD THAT:- Reliance placed on the latest decision in M/S HARIT POLYTECH PVT. LTD. VERSUS COMMISSIONER, CENTRAL EXCISE CGST- JAIPUR I, GANPATI PLASTFAB LTD., M/S APEX ALUMINIUM EXTRUSION PVT. LTD., M/S MAHA MAYAY STEELS, M/S. TIRUPATI BALAJI FURNACES PVT. LTD., M/S. TRANS ACNR SOLUTIONS PVT. LTD., M/S. FRYSTAL PET PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS CGST- ALWAR [ 2023 (3) TMI 1120 - CESTAT NEW DELHI] , where on reference the issue was once again settled that in the promotion policy involved in the present case, the subsidy does not reduce the sales tax that is required to be paid by the assessee as the entire amount of sales tax collected by the assessee from the customer is paid. The subsidy amount, therefore, cannot be included in the transaction value for the purpose of levy of central excise duty under Section 4 of the Excise Act. The principle of law that emerges from series of decisions is that the VAT amount paid by the assessee using VAT 37B challans would be construed as actual payment of VAT and thus will not be included in the transaction value in terms of Section 4(3)(d) of the Act - the impugned order holding otherwise needs to be set aside. In the present case also, the entire amount of sale tax collected from the customer is paid and not retained by the appellant. The other submissions made on the point of extended period of limitation or the liability towards interest and penalty, not considered, which otherwise do not survive. The impugned order deserves to be set aside - Appeal allowed.
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2024 (7) TMI 1453
CENVAT Credit - input service - clearing and forwarding agency service - denial of credit on the ground that warehouses and dealers points are not the place of removal - whether the warehouse / depots are the place of removal or not? - HELD THAT:- As apparent from the said definition clause (2) thereof includes warehouse to be a place of removal and clause (3) thereof includes depots as the place of removal. Admittedly, the cement manufactured by the appellant has been transferred to the warehouse/depot. Admittedly, the C F Agency service is obtained for the transit from factory to warehouse or depot. As already observed from the above definition, the warehouses as well as depot are also the place of removal. The decision of Bombay High Court in the case of CCE, NAGPUR VERSUS ULTRATECH CEMENT LTD., [ 2010 (10) TMI 13 - BOMBAY HIGH COURT] as relied upon by the appellant has been upheld by Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX VERSUS ULTRA TECH CEMENT LTD. [ 2018 (2) TMI 117 - SUPREME COURT] . The ratio of the decision is that all input services as has been received till the place of removal are eligible for the availment of Cenvat Credit. Thus, it is clear that the service of C F agent as received by the appellant since was received till the place of removal; it is held that appellant is eligible for the availment of Cenvat Credit. The denial of said availment is not sustainable. The order under challenge is liable to be set aside - appeal allowed.
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Indian Laws
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2024 (7) TMI 1452
Challenge to proceedings initiated by the appellant State Bank of India under the SARFAESI Act, 2002 - HELD THAT:- There being a mortgage and the loan amounts recoverable, the appellant is entitled to proceed under the SARFAESI Act - the liability of the guarantor is joint and several with the principal debtor. The impugned judgment is set aside. Consequently, the appellant State Bank of India is entitled to proceed under the SARFAESI Act, including the notice under Section 13(4), which was impugned and quashed vide the impugned judgment - Appeal allowed.
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2024 (7) TMI 1451
Requirement of pre-deposit towards compliance with proviso to Section 43 (5) of Real Estate (Regulation and Development) Act, 2016 (RERA) - liability of the Appellant to pay such interest is not in praesenti but in future - direction to deposit of the entire amount of interest when proviso to sub-Section (5) of Section 43 permits deposit of 30% of the penalty. Requirement of pre-deposit towards compliance with proviso to Section 43 (5) of Real Estate (Regulation and Development) Act, 2016 (RERA) - HELD THAT:- The requirement of making pre-deposit under Proviso to Section 43 (5) is applicable only in respect of an appeal filed by the promoter. When the flat purchaser/allotee files an appeal, there is no requirement of making any pre-deposit. Since the appeals in the present case are filed by the promoter, Proviso to Section 43 (5) gets attracted. According to the Appellant, the total amount to be paid to the allotee including interest and compensation imposed on him within the meaning of the Proviso has to be the amount which is payable on the date of passing of Order by MahaRERA. That such total amount does not and cannot mean the amount which is payable to the complainant in future. It must be borne in mind that the special exemption for deferring the payment of interest by Appellant is given only for the purpose of ensuring that the entire project is not put in jeopardy and that other flat/office purchasers do not suffer. This dispensation is not granted to protect any interest of the promoter. Such deferment would therefore not mean that promoter would get a licence to treat the Order passed by MahaRERA as imposing no obligation as on the date of passing of the Order. If the promoter decides to challenge MahaRERA s order, the protection of deferment of payment of interest cannot be applied while deciding the issue of pre-deposit under Proviso to Section 43 (5). There is determination of the amount by the Regulatory Authority, the liability on promoter is fastened and only the time for making the payment is postponed. Therefore it cannot be countenanced that no liability is fixed at the present on Appellant. The objective behind making mandatory pre-deposit under proviso to Section 43 (5) is to put a deterrent on promoters from engaging flat purchasers in endless litigation without any consequences for him. If this objective is borne in mind, permitting Appellant to prosecute Appeals challenging MahaRERA s order without any consequence of making pre- deposit would destroy the very objective behind incorporation of Proviso to sub Section 5 of Section 43. Even if liability to pay interest is deferred by MahaRERA in the overall interest of the project, such deferment is granted only if the promoter is willing to be abide by the Order of the Regulatory Authority. Such deferment will have no effect on promoter s liability to make pre-deposit under Proviso to sub Section 5 of Section 43. Therefore, Appellant must deposit the amount quantified by the Appellate Tribunal as a pre-condition for entertainment of its Appeals. The Appellant must deposit the amount of interest as directed by MahaRERA as a pre-condition for entertainment of Appeals before the Appellate Tribunal, even though its liability to pay such interest is not in praesenti but in future. This would however be subject to deduction of amount of interest in respect of COVID-19 pandemic period as per Notifications/Order Nos. 13 and 14 dated 2 April 2020 and 18 May 2020. Deposit of 30% penalty under Proviso to sub-Section 5 of Section 43 - HELD THAT:- It is fairly conceded that what is directed to be paid by MahaRERA is not penalty but interest, which would be covered by the expression the total amount to be paid to the allotee . In the light of the above, the second question formulated can be answered holding that the entire amount awarded by MahaRERA (subject to minor modification) must be deposited and issue of deposit of any penalty does not arise in the present case. The Appeals filed by Appellant are partly allowed to the limited extent of directing the Appellate Tribunal to deduct the amount of interest payable during the moratorium period covered by Notifications/Order Nos. 13 and 14 dated 2 April 2020 and 18 May 2020 issued by MahaRERA. The Judgment and Order of the Appellate Tribunal dated 31 October 2022 shall be modified to this limited extent and rest of the Order is maintained.
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