Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 22, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Levy of penalty - invalid/expired E-way bill - existence of element of tax evasion or not - The principles of natural justice were statutorily recognized and ingrained in Section 126(1)(3) of the Act. The Law Makers have taken care of doctrine of proportionality while bringing sub-section (1) of Section 126 in the Statute Book. The punishment should be commensurate to the breach is the legislative mandate as per subsection (1) of Section 126 - In the instant case, the delay of almost 4:30 hours before which E-way Bill stood expired appears to be bonafide and without establishing fraudulent intent and negligence on the part of petitioner, the impugned notice/order could not have been passed. - HC
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Levy of GST - Rate of GST - Pure services or not - services proposed to be provided by to the Department of Horticulture for cleaning and sweeping of lawns and garden path areas and segregation and transport of the garbage - the applicant satisfies the above two conditions mentioned supra to claim exemption - AAR
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Classification of manufactured goods - rate of GST - amusement park ride karts commonly known as Go-karts - the 'amusement park ride karts' supplied by the applicant neither qualify as 'motor cars' nor as 'motor vehicle' under the Motor Vehicles Act, 1988 as they are not road worthy. They are also not designed for transport of persons and are meant only for amusement or entertainment for use on a fixed or restricted course. Hence they are not classifiable under CTH 8703. - the amusement park rides are taxable at 19% of GST i.e. 9% CGST and 9% SGST. - AAR
Income Tax
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Harassment of assessee - Re-assessment - Huge Demand of income tax - The practice of frequently violating principles of natural justice, non consideration of replies of assessees under one pretext or the other or rejecting it with one or two lines orders without recording reasons for rejection, is gradually increasing which needs to be taken care of immediately by the respondents at the highest level, otherwise prevailing situation of arbitrary approach and breach of principles of natural justice may not only adversely affect the assessees who pay revenue to the Government, but also may develop a perception amongst people/assessees that it is difficult to get justice from the authorities in statutory proceedings. - Writ petition is allowed with cost of Rs.50,00,000/- on the Revenue department - HC
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Direct Tax Vivad Se Vishwas Scheme - definition of ‘dispute’ under the VSV Act / Rules - attempt by the CIT to exclude a genuine disputant of tax liability, like the petitioner, from the possibility of settlement under the VSV Act is extremely hyper-technical. The interest as demanded under Section 220 (2A) which is 1% for every month of the period of delay as opposed to an application of Rule 154 of the Companies Court Rules which provides for an interest ceiling at the rate of 4% interest for companies in liquidation, is a huge statutory benefit given to companies in liquidation. It cannot be contended that the respondent CIT is not qualified to account for the beneficial provisions for a company in liquidation. - PCIT / CIT directed to re-examine the declaration filed - HC
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Revision u/s 263 - violation of the provisions of Section 13(1) (c) - The least that the AO was called upon to do was to require the assessee to make good his claim that the amount was sourced from Kulwant Kaur Kukreja Educational Society. The violation of Section 13(1) (c) of the Income Tax Act also required examination after examination of the first aspect as aforesaid. - PCIT directed to administratively examine whether any action is called for against the AO in the light of the manner in which he has conducted himself while dealing with the proceedings after issuance of the notices under Section 143(2) and Section 142(1) of the Income Tax Act. - HC
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Revision u/s 263 - Addition u/s 68 r.w.s. 115BBE - no verification of ‘other income’ was done by Ld. AO. In fact during revisional proceedings, the assessee shifted the stand and submitted that it was surplus out of deposits and withdrawals which are contradictory to return of income. It is clear that the nature and source of Rs.7.55 Lacs was nowhere examined by Ld. AO as well as no explanation for the same was furnished by the assessee. Under such circumstances, the revision was justified. - AT
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Addition u/s 43CA - difference between sale value of the flats sold and the stamp duty value of the same - The net effect of the judgment of the Supreme Court is that if a fresh benefit is provided by the Parliament in an existing provision, then such an amendment should be given retrospective effect. Therefore, even without going into the merits of the case by the application of first proviso to section 43CA having retrospective effect, the grounds of appeal of the assessee stands allowed. - AT
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TP adjustment on account of interest paid by the assessee on behalf of the associated enterprise - the payment of interest by the assessee, on behalf of the associated enterprise, which has not been claimed as expenditure, is revenue neutral and provisions of Chapter X of the Act are not applicable in such a situation. - TP adjustement directed to be deleted - AT
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Reopening of assessment u/s 147 - Whether AO has assumed the jurisdiction on wrong facts? - The date of filing of the return is much before than the date of recording of reasons which is 27.03.2019. AO has noted that PAN was searched in the system and DCR of respective year has also been consulted and he had not found the copy of return filed by assessee. In view of the fact of having filed the return of income by the assessee the finding of the Assessing Officer that no return has been furnished by the assessee is wrong and therefore AO has reopened the case by recording a wrong fact. - AT
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Rectification of mistake u/s 154 - period of limitation - intimation or deemed intimation u/s 143(1) - If we read that the limitation provided under section 154(7) is not be available in the case of passing of any intimation to rectify the order, then chaos would happen , and unlimited power would be available to the Assessing Officer/CPC to rectify the mistake even after the lapse of 4 years. In the light of the above, we are of the opinion that limitation for rectification under 154(7) is 4 years even for intimation also. - AT
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Revision u/s 263 - Addition u/s 68 - income from other source (income declared at the time of survey) - tax is payable u/s 115BBE or not - CIT was not at all justified by invoking the provisions of Sec. 263 by wrongly/incorrectly holding that the subjected assessment order u/s 143(3) dated 25.02.2019, was passed without considering that the income declared under the head of other sources being recovery of cash amount of advances paid for purchase, comes under preview of S. 68 and 69 and thus, the tax u/s 115BBE was to be paid, as against the tax at normal rates. The assumption of jurisdiction u/s 263 was contrary to the law and facts on record. - AT
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Validity of Addition on protective basis - Although, there is no provision in the Income Tax Act authorizing the levy of income tax on a person other than whom income tax is payable but the object of the protective assessment is that in case substantive addition is made in the hands of other person and in case assessment fails then in that eventuality the Department must get the tax from the person in whose hands protective assessment is made or ultimately if substantive addition made is confirmed then in that eventuality protective addition cannot survive. - no loss is going to suffer by the assessee, in case, we uphold the order of the ld. CIT(A) in upholding the protective addition made by the AO in the hands of the assessee - AT
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Addition u/s.56(2)(viib) - Determination of FMV of shares - Admittedly, provision of section 56(2)(viib) of the Act do not prescribe only one method for valuation of fair market value of share which is evident from the perusal of the section itself, as reproduced above. The assessee can also justify the fair market value of the shares based on the valuation of its asset as on the date of issue of shares including both tangible and intangible assets. Therefore the finding of the Revenue authorities in the present case that valuation of FMV as per the Rule 11UA is not justified, we hold is not in accordance with law - valuation report of FMV of the shares cannot be based on one method only. - AT
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Validity of proceedings u/s 153A - Whether "no search was conducted” on the assessee? - Observations of the ld. CIT(A) that there was no warrant executed at the address mentioned in the ROC record or the other address of the assessee and hence “no search was conducted” goes against the fundamentals of issue of warrant of authorization u/s 132. It is not necessary that warrant has to be issued only at /on the premises of the registered office of the company or corporate office, factory or godown but a warrant can be authorized to any other place where the issuing authority satisfies and reasons to suspect that the material/evidences pertaining to the assessee have been kept and are to be found. - AT
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Deduction u/s 80IA - AO held that the assessee maintained consolidated figure of power generation unit and no separate and independent books of account was maintained by the assessee for each and every wind mill, hence, the profit/loss of each wind mill cannot be ascertained from the incomplete record, therefore, deduction u/s 80IA was disallowed - the assessee is eligible to claim deduction of profit of each undertaking from different period. Thus, each undertaking has to be considered as a separate undertaking and cannot be clubbed in order to compute the deduction under Section 80IA - CIT(A) rightly allowed the claim - AT
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Bogus sales promotion expenses - The details of MR's who distributed the gifts also therefore does not establish the fact of gift having been actually distributed by the assessee. These are only self serving documents and no cognizance of the same can be taken for finding whether the assessee had in fact distributed gift articles to its customers/clients. - The reasoning of the ld. CIT(A) therefore for restricting the disallowance to the extent of 12.5% of the total expenses is therefore we hold flawed, illogical and not sustainable. - The entire expenenses in question to be disallowed - AT
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TDS u/s 194A - addition made u/s 40(a)(ia) - the provisions of Maharashtra Cooperative Societies Act provides that the members includes nominal members and, therefore, we do not see any reason as to why the exemption under clause (v) of sub-section (3) of section 194A of the Act cannot be given in the case of members referred to above. - AT
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Long term capital gain computation - Fair market value as on 1.4.81 - Evidence / Poof of cost of improvement incurred after 1.4.1981 - While it is the claim of the assessee that the improvement has taken place immediately after the cut of date for adoption of fair market value of cost of acquisition as on 01.04.1981, it is equally plausible that such cost, if any, has been incurred prior to the cut of date and thus already taken into account for the purposes of fair market value of cost of acquisition of the property in question. - The affidavit filed by the assessee appears to be only a self serving document and no weight can be attached to such standalone paper - AT
Customs
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Violation of principles of natural justice - From the statutory provision of section 138 B, it is not the option for the Adjudicating Authority to allow or not to allow the cross- examination, if the appellant has requested for cross- examination, it is in the interest of principle of natural justice the Adjudicating Authority is duty bound to conduct the cross-examination of the witnesses - AT
Corporate Law
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Disqualification of Director - Deactivation of DIN no - Defaulting company was already dissolved - It is preposterous for the respondents to contend that the petitioner was disqualified for failure to submit returns with respect to a dissolved company. It is disheartening to note that even when the anomaly with respect to the status of the company was informed to the second respondent, absolutely nothing was done by the respondents.- HC
IBC
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Financial Debt or Operational Debt? - mobilization advance given by the Appellant to the Corporate Debtor - Mobilization advance was not disbursed against the consideration for the time value of money. - The guarantee referred to in Section 5(8)(i) must relate to any of the items referred to in sub clauses (a) to (h). The mobilization advance given by the Appellant to the Corporate Debtor does not fall in any of the clauses (a) to (h) hence no benefit can be availed of the Appellant of provisions of Section 5(8)(i). - Not to be treated as Financial Debt - AT
Service Tax
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Refund of unutilized CENVAT Credit - Output service - services on which no tax was payable by the Respondent - The assessee is a firm of legal practitioners, which renders legal services to its clients both in India, as well as outside India - it cannot but be concluded that the said exclusionary provision i.e., Subrule (2) of Rule 2(p) of the 2004 rules, is not applicable to the assessee, as in respect of legal service exported by it, service tax is not paid by the recipient of service. The recipient of service is located outside the taxable territory and therefore, this provision can only apply to legal services offered by the assessee to the recipient of service located within the taxable territory. - Refund cannot be denied - HC
Central Excise
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CENVAT Credit - input services - services of Commission Agent received for marketing of products / sale of goods - The learned Commissioner has correctly held that the impugned service does not qualify as Input Service as the same was not used in or in relation to manufacture of goods by the appellants and therefore, the credit availed is illegal. - penalty under Rule 15 of CENVAT Credit Rules, 2004 is rightly imposed. - AT
Case Laws:
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GST
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2022 (8) TMI 814
Levy of penalty - invalid/expired E-way bill - existence of element of tax evasion or not - non-rebuttal of fraudulent intent and negligence on the part of petitioner - HELD THAT:- The respondents could not establish that there exist any element of evasion of tax, fraudulent intent or negligence on the part of the petitioner. In this backdrop, the impugned notice/order could not have been passed. The principles of natural justice were statutorily recognized and ingrained in Section 126(1)(3) of the Act. The Law Makers have taken care of doctrine of proportionality while bringing sub-section (1) of Section 126 in the Statute Book. The punishment should be commensurate to the breach is the legislative mandate as per subsection (1) of Section 126 - In the instant case, the delay of almost 4:30 hours before which E-way Bill stood expired appears to be bonafide and without establishing fraudulent intent and negligence on the part of petitioner, the impugned notice/order could not have been passed. The penalty imposed is set aside - petition allowed.
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2022 (8) TMI 813
Validity of summon order - seeking direction to respondent not to arrest the petitioners in pre inquiry proceeding in pursuance of the summon - Section 70 of the CGST Act - HELD THAT:- This Court while deciding a similar issue in the case of Himgiri Ispat Pvt. Ltd. Vs. Commissioner of the CGST, Commissionerate at Dehradun [ 2022 (2) TMI 1107 - UTTARAKHAND HIGH COURT ] has held that a writ petition is not maintainable against an order of show cause or summoning order for production of documents. However, certain directions were issued to the respondents to comply with, as envisaged under Section 69 (1) of the Act. It is directed that petitioners shall appear before respondent no. 3 within 15 days from today and if so advised, they may take assistance of an Accountant but if respondent no. 3 desires to arrest the petitioners, then he shall comply with the provisions of Section 69 (1) of the Act. The writ petition is disposed off.
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2022 (8) TMI 812
Maintainability of petition - availability of alternative remedy of appeal - Wrongful availment of Input Tax Credit - HELD THAT:- Without filing an appeal before the concerned authority, the petitioner has approached this Court by way of this Writ Petition. The Hon'ble Apex Court and this Court, time and again, held that if there is an alternative and efficacious remedy of appeal, the petitioner can very well approach the concerned authority. Hence, the petitioner is at liberty to approach the Appellate Authority by raising the points. The delay in filing appeal if any to be considered favourably. Petition disposed off.
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2022 (8) TMI 811
Levy of penalty u/s 129 (3) of the Central Goods and Service Tax Act, 2017 - Detention of vehicle of petitioner - detention for the reason of suspected transaction - whether transaction appeared to be 'doubtful'? - HELD THAT:- The point of origination of goods is Telangana and not Guwahati as claimed. Though this point was specifically put to the petitioner in the course of adjudication proceedings and the petitioner could very well have produced the toll receipts or any other information/material in its possession to disprove the suspicion, this does not appear to have been done. It is on the basis of the aforesaid discussion that the impugned order has to be passed. No violation amenable to Article 226 of the Constitution of India has been made out by the petitioner. No doubt, the petitioner may still have in its possession/material to disprove the conclusions of the respondent authorities. However, consideration of such information, if at all, would involve an examination of disputed facts which this Court is not inclined to embark upon in a writ petition. The petitioner has an efficacious, alternate remedy provided under Section 107 of the aforesaid Act and is at liberty to approach the Respondent/Appellate Authority as expeditiously it desires. It is also a settled position that an Appellate Authority has all powers incidental and ancillary to the power of disposal of an appeal that include powers of grant of interim protection and release of seized material - Petition dismissed.
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2022 (8) TMI 810
Classification of supply - Rate of GST - supply of services - Government Entity or not - contract for construction of Head Works, Sumps, Pump Rooms, laying, jointing of pipe line and commissioning and maintenance of the entire work for Water Supply Projects / Sewerage Projects / Facilities - applicability of N/N. 15/ 2021-Central Tax (Rate), dated 18th November, 2021 r/w Notification No.22/ 2021-Central Tax (Rate), dated 31st December, 2021 - HELD THAT:- The Applicant has been awarded a contract by BWSSB to execute the work of Rehabilitation/Remodeling/Replacement of 400-1000 mm dia sewer line in V-Valley and wants to know the applicable rate of GST on the same - Bangalore Water Supply and Sewerage Board was set up by The Bangalore Water Supply and Sewerage Act 1964 to supply water in Bangalore Metropolitan area and to make adequate provision for the sewerage and disposal of sewage in the Bangalore Metropolitan area. Whether BWSSB is a State Government or local authority or Governmental Authority or Government Entity - HELD THAT:- If the Applicant is any one of these then only the Entry No.3(iii) of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 will be applicable to the applicant - Since the BWSSB is a Board set up by The Bangalore Water Supply and Sewerage Act, 1964, the same cannot be considered as State Government. As per Clause (e) of Article 243 and Article 243Q of Indian Constitution, we can say that Municipality is an institution of self-government at transitional area, smaller and larger urban areas - From the definitions of Panchayat and Municipalities we can see that both are institutions of self-government in defined areas. Self-Government is the management of local affairs by local Authorities, members of which have been elected by the local people. One of the distinctive attributes and characteristics of Local Authority is that, their members are elected through direct elections by the inhabitants of the defined area. But as per the section 3 of BWSSB Act 1964, all the members of BWSSB are appointed by the State Government - BWSSB is also not a Municipal Committee or a Zilla Parishad or a District Board, since it is not vested with the control or management of a municipal or local fund. In view of the above, we can conclude that BWSSB is not Local Authority. Whether BWSSB is a Governmental Authority or Government Entity? - HELD THAT:- BWSSB was set up by The Bangalore Water Supply and Sewerage Act 1964, to supply water in Bangalore Metropolitan area and to make adequate provision for the sewerage and disposal of sewage in the Bangalore Metropolitan area. These duties performed by BWSSB are covered under the functions entrusted to a Municipality under article 243W of the Constitution that is 5th and 6th entry of 12th schedule of the constitution - Since the BWSSB is set up by the Act of State Legislature to carry out function entrusted to a Municipality under article 243W of the Constitution, the same may be considered as Governmental Authority. Since BWSSB is considered as Governmental Authority, the services provided by the Applicant to the BWSSB are covered under the entry 3 (iii)(c)(iii) of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 as discussed in para. 12 supra and hence the same is exigible to GST at 12% till 31.12.2021 - the services mentioned in entry 3(iii) of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 are subjected to GST at 12% only if those services are supplied to Central Government, State Government, Union territory or a local authority and not when supplied to Governmental Authority or a Government Entity. Since BWSSB is considered as Governmental Authority, this entry is not applicable to the services supplied by the applicant to the BWSSB with effect from 01.01.2022. The applicable rate of tax under the Goods and Services Tax Act, 2017 on the supplies made by the Applicant to the BWSSB as per the instant application is 18% w.e.f 01.01.2022 as per entry 3 (xii) of No.11/ 2017-Central Tax (Rate) dated 28.06.2017.
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2022 (8) TMI 809
Levy of GST - Rate of GST - Pure services or not - services proposed to be provided by to the Department of Horticulture for cleaning and sweeping of lawns and garden path areas and segregation and transport of the garbage - to the Department of Horticulture for supply of manpower for garden maintenance on outsource basis to the Department of Horticulture - applicability of entry 3 of Notification No. 12 of 2017 (Central Tax Rate), dated: 28.06.2017 - HELD THAT:- The applicant is providing manpower services for cleaning and sweeping of lawns and garden path areas, segregation and transport of the garbage in Cubbon Park and for maintenance of garden in Siri Horticulture Garden, Ooty, Tamilnadu. This is in relation to function entrusted to a municipality under article 243W of the constitution which is covered by 12th entry of twelfth schedule which says 'Provision of urban amenities and facilities such as parks, gardens, playgrounds'. This manpower services are provided to Horticulture Department, Government of Karnataka. The Applicant is providing services to the state government which is covered by 12 th entry of twelfth schedule of the constitution which says 'Provision of urban amenities and facilities such as parks, gardens, playgrounds'. Thus the applicant satisfies the above two conditions mentioned supra to claim exemption under Entry No. 3 of Notification No.12 of 2017 (Central Tax Rate), dated: 28.06.2017.
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2022 (8) TMI 808
Maintainability of Advance Ruling application - Exemption from GST - supply of craftsman and other manpower service to M/s. Karnataka Institute of Leather Technology (State Government Organisation under Department of Industries and Commerce approved by AICTE DTE), GOK, under contractual agreement - Eligibility from exemption as envisaged under Sl.No.72 of the Notification No.12/ 2017-CT(R) dated 28-06-2017 for CGST - HELD THAT:- The instant application has been filed online on 23.05.2022 and the question raised therein is about the applicability of GST on supply of manpower service to M/s. Karnataka Institute of Leather Technology. The notice U/s 73 of KGST and CGST Act, 2017 issued by concerned authorities, also pertains to the applicability of GST supply of manpower service to M/s. Karnataka Institute of Leather Technology. The issues raised in the instant application and the issues mentioned in the notice mentioned are one and the same i.e applicability of GST on supply of manpower service to M/s. Karnataka Institute of Leather Technology. Thus first proviso to Section 98(2) of the CGST Act 2017 is squarely applicable to the instant case, as all the conditions therein are fulfilled. The application is rejected as inadmissible , in terms of first proviso to Section 98(2) of the CGST Act, 2017.
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2022 (8) TMI 807
Classification of manufactured goods - rate of GST - amusement park ride karts commonly known as Go-karts - classifiable under Chapter Tariff Heading 9508 of the First Schedule to the Customs Tariff Act, 1975 or not? - Go-karts manufactured and supplied by the Applicant which are not roadworthy and cannot be registered as Motor Vehicles with the Regional Transport Authority (RTO for short) are classifiable as Motor Vehicles meant for carrying of passengers / persons under Chapter Tariff Heading 8703 of the First Schedule to the Customs Tariff Act, 1975 or not? - Applicability of Sl.No.441A of Schedule III to Notification No.1/2017-Central Tax (Rate) dated 28-06-2017 as amended by Notification No.18/ 2021-Central Tax (Rate) dated 28-12-2021 or Sl.No.453 of Schedule III to Notification No.1/2017-Central Tax (Rate), dated 28-06-2017. HELD THAT:- The applicant states that they are engaged in manufacture and supply of amusement park ride karts' commonly known as 'Go karts', which are mainly used for joy riding or amusement ride by both children as well as adults. The Applicant submits that the products manufactured by them are designed and shaped to run or drive only on extremely smooth, specially designed tracks or closed circuits and not on track or normal automobiles are able to operate - the Applicant states that they were under the impression that Go Karts are classifiable under Chapter Tariff Heading (CTH) 9503 but were advised to classify under CTH 8703 and pay GST at 28%. So the applicant wants to know whether 'amusement park ride karts' commonly known as 'Go karts', are to be classified under CTH 8703 taxable at 28% or under CTH 9503 taxable at 18%. Further as per the provisions of Section 39 of the Motor Vehicles Act, 1988 motor vehicles are not permitted to drive on roads without registration with the registering authority i.e., RTO - The applicant submits that as per the Motor Vehicles Act, Children below the age of 18 years are not permitted to ride or drive motor vehicles and require driving license to drive the vehicle. However, no such restrictions are imposed under any of the statute to use Go-karts by children below the age of eighteen years. Further, the 'amusement park ride karts' supplied by the applicant neither qualify as 'motor cars' nor as 'motor vehicle' under the Motor Vehicles Act, 1988 as they are not road worthy. They are also not designed for transport of persons and are meant only for amusement or entertainment for use on a fixed or restricted course. Hence they are not classifiable under CTH 8703. Whether the 'amusement park ride karts' supplied by the applicant are classifiable under CTH 9508? - HELD THAT:- Since the Go Karts manufactured and supplied by the applicant are designed and shaped to run or drive only on extremely smooth specially designed surfaced tracks and the same are primarily used across the globe as an amusement ride for children and families the same may be considered as amusement park rides as per the meaning assigned to amusement park rides . Whether the 'amusement park ride karts' commonly known as 'Go-karts' can be classified under Sl.No.441A of Schedule III of Notification No.18/2021-Central Tax (Rate) dated 28-12-2021? - HELD THAT:- As per serial No. 441A, CHAPTER number 9508, the amusement park rides are taxable at 9% CGST and 9% SGST.
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Income Tax
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2022 (8) TMI 806
Reopening of assessment u/s 147 - information has been received that the petitioner has deposited a sum in its bank account which is undisclosed income and escaped assessment to tax - Allegation of breach of principles of natural justice - HELD THAT:- Natural justice has been variously defined by different Judges, for instance a duty to act fairly, the substantial requirements of justice, the natural sense of what is right and wrong, fundamental justice and fair-play in action. Over the years by a process of judicial interpretation two rules have been evolved as representing the principles of natural justice in judicial process, including therein quasi-judicial and administrative process. They constitute the basic elements of a fair hearing, having their roots in the innate sense of man for fair-play and justice which is not the preserve of any particular race or country but is shared in common by all men. The first rule is `nemo judex in causa sua' or `nemo debet esse judex in propria causa sua' that is no man shall be a judge in his own cause. The second rule is `audi alteram partem', that is, `hear the other side'. A corollary has been deduced from the above two rules and particularly the audi alteram partem rule i.e. 'he who shall decide anything without the other side having been heard, although he may have said what is right, will not have been what is right' or in other words, as it is now expressed, `justice should not only be done but should manifestly be seen to be done'. Natural justice is the essence of fair adjudication, deeply rooted in tradition and conscience, to be ranked as fundamental. The purpose of following the principles of natural justice is the prevention of miscarriage of justice. Order without valid reasons - unsustainable - In the present set of facts, we find that despite that material disclosed by the assessee before the respondent Nos.2 and 4 and despite specific stand taken by him that he has not deposited any cash amount in his bank account with Bank of Baroda what to say of Rs.13,67,24,000/-, the aforesaid respondents have neither considered the objection/ reply nor recorded any reasons for its rejection. Thus, right to reason which is an indispensable part of a judicial system, has been deliberately violated by the respondents. Objection as to alternative remedy of appeal - Objection raised by the learned senior standing counsel for the respondent Nos.2, 3 and 4 regarding maintainability of the writ petition on the ground of alternative remedy, is not tenable on the facts of the present case. In the present set of facts, in the absence of any valid information for invoking jurisdiction under Section 147/ 148 of the Act, 1961, the entire proceedings are without jurisdiction. Alternative remedy when not bar? - Article 226 of the Constitution of India confers very vide powers on High Courts to issue writs but this power is discretionary and the High Court may refuse to exercise the discretion if it is satisfied that the aggrieved person has adequate or suitable remedy elsewhere. It is a rule of discretion and not rule of compulsion or the rule of law. Even though there may be an alternative remedy, yet the High Court may entertain a writ petition depending upon the facts of each case. It is neither possible nor desirable to lay down inflexible rule to be applied rigidly for entertaining a writ petition. No Factual Dispute - We find that there is no factual dispute involved in the present writ petition that the information which was made basis for recording reasons to believe for escapement of income of the petitioner to tax, was unfounded and the cash deposit which has been shown by the petitioner in its bank account with Union Bank of India has not been disputed at all. That apart, the original assessment of the petitioner was made under Section 143(3) of the Act, 1961 in which Form 26AS as it existed at all relevant point of time, reflects the cash deposit by the petitioner in the Union Bank of India amounting to Rs.3,41,81,000/- which the petitioner assessee has always admitted and has shown in its books of accounts and a copy of statement of deposit was also filed by the petitioner before the respnodent No.4 during reassessment proceedings but arbitrarily the respondent No.4 baselessly assumed cash deposit in the bank account with Bank of Baroda amounting to Rs.13,67,24,000/- whereas as per bank statement of Bank of Baroda, there was no cash deposit. Abuse of Power - It is settled law that if a public functionary acts maliciously or oppressively and the exercise of power results in harassment and agony then it is not an exercise of power but its abuse. No law provides protection against it. Harassment by public authorities is socially abhorring and legally impermissible which causes more serious injury to society. In modern society no authority can arrogate to itself the power to act in a manner which is arbitrary. In a recent judgment in NABCO PRODUCTS PRIVATE LIMITED [ 2022 (8) TMI 692 - ALLAHABAD HIGH COURT] this Court noticing increasing tendency amongst Assessing Officers, particularly the respondent No.4, i.e. National Faceless Assessment Centre to violate principles of natural justice, non-consideration of replies of assessees under one pretext or the other or rejecting it without recording reasons for rejection and thus expressed the need for evolving an effective system of accountability of erreing officers. Whether complete go-bye to Quashi-Judicial Function provided under the Act, 1961 ? - From the stands taken by the respondent No.1 in the aforequoted paragraphs 7, 8 and 9 of the counter affidavit, it is evident that all settled principles of law, duty to discharge quasi-judicial function and observance of statutory provisions of the Act, 1961 have been given complete go-bye and participation of assessees in proceedings under Section 148A or 148 or 147 of the Act, 1961 would remain an empty formality, inasmuch as the Assessing Officer would create liability on assessees only on the basis of data fed in the data base/ portal of the department and would not like to adjudicate the matter in accordance with law so as to take risk of initiation of disciplinary proceedings against himself. By no stretch of imagination or the provisions of the Constitution or the law evolved so far by judicial decisions, the stand so taken by the respondent No.1 in paragraphs 7 and 8 of the counter affidavit can be justified or conceived. It appears that either the deponent of the aforesaid counter affidavit namely Sri Shishir Kuamr Jha, Principal Chief Commissioner of Income Tax, U.P. (West) and Uttarakhand Region at Kanpur has stated the real state of affairs prevailing in the income tax department or has shown extreme negligence while making statement on oath on record in paragraphs 7 and 8 of the aforeaid counter affidavit. Quasi-Judicial Function - In Commissioner of Income Tax, Shimla vs. Greenworld Corporation Parwanoo [ 2009 (5) TMI 14 - SUPREME COURT ] Hon ble Supreme Court held that an order passed by quasi-judicial authorities on the dictates of the higher authority is illegal and being without jurisdiction, is a nullity. Hon ble Supreme Court further held that an Income Tax Officer while passing an order of assessment, performs a quasi-judicial function. Hon ble Supreme Court further held that it is one thing to say that while making the orders of assessment the Assessing Officer shall be bound by the statutory circulars issued by CBDT but it is another thing to say that the assessing authority exercising quasi-judicial function keeping in view the scheme contained in the Act, would lose its independence to pass an independent order of assessment. If the Assessing Officer passes an order at the instance or dictate of the higher authority, it shall be illegal. The stand so taken by the respondent No.1 in paragraphs-7 and 8 of the counter affidavit deserves to be rejected and is hereby rejected and it is directed that the respondent No.1 or other authorities under the Act, 1961 shall not interfere with the quasijudicial function and discharge of statutory duties by the Assessing Officers unless permitted by the Act, 1961. Let a circular be issued by the respondent No.1 forthwith clarifying the position. Accountability - 'Sovereignty' and acts of State are two different concepts. The former vests in a person or body which is independent and supreme both externally and internally whereas latter may be act done by a delegate of sovereign within the limits of power vested in him. No civilised system can permit an executive to play with the people of its country and claim that it is entitled to act in any manner as it is sovereign. No legal or political system today can place the State above law as it is unjust and unfair for a citizen to be deprived of his property illegally by negligent act of officers of the State. The need of the State to have extraordinary powers cannot be doubted. But with the conceptual change of statutory power being statutory duty for sake of society and the people the claim of a common man or ordinary citizen cannot be thrown out merely because it was done by an officer of the State even though it was against law and negligent. Needs of the State, duty of its officials and right of the citizens are required to be reconciled so that the rule of law in a Welfare State is not shaken. The practice of frequently violating principles of natural justice, non consideration of replies of assessees under one pretext or the other or rejecting it with one or two lines orders without recording reasons for rejection, is gradually increasing which needs to be taken care of immediately by the respondents at the highest level, otherwise prevailing situation of arbitrary approach and breach of principles of natural justice may not only adversely affect the assessees who pay revenue to the Government, but also may develop a perception amongst people/assessees that it is difficult to get justice from the authorities in statutory proceedings. Imposition of Cost - The respondents have acted arbitrarily, illegally without jurisdiction, caused harrassment to the petitioner and abused power conferred under the Act, 1961, which resulted in creation of illegal demand of income Tax of Rs.16,90,61,731/-, we find it a fit case to impose cost of Rs.50,00,000/- (Rupees Fifty Lakhs) upon the respondents which shall be deposited by the respondents in the Prime Minister National Relief Fund within three weeks from today. Writ petition is allowed with cost of Rs.50,00,000/- on the respondents, which shall be disposited in Prime Minister National Relief Fund within three weeks from today.
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2022 (8) TMI 805
Direct Tax Vivad Se Vishwas Scheme - definition of dispute under the VSV Act / Rules - exclusion of a disputant of tax liability, like the petitioner, from the possibility of settlement under the VSV Act - case of the petitioner that on filing of the declarations in prescribed forms in terms of Section 4 (1) of the VSV Act, the designated authority was required to issue certificate under Section 5 (1) intimating the particulars of tax arrears and the amount payable after such determination - petitioner contended that since this Court had given liberty to approach authorities seeking waiver of interest and penalties and while the penalty was waived under Section 273 (A) (4) of the VSV Act, Section 220 (2A) being almost similar, interest ought to have been waived as well - HELD THAT:- Declaration under Form I II requesting for settlement of their tax arrears relating to disputed interest ought to have been resolved under the VSV Act since they fell within the scope of Section 3 read with Section 2(1) (h) and 2 (1) (o). CIT however was also relying on definitional sections to contend that while tax arrears included disputed interest but the disputed interest was only in a case where an appeal has been filed and rejection of the waiver application prior in time by the department could not be considered an appeal and petitioner would not be an appellant . In the opinion of this court this contention of respondent is inherently flawed on various grounds. Firstly , there is no definition of appeal in the VSV Act for CIT to take support of any straitjacketed definition. Secondly , what is instead defined was dispute , not in the VSV Act but in the Rules at Clause 2 (b) and includes an appeal, writ, special leave petition, arbitration, conciliation and mediation the intent of the VSV Act was to provide resolution of all nature of disputes relating to tax, penalty, interest, fee as determined under provisions of the VSV Act. The restrictive scope that the CIT is providing for definition of dispute or even of an appeal is not in synchronicity with the letter and spirit of the VSV Act that propounds an ameliorative scheme for resolution. Thirdly , Section 2 (1) (o) which defines tax arrears includes distinct categories which are in the alternative and not cumulative viz., disputed tax, disputed interest, disputed fee, disputed penalty. Therefore, for the CIT to contend that Section 2 (1) (h) relates to a disputed interest on a disputed tax only and therefore the petitioner was non-suited since there was no disputed tax but only disputed interest, is not tenable. Provisions have to read purposively and in harmony with the scheme of the VSV Act and its intent. It is a well settled principle of law that a statute should be given a purposive construction in order to give effect to its legislative purpose. This, not being a taxing statute but one which propounds a dispute resolution scheme for tax disputes would be amenable to a purposive construction. Fourthly , even as per the Statement of Objects and Reasons to the VSV Act, which is extracted below for convenience, the intent was to include all sorts of disputes even if pending before the Commissioner of Income Tax or the courts. The intent of the legislature was clearly to have an expansive inclusion rather than a restrictive exclusion. In fact section 9 of the VSV Act, which provides what is specifically excluded from the VSV Act [as also the Explanation to Section 2 (1) (o)], does not include anything which relates to the case of the petitioner. Fifthly , even this Court in Shyam Sunder Sethi v. Pr. Commissioner of Income Tax-10 and Others [ 2021 (3) TMI 603 - DELHI HIGH COURT ] has set aside a similar order of rejection based upon an FAQ under the VSV Act, as bad in law. Accordingly, attempt by the CIT to exclude a genuine disputant of tax liability, like the petitioner, from the possibility of settlement under the VSV Act is extremely hyper-technical. The interest as demanded under Section 220 (2A) which is 1% for every month of the period of delay as opposed to an application of Rule 154 of the Companies Court Rules which provides for an interest ceiling at the rate of 4% interest for companies in liquidation, is a huge statutory benefit given to companies in liquidation. It cannot be contended that the respondent CIT is not qualified to account for the beneficial provisions for a company in liquidation. That is not the ground of rejection of petitioner s declaration under the Act. The ground of rejection as stated that the company application filed by the petitioner in this Court was not an appeal and therefore not within the scope of the VSV Act, which in light of above analysis cannot be accepted. This writ petition is disposed setting aside the rejection dated 5th January, 2021 of From I and II filed by petitioner on 20th March, 2020 by the Principal Commissioner of Income TaxIV, Delhi (CIT) with directions to the CIT to re-examine/reassess the declaration filed by the petitioner under the VSV Act and decide on its merits in terms of procedure envisaged under the Act read with its Rules.
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2022 (8) TMI 804
Revision u/s 263 - violation of the provisions of Section 13(1) (c) - monies for purchase of the land was sourced from the said society, however, the aspect of violation of Section 14(1) (c) was not raised by the AO, while completing the assessment of the aforesaid society - HELD THAT:- We are of the view that no substantial question of law arises for our consideration in the present appeal. The order passed by the PCIT under Section 263 as well as the order passed by the Tribunal are completely justified in the facts of the case. In fact, we are shocked to see the manner in which the AO dealt with the case after issuance of notices under Section 143(2) 142(1) of the Income Tax Act along with questionnaire to the assessee. The least that the AO was called upon to do was to require the assessee to make good his claim that the amount was sourced from Kulwant Kaur Kukreja Educational Society. The violation of Section 13(1) (c) of the Income Tax Act also required examination after examination of the first aspect as aforesaid. We also fail to appreciate / understand as to what is the reason for the assessee to avoid the inquiry and scrutiny with regard to the source of funds through which the land was purchased by the assessee. We, therefore, dismiss this appeal and we also direct the Principal Commissioner of Income Tax, Dehradun to administratively examine whether any action is called for against the AO in the light of the manner in which he has conducted himself while dealing with the proceedings after issuance of the notices under Section 143(2) and Section 142(1) of the Income Tax Act.
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2022 (8) TMI 803
Revision u/s 263 - Addition u/s 68 r.w.s. 115BBE - assessee, by admitting other income did not disclose the source of earning such income and prima facie conclusion was that this income represents undisclosed income - limited scrutiny to examine cash deposit during demonetization period - Unexplained income require taxation @60% u/s 115BBE - assessee opposed the revision on the ground that existence of books of accounts was a condition precedent for invoking the provisions of Sec. 68 and since the income do not include any income referred to in Sec.68, the provisions of Sec.115BBE would not apply - HELD THAT:- Upon perusal of assessee s replies during regular assessment proceedings as placed before us, we find that the nature of other income of Rs.7.55 Lacs has nowhere been disclosed by the assessee whereas this income has been reflected in the return of income. This income was shown to be one of the sources of funds during regular assessment proceedings. However, no verification of other income was done by Ld. AO. In fact during revisional proceedings, the assessee shifted the stand and submitted that it was surplus out of deposits and withdrawals which are contradictory to return of income. It is clear that the nature and source of Rs.7.55 Lacs was nowhere examined by Ld. AO as well as no explanation for the same was furnished by the assessee. Under such circumstances, the revision was justified. Finding no reason to interfere in the impugned order, we dismiss the appeal.
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2022 (8) TMI 802
TP Adjustment - MAM - Assessee benchmarked using cost plus method (CPM) - rejecting the method TPO applied Transactional Net Margin Method (TNMM) to benchmark these transactions - HELD THAT:- Assessee is 100% EOU and its profits are exempt. The entire products are sold to joint venture entities outside. In such a case, there would be no incentive for the assessee to shift its profits outside India. Further, the assessee is a contract manufacturer and do not carry out marketing functions. The entire risk is borne by the Associated Entities. The sale transactions have been benchmarked using cost plus method (CPM) which would be Most Appropriate Method considering the functions of the assessee. It is also undisputed fact that similar methodology as adopted by the assessee in other years has been accepted by Ld. TPO. Therefore, TNMM method could not be applied to the case of the assessee. The issue has rightly been adjudicated by Ld. CIT(A) in the impugned order. Adjustment made for import of raw material - as alleged that the price paid by the assessee was higher than the cost from original supplier. Therefore, Resale Price Method (RPM) as adopted by the assessee was rejected and Comparable Uncontrolled Price (CUP) method was adopted to arrive at this adjustment. However, it could be seen that the assessee did not resell the components thus purchased to any third parties and the components were utilized for manufacturing of goods exclusively for sale as finished goods to Associated Enterprises (AE) by adding its own margin. In such a case, RPM method was to be accepted and comparison of price of raw material sold by the AE to other parties could not be the basis of adjustment. On this score also, no infirmity could be found in the impugned order. - Decided against revenue.
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2022 (8) TMI 801
Rectification of mistake u/s 154 - levy of interest u/s. 234A - AR submitted that without specific direction, such a levy could not be made - HELD THAT:- We find that Hon ble Supreme Court in the case of CIT V/s Anjum M.H.Ghaswala [ 2001 (10) TMI 4 - SUPREME COURT] has held that a perusal of Sections 234A, 234B and 234C would show that the interest for default in furnishing return of income, default in payment of advance-tax and interest for deferment of advance-tax are mandatory in nature and therefore, Income Tax Settlement Commission (ITSC) was not empowered to reduce or waive interest statutorily payable under Sections 234A, 234B and 234C except to the extent of granting relief under the Circulars issued by the Board under section 119. This being so, there would be no requirement for AO to levy the same specifically in the assessment order. For the same reason, another plea of Ld. AR that debatable issue could not be subject matter of rectification u/s 154, would have no legs to stand. As in the present case, interest was levied in the original Income Tax Computation Form, the quantum of which was rectified u/s 154 which could certainly be done. The case law of Hon ble Delhi High Court in CIT V/s Inchcape India Pvt. Ltd. [ 2002 (8) TMI 862 - DELHI HIGH COURT] is also on the same fact and hence, not applicable. - Decided against assessee.
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2022 (8) TMI 800
Deduction u/s 80P(2)(a)(i) - whether assessee qualifies for deduction being a registered co-operative society vis- -vis in providing credit facilities to its members? - HELD THAT:- We hold that the CIT(A) was not justified in confirming the addition made by the Assessing Officer by way of adjustment u/s 143(1)(a) denying deduction u/s 80P(2)(a)(i) of the Act when the assessee qualifies for the deduction being a registered co-operative society engaged in providing credit facilities to its members. Appeal of assessee allowed.
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2022 (8) TMI 799
Addition u/s 43CA - difference between sale value of the flats sold and the stamp duty value of the same - difference was less than 10% - applicability of proviso of section 43CA retrospectively covering the assessment year in question - As contended by the assessee that stamp value was at uniform rate without taking into consideration the peculiar features of a particular property - HELD THAT:- If any liability has to be fastened with the assessee tax-payer retrospectively then the statute and the provision must spell out specifically regarding such retrospective applicability. However, if the provision is beneficial for the assessee, in view of the welfare legislation spirit imbibed in the Income-tax Act, such beneficial provision can be applied in a retrospective manner. In the case of the assessee before us for the preceding assessment year i.e. A.Y. 2014-15, the difference of the consideration received from transfer of asset and the value adopted for stamp duty valuation was apparently not less than 10% tolerance margin which has been brought into effect from 1-4-2021 in the first proviso to section 43CA and therefore, the Tribunal in its wisdom had restored the matter to the file of the A.O for fresh adjudication (supra). Before us, admittedly such difference of tolerance margin is less than 10%. Applicability of this proviso of section 43CA retrospectively covering the assessment year in question i.e. A.Y. 2015- 16, from the spirit of Supreme Court decision in Vatika Township Pvt. Ltd. [ 2014 (9) TMI 576 - SUPREME COURT] case is analysed. Now, the intent of the legislature is to provide relief to the assessee in case such difference is less than 10% which has been brought into effect from 01-04-2021 thereby providing benefit to the assessee. This being the beneficial provision therefore will even have retrospective effect and would apply to the present assessment year 2015-16. If legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect . The net effect of this judgment is that if a fresh benefit is provided by the Parliament in an existing provision, then such an amendment should be given retrospective effect. Therefore, even without going into the merits of the case by the application of first proviso to section 43CA having retrospective effect, the grounds of appeal of the assessee stands allowed.
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2022 (8) TMI 798
TP adjustment on account of interest paid by the assessee on behalf of the associated enterprise - HELD THAT:- Associated enterprise of the assessee is its subsidiary company in which assessee holds majority control i.e. 55% of the shareholding. Apart from the assessee, two other persons staying in Indonesia held balance 45% of shareholding of the said subsidiary company. The associated enterprise of the assessee was to invest in coal mine in Indonesia and therefore for said purpose funds were required to be arranged by aforesaid 3 promoters, including the assessee company, respective of shareholding ratio. To fulfil this commitment of fund for the subsidiary company, the assessee had arranged 3 million USD Bridge Loan from the Bank of India, Singapore branch. Since this loan was arranged by the assessee to fulfill its commitment under the MOU with the other shareholders, the assessee had, inter-alia, borne the entire interest expenditure on the aforesaid loan. In the present case, the lower authorities on the basis that no benefit was received by the assessee by paying the interest on the loan, which loan was in fact utilized by the associated enterprise, treated the arm s length price of the interest to be Nil and accordingly made the addition of the entire amount of interest paid by the assessee on behalf of the associated enterprise. The provisions of Chapter X shall have the relevance when assessee has claimed any expenditure or earned any income from the international transaction, which due to assessee s dealing with associated enterprise has the possibility of being manipulated in order to reduce the taxable income within India. In such situation, the income or expenditure shall be computed / determined having regard to the arm s length price. In the present case, the Revenue though treated the arm s length price of interest paid by the assessee, on behalf of the associated enterprise, as Nil, however, has not disputed the fact that assessee has not claimed such expenditure and thus even when its value is considered at par, i.e. as paid by the assessee, same will not affect the income chargeable to tax in India - Thus the payment of interest by the assessee, on behalf of the associated enterprise, which has not been claimed as expenditure, is revenue neutral and provisions of Chapter X of the Act are not applicable in such a situation. Accordingly, we direct the TPO/AO to delete the transfer pricing adjustment on account of interest paid by the assessee. As a result, ground No. 3 raised in assessee s appeal is allowed. Adjustment on account of corporate guarantee - HELD THAT:- During the course of hearing, the learned AR did not press other grounds raised by the assessee in respect of transfer pricing adjustment on account of corporate guarantee and only prayed that rate of guarantee commission for benchmarking should be restricted to 0.5%. We find that Hon ble jurisdictional High Court in Everest Kento Cylinders Ltd. [ 2015 (5) TMI 395 - BOMBAY HIGH COURT upheld charging of guarantee commission at the rate of 0.5%. Accordingly, respectfully following the aforesaid decision of Hon ble jurisdictional High Court, we direct the TPO/Assessing Officer to compute the transfer pricing adjustment on account of corporate guarantee by charging guarantee commission at the rate of 0.5%. Accordingly, ground no. 2 raised in assessee s appeal is partly allowed.
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2022 (8) TMI 797
Unexplained cash credit - CIT-A accepting the Peak Balance Theory put forth by the assessee - assessee pleaded that it was engaged in money lending business which was rejected by revenue - whether method of peak credit was rightly adopted for addition of the alleged undisclosed income of the assessee? - HELD THAT:- Peak credit has to be worked out properly by considering only cash receipts and cash withdrawals and the same is required to be verified by Ld. AO. The same is the plea of Ld. Sr. DR who has submitted that peak credit was not made available to Ld. AO and therefore, modification in directions is required. We find that the assessee has made deposited cash and withdrawn the same throughout the year. Accepting the plea of Ld. Sr. DR, the working of the peak credit shall be furnished by the assessee to Ld. AO who is directed to consider the same and restrict the addition to the extent of peak credit of cash receipts and cash withdrawals. The cheque entries shall be separately examined and re-adjudicated. The directions given in the impugned order stand modified to that extent.
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2022 (8) TMI 796
Reopening of assessment u/s 147 - assumption of jurisdiction for issuing of notice u/s. 148 - Whether Assessing Officer has assumed the jurisdiction on wrong facts? - on the basis of AIR information, the case of the assessee was reopened and in the bank account there was no mention of PAN of the assessee and during a search in the PAN database, the name of the assessee did not appear therefore the Assessing Officer was left with no option but to issue notice u/s. 148 - HELD THAT:- As per AIR information available on record, the Assessing Officer observed that assessee has purchased an immovable property which has escaped income. AO wrote a letter to assessee to explain the source of such investments. The assessee did not reply to the said notice. AO further notes that PAN database was searched in the system but could not find the particulars about assessee therefore he held that no question of assessment u/s. 143(3) arises as no return was visible on the system and therefore he held that there has been a failure on the part of assessee to make a return u/s. 139 and he initiated the reassessment proceedings. A list of questions which needs to be filed by AO while initiating reopening of a case. Sl.No. 8 of the questions requires Assessing Officer to answer to a question as to whether provisions of Section 147(a) or 147(b) are applicable. Against reply to this question Section 147(a) has been mentioned and it has also been mentioned that no return has been furnished by the assessee. On the contrary, the fact remains that assessee did file return of income u/s. 139 of the Act on 19.03.2013. The date of filing of the return is much before than the date of recording of reasons which is 27.03.2019. AO has noted that PAN was searched in the system and DCR of respective year has also been consulted and he had not found the copy of return filed by assessee. In view of the fact of having filed the return of income by the assessee the finding of the Assessing Officer that no return has been furnished by the assessee is wrong and therefore AO has reopened the case by recording a wrong fact. The copy of acknowledgment of return for the relevant year has been made part of this order. Had the Assessing Officer noted the correct facts of filing the return, he would have verified the fact of escapement of income from the return of income which he has not done therefore the notice issued u/s. 147 is not legally tenable. Thus quash the notice u/s. 147 and therefore hold the assessment order void ab initio and the consequent order of ld. CIT(A) is also held to be a void ab initio. - Decided in favour of assessee.
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2022 (8) TMI 795
Disallowance u/s 14A - HELD THAT:- We find that as the exempt income earned by assessee is merely ₹17,910/-, the disallowance u/s 14A cannot exceed the sum.CIT (A) allowed the relief to the assessee following the decision of Hon'ble Delhi High Court in case of Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] and CIT Vs. Cortech Energy P. Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] . The learned Departmental Representative could not show us any infirmity in the appellate order. Accordingly, we confirm the order of the CIT (A) in restricting the disallowance u/s 14A of the Act to the extent of exempt income of ₹17910/-. Accordingly, the solitary ground of appeal of AO is dismissed. Addition u/s 56(2) (viib) regarding alleged excess share price received by the assessee - HELD THAT:- In the present case, the assessee has worked out fair market value of the shares according to explanation (a) (ii) to section 56 (2)(viib) of the act. However, the learned assessing officer, in absence of proper justification by the assessee, could not verify the above valuation by assessee. Now assessee has tried to substantiate the same before us. In view of above additional evidences submitted by the assessee, we direct the assessee to justify the share valuation before the learned assessing officer as per explanation (a) (ii) of section 56 (2) (viib) - We direct the learned AO examine methodology of working adopted by the assessee by including market value of certain assets only to certain extent as well as the value of quoted equity shares at indicative market value but considering only part of such market value for the purpose of valuation. The above working given by the assessee is strange; as it is not of the date of on which the shares are issued and also it includes only part of the market value of some of the assets , at its own whims and fancies. Valuation needs to fulfill the criteria of satisfaction of the AO , therefore, it is prerogative of ld AO to apply his mind to it and then decide. If , the ld AO is not satisfied with such valuation , the only option left with ld AO is to value shares according to Rule 11 UA of The IT Rules, which ld AO has already done as per net assets value method, against which ld AR did not submit anything, should be upheld. Accordingly ground number 1 4 of the appeal of the assessee are restored back to the file of the learned assessing officer to decide the issue on the merits of the case on the basis of submission made by the assessee. Learned AO may also carry out such inquiries in accordance with the law, as he may deem fit. The assessee is also directed to justify the valuation supported by the proper documentation as well as any other information to justify share valuation. Disallowance of interest expenses - whether the amount of advances given by the assessee without charging any interest are having any nexus of non-interest-bearing funds obtained by the assessee? - HELD THAT:- Claim of the assessee before the lower authorities was only that assessee has given the advances for the business consideration and also assessee has enough interest free funds available and therefore it is entitled to a presumption that the advances have been given out of those interest-free funds. Both these arguments before the lower authorities have been rejected by them for cogent reasons. The assessee does not have enough interest free funds available with it to have the benefit of presumption that advances given free of interest have emanated out of that. The claim of the advances given for the business purpose is also not repeated before us. Therefore, both these arguments have been correctly rejected by authorities. The onus is very heavy on the assessee to show that the amount of advances given by it does not have nexus with interest-bearing funds or mix funds. Here the assessee has stated that the advances have been given prior to the assessee of obtaining interest-bearing funds as loan. Further, the claim of the assessee is also that on some of the advances, interest has been charged. If the interest has been charged at the lower rate, even then disallowance deserves to be made o the extent of differential rate of interest. As this facts are not raised before ld AO CIT (A), same were not examined. As this are the factual examination, in the interest of justice, same needs to be remitted back to file of LD AO. Therefore, the ground number 5 6 are set-aside to the file of the learned assessing officer with a direction to the assessee to justify the claim with adequate evidences to the satisfaction of the assessing officer that non-interest-bearing funds have been utilized , or proper interest has been charged. The AO may examine the claim of the assessee and decide the issue afresh.
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2022 (8) TMI 794
Rectification of mistake u/s 154 - applicability of period of limitation - intimation or deemed intimation u/s 143(1) - whether no rectification order is permissible to be passed under Income Tax Act 1961 after passage of 4 years from the date of passing of the order under section 154(7)? - HELD THAT:- In the present case, if we look into the purpose, object, text, and context of section 154(7) ,then it would be clear that the purpose of providing limitation of 4 years was to give certainties and finality to the order passed by the CPC/A.O. If we read that the limitation provided under section 154(7) is not be available in the case of passing of any intimation to rectify the order, then chaos would happen , and unlimited power would be available to the Assessing Officer/CPC to rectify the mistake even after the lapse of 4 years. In the light of the above, we are of the opinion that limitation for rectification under 154(7) is 4 years even for intimation also.
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2022 (8) TMI 793
Disallowance of club expenditure - being incorrect claim u/s 143(1)(a)(ii) u/s 143(l)(a)(iv) on the alleged contention that the same has been mentioned in clause 21(a) of Form 3CD but not disallowed u/s 37 of the Act in the return - Assessee claims that the same was reported in clause 21(a) of Form 3CD for disclosure purposes only and same is in accordance with the Guidance Note on Tax Audit under section 44AB of the Income tax Act 1961 issued by the Institute of Chartered Accountants of India - HELD THAT:- CIT(A) has confirmed the disallowance with the very summary observations without going on the facts of the case. The copy of Form 3CD available at page no. 105 of the paper book shows that in clause 21(a) of the particulars of expenditures incurred, under head of club entrance fees and subscription has been shown with regard to Gymkhana Club at Rs. 14,407/- , Holiday Club Rs.3,263/- and Panchshila Club rs. 22,610/-, totaling to Rs. 42,280/-. The auditors have not shown these expenditure to be disallowable as required to be disclosed in Annexure available at page no. 73 of the paper book. When admittedly the assessment was completed with intimation u/s 143(1) of the Act then the disallowance based upon comments of auditor in audit report could not have been made as none of the specific circumstances mentioned u/s 143(1)(a)(ii) or 143(1)(a)(iv) of the Act are met out. If at all a disallowance was to be made an opportunity of hearing by issuance of notice u/s 142(1) was therefore required. Assessee infact had had claim on merits also on the basis of judgment of Hon ble Supreme Court of India in CIT v. United Glass Mfg. Co. Ltd . [ 2012 (9) TMI 914 - SUPREME COURT] has considered the question of club expenses and held that the Club Membership Fees for subscription is allowable as a business expenditures and had it been given opportunity under law to explain same would have been allowed. - Decided in favour of assessee.
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2022 (8) TMI 792
Unexplained cash deposits - CIT(A) was of the considered opinion that assessee failed to discharge its onus - HELD THAT:- When the case of assessee is of a prejudice being caused due to not being provided opportunity of cross examination of witnesses then there should at least be some matter on record to suggest that accepting the evidences as un-rebutted, has caused prejudice to the assessee. The right of cross examination is certainly a sacrosanct right but on questions of facts, there has to be a plausible defence or a case to be put up to the witnesses to rebut their evidences or to question their veracity. Bald averments of prejudice are not sufficient that the denial of right of cross examination has resulted into prejudice. Rather when Revenue Authorities are recording evidences during assessment proceedings they are discharging duty imposed under law and the presumption is attached that the records are correct. The statement of concerned Patwari could have been very well rebutted by merely production of Revenue records before CIT(A) or even this Tribunal. As a matter of fact, it appears from record that the agreements themselves were not produced disclosing as to what were the survey numbers of the land which were proposed to be sold to five different persons. Thus, there is no substance in the grounds raised and the same are decided against the assessee.
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2022 (8) TMI 791
Revision u/s 263 - Addition u/s 68 - income from other source (income declared at the time of survey) - tax is payable u/s 115BBE or not - recovery of cash amount of advances made by the assessee to the other persons for purchase of land / plots and thus comes under the purview of section 68 or not - HELD THAT:- Additional income was in the nature of business income and don t fall under Sec. 68 and/or Sec. 69 of the Act and consequently therefore, Sec.115BBE could not have been invoked. In view of the above discussion, therefore, we are of the considered view that the CIT was not at all justified by invoking the provisions of Sec. 263 by wrongly/incorrectly holding that the subjected assessment order u/s 143(3) dated 25.02.2019, was passed without considering that the income declared under the head of other sources being recovery of cash amount of advances paid for purchase, comes under preview of S. 68 and 69 and thus, the tax u/s 115BBE was to be paid, as against the tax at normal rates. The assumption of jurisdiction u/s 263 was contrary to the law and facts on record. Hence, the proceedings initiated u/s 263 of the Act and the impugned order are hereby quashed. Thus, ground of appeal decided in favour of assess and against the revenue. Assumption of jurisdiction u/s 263 for not initiating penalty proceedings u/s 271AAC - CIT held that the additional income was also subjected to penalty u/s 271AAC of the Act and accordingly set aside the subjected assessment order - HELD THAT:- After hearing both the parties and perusing the materials available on record as well as judicial pronouncements cited by both the parties, we at the outset have no hesitation to hold that the issue involved is no more res integra in as much as the in the case of CIT vs Keshrimal Parasmal [ 1985 (5) TMI 34 - RAJASTHAN HIGH COURT] - We are of the considered view that the ld. Pr. CIT acted beyond jurisdiction in holding that the additional income was subjected to penalty u/s 271AAC - Ground No. 3 of the assessee is allowed
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2022 (8) TMI 790
Delayed payments of PF ESI contribution relating employee s contribution - payment before the due date of filing of return of income U/s 139(1 ) - Scope of amendment - HELD THAT:- As decided in PRATAP TECHNOCRATS PRIVATE LIMITED, PRAHLAD NARAYAN BAIRWA, JAIRAJ, THE EARTH HOUSE RESORTS LLP [ 2022 (3) TMI 1310 - ITAT JAIPUR] wherein did not accept the Ld. CIT(A) s stand denying the claim of assessee since assessee delayed the employees contribution of EPF ESI fund and as per section 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds - We are of the view that the amendment brought in the statue i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended by inserting explanation 2 is prospective and not retrospective. Hence, the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year under consideration i.e. 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue raised in assessee s appeal is allowed. Decided in favour of assessee.
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2022 (8) TMI 789
Addition on protective basis - addition has been confirmed on substantive basis in the hands of firm - assessee had introduced the capital in cash and received interest on partner s capital and remuneration - addition of capital introduced by the firm in the hands of the firm and AO disallowed the interest and remuneration paid to the partners on substantive basis - HELD THAT:- It is imperative to mention that in the case of Jagannath Bawri and Others vs CIT and Others [ 1998 (8) TMI 83 - GAUHATI HIGH COURT] has explained the concept of protective assessment. We are of the view that protective assessments are a particular type of assessment that focuses on those assessments which is made to protect the interest of the Revenue. Although, there is no provision in the Income Tax Act authorizing the levy of income tax on a person other than whom income tax is payable but the object of the protective assessment is that in case substantive addition is made in the hands of other person and in case assessment fails then in that eventuality the Department must get the tax from the person in whose hands protective assessment is made or ultimately if substantive addition made is confirmed then in that eventuality protective addition cannot survive. Therefore, keeping in view the above proposition and also keeping in view the judgement discussed by us herein above , we are of the view that in the present facts and circumstances of the case, no loss is going to suffer by the assessee, in case, we uphold the order of the ld. CIT(A) in upholding the protective addition made by the AO in the hands of the assessee. In this view of the matter, the appeal of the assessee is dismissed.
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2022 (8) TMI 788
Rectification of mistake u/s 154 - income under the head of House Property Income - Action of the AO in not giving the benefit made by the AO on account of interest paid on house loan and erred in sustaining the addition on account of house property which is allowable as per law - HELD THAT:- From the order of the ld. CIT(A), it appears that the ld. CIT(A) has not taken into consideration the entire submission of the assessee but observed that the appellant has also not filed the copy of Home Loan Interest Certificate to allow. In the absence of claim in the return filed and non-submission of evidence during the appeal proceedings, the relief cannot be granted. Hence, the appeal is dismissed. Further the order of the ld. CIT(A) does not indicate that he has asked for the copy of such home loan interest certificate as well as other evidences to settle the issue in dispute. However, the assessee has very explicitly filed the details as to the calculation in the income tax return as well as income from house property. At both the places, the income chargeable under the head House Property holds good similar amount of Rs.1,37,444/-. Hence, there is no question of confirming the disallowance of interest paid on house property amounting to Rs.1,56,556/-. Keeping in view the above facts, circumstances of the case, computation of ITR, salary certificate issued by Bank of Baroda and house property income shown at Rs.1,37,444 in the ITR Form of the assessee as well as the Certificate dated 26-04-2021 issued by the Manager (Credit) Bank of Baroda, Jaipur as to the payment of Rs.1,56,556/- against the loan taken by the assessee from the Bank support the contention of the assessee. Hence, we do not concur with the findings of the ld. CIT(A) which is reversed. Thus the Ground No. 1 and 2 of the assessee is allowed.
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2022 (8) TMI 787
Allowability of business expenditure incurred outside India which pertains only to the Indian Business - Disallowance of business expenses incurred outside India - Expenditure attributable to the Appellant s business operations in India or not? - CIT(A) confirmed the addition merely on the grounds that the assessee has not brought any evidence in support of the claim that the expenses were incurred exclusively for the Indian business - HELD THAT:- We have gone through the certificate provided by the assessee of KPMG which has been accepted by the AO for Head Office General Charges but ignored the costs directly pertaining to Indian business. The costs directly pertaining to Indian business are not subjected to the provisions of Section 44C of the Act and hence, appeal of the assessee on this ground is allowed. Early Retirement Scheme- (ERS) - Assessee claimed being 1/5th of such expenditure as deduction u/s.35DDA - AO disallowed expenses on the ground that the assessee did not furnish evidence of persons who retired during the year and given compensation under separation scheme - HELD THAT:- The audit report cannot be taken as a sacrosanct document to be relied upon for the business purposes like banking operations/loans and for statutory obligations like taxation. All the financials scams and tax evasion cases had their genesis in the window dressing of the balance sheets and the other related financial statements. When an item of the financial statements which is to be examined and verified by the tax authorities for allowing any deduction, it is incumbent upon the assessee to provide the basic backup details based on which the auditors have certified that such expenses is true to their knowledge. In the absence of any supporting evidences, the claim of the assessee cannot be allowed by the tax authorities. In case, the bank takes a position that owing to the scattering of retired employees all over India and inability to provide such details for their own benefit points to the efficient functioning of the bank itself. When the bank itself cannot be organized their own affairs, it will be very difficult to gain the public trust to part and park their hard earned amounts with the bank. Since, no details have been submitted so far and as the ld. Counsel has argued that the details are being collated, the matter is being referred to the file of the Assessing Officer to examine the issue afresh after the assessee submits the list of eligible employees of the retirement scheme and to take a decision in accordance with the Income Tax Act. Allowability of Bad debts - AO disallowed the assessee s claim for bad debts written off in books on the grounds that these should be set-off against provision made under section 36(1)(viia) - HELD THAT:- The key provisions are the bad debts has to be written off as irrecoverable, in the case of the assessee (i.e. bank) the amounts shall be limited to the amount by which such date are part thereof exceeds of credit balance in the provision for bad debts, As per the provisions of Section 36(1)(viia), the amount allowable is 5% of the amount of the profits determined. The facts relevant to applicability of the above provisions to the assessee assessee claimed bad debts, amount of profit determined, 5% of profit was Rs.10,78,12,465/- credit balance available u/s 36(1)(viia) was Rs.10,78,12,465/-. The specific provisions would have precedence over the generic provisions. Hence, we hold that, as per the provisions of the Act, the deduction allowable is Rs.1,88,87,531/-.
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2022 (8) TMI 786
Addition u/s.56(2)(viib) - Determination of fair market value of shares - addition made to the income of the assessee on account of share premium received on issue of shares which were not justified to be at fair market value as per the provisions of section 56(2)(viib) - assessee contended that the AO calculated fair market value of the shares as prescribed under Rule 11UA and determined allowable share premium at Rs.5/- and Rs.8/- for two blocks of shares allotted by the assessee on 8.9.2014 and 31.3.2015 respectively as against premium of Rs.6/- and Rs.9/- respectively charged by the assessee - HELD THAT:- Though the assessee has submitted valuation of fair market value of its shares, the authorities below have dismissed the same simply for the reason that it was not as per the Rule prescribed under 11UA of IT Rules or not as per any certificate furnished by the Chartered Accountant or Merchant Banker as prescribed under Rule 11U of the IT Rules. Admittedly, provision of section 56(2)(viib) of the Act do not prescribe only one method for valuation of fair market value of share which is evident from the perusal of the section itself, as reproduced above. The assessee can also justify the fair market value of the shares based on the valuation of its asset as on the date of issue of shares including both tangible and intangible assets. Therefore the finding of the Revenue authorities in the present case that valuation of FMV as per the Rule 11UA is not justified, we hold is not in accordance with law - valuation report of FMV of the shares cannot be based on one method only. In view of the above, we consider it fit case to restore the issue back to the AO to consider the valuation report submitted by the assessee in the light of and as prescribed under the provision of the law after giving due opportunity of hearing to the assessee, and thereafter decide the issue afresh in accordance with law. Ground No.1 is allowed for statistical purpose. Book profit adjustment u/s 115JB - Adjustment to the book profit of the assessee under section 115JB of the Act being interlinked, the same is also restored to the AO to adjudicate the issue along with issue of addition to be made under section 56(2)(viib) of the Act.
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2022 (8) TMI 785
Late payment of Employees' contribution to E.S.I. - Addition u/s 36(1)(va) r.w.s. 43B - whether disallowance on account of late deposit of ESI can be subject of matter of addition/adjustment under intimation issued u/s 143(1) ? - HELD THAT:- We note that the issue is squarely covered against the assessee in case of Gujarat State Road Transportation Corporation [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] wherein it was held that where assessee did not deposit employees' contribution to employees' account in relevant fund before due date prescribed in Explanation to section 36(1)(va), no deduction would be admissible even though he deposits same before due date u/s 43B of the Act. Again, the Gujarat High Court in the case of Pr. CIT v. Suzlon Energy Ltd. [ 2020 (2) TMI 792 - GUJARAT HIGH COURT] held that where assessee had not deposited employees' contributions towards PF and ESI within prescribed period in law and Assessing Officer by invoking provisions of section 36(1)(va) read with section 2(24)(x) made addition of aforesaid amount to income of assessee, impugned addition made to income of assessee was justified. Respectfully following the above decisions of Jurisdictional High Gujarat High Court, we hold that there is no infirmity in the order passed by ld. CIT(A). Adjustment u/s 143(1) - Addition/adjustment under intimation issued u/s 143(1) of the Act since the issue is a debatable one wherein various Courts/ Tribunals have taken a divergent view in the matter, in our the view, the issue stands covered by the decision of Ahmedabad ITAT in the case of Diversified Services [ 2022 (5) TMI 1433 - ITAT AHMEDABAD] wherein ITAT held that since the jurisdictional Gujarat High Court has decided the issue against the assessee, the same can be subject matter of adjustments u/s 143(1) CIT(Appeals) has not erred in facts and in law in confirming addition/ disallowance in respect of late payment of ESI in the instant set of facts. In the result, the appeal of the assessee is dismissed.
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2022 (8) TMI 784
Validity of proceedings u/s 153A - Whether no search was conducted on the assessee? - warrant to be issued only at /on the premises of the registered office of the company or corporate office, factory or godown - HELD THAT:- A warrant can be issued in the name of any assessee to search any place where the documents pertaining to the assessee have been kept or are to be found as per the satisfaction of the warrant issuing authority. In the instant case, the warrant has been issued in the name of the assessee and the premises namely Plot No. 237238, Uydog Vihar, Phase-1, Gurgaon is the place where the warrant issuing authority had belief and had reasons to suspect that the documents and evidences leading to evasion of tax pertaining to the assessee have been kept or are to be found as per the satisfaction of the warrant issuing authority. The Director of the company has seen the warrant, signed and was present throughout the search procedure which can be observed by going through the warrant of authorization. Hence, the warrant is said to be rightly issued and search on the assessee has been correctly took place. Observations of the ld. CIT(A) that there was no warrant executed at the address mentioned in the ROC record or the other address of the assessee and hence no search was conducted goes against the fundamentals of issue of warrant of authorization u/s 132. It is not necessary that warrant has to be issued only at /on the premises of the registered office of the company or corporate office, factory or godown but a warrant can be authorized to any other place where the issuing authority satisfies and reasons to suspect that the material/evidences pertaining to the assessee have been kept and are to be found. The ld. CIT(A) ignored the provisions of Section 132(1), the proviso under clause (B), provisions of (1A) which clearly deal with the jurisdiction, the premises and the actions that can be taken by the revenue authorities. The decision of the ld. CIT(A) that no search was conducted on the assessee and summarily nullifying the proceedings u/s 153A as ex-facie illegal is devoid of any merit and cannot be sustained.
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2022 (8) TMI 783
Deduction u/s 80IA - AO held that the assessee maintained consolidated figure of power generation unit and no separate and independent books of account was maintained by the assessee for each and every wind mill, hence, the profit/loss of each wind mill cannot be ascertained from the incomplete record, therefore, deduction u/s 80IA was disallowed - HELD THAT:- We find that the CIT(A) while granting relief to the assessee has held that this is an undisputed fact that separate accounts are maintained for each windmill undertaking. The deduction is to be computed with respect to each unit independently taking into consideration the profit of each unit without clubbing loss of others. CIT(A) by referring the decision of Hon'ble Supreme Court in the case of Synco Industries Ltd. [ 2008 (3) TMI 13 - SUPREME COURT ] held that deduction under Chapter VIA of the Act would be available, only if the computation of gross total income as per the provisions of the Act after setting of different carries forward losses and unabsorbed depreciation of earlier year is not NIL. CIT(A) also held that after adjusting the losses of windmill units 7 to 9 against the profit of hotel, the profit was Rs. 6.292 crores. The profit from windmill No. 1 to 6 was Rs. 2.369 crore and the resultant income is worked out at Rs. 2.708 crore. Against which the assessee has claimed deduction to the extent of Rs. 1.068 crore, thus the claim of assessee is in accordance with ratio laid down in the case of Sintex Industries Ltd. [ 2013 (7) TMI 979 - GUJARAT HIGH COURT ] CIT(A) after referring the decision in Eastern Medikit Ltd., Jindal Aluminum, Meera Cotton and Synthetics Mills P Ltd. and Dewan Kraft Systems [ 2007 (2) TMI 149 - DELHI HIGH COURT ] concluded that in the said cases, it has been held that the primary step for considering the grant of deduction under Chapter VIA is to be determine the gross total income which in turn is computed by aggregating the total income from all sources in the year after aggregating the income. There is no question of adjusting loss of any other business against the business income of eligible undertaking for deduction under Chapter VIA and the deduction under Section 80IA is to be allowed unit wise without deducting incurred loss by the other unit of eligible business and allowed the appeal of assessee. We find that the facts of case in hand is almost similar in case of Rangamma Steels Melleables [ 2009 (11) TMI 909 - ITAT CHENNAI ] as recorded above. As per the spirit of Section 80IA of the Act, the assessee is eligible to claim deduction of profit of each undertaking from different period. Thus, each undertaking has to be considered as a separate undertaking and cannot be clubbed in order to compute the deduction under Section 80IA. In view of the aforesaid factual and legal discussion, we affirm the order of ld. CIT(A) with this additional observations. No contrary facts or law is brought to our notice to take other view. Grounds of appeal raised by the revenue are dismissed.
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2022 (8) TMI 782
Bogus sales promotion expenses - CIT(A) had restricted this disallowance to the extent of 12.5% of the sales promotion expenses - HELD THAT:- As perused the contents of the copy of stock register of the assessee reveals is that it is a stock record of various items ranging from Pencil in CD Box, bottle opener, digital diary, Leather folder box and such other several items purportedly used for the purpose of gifting. The items have been recorded as In on the basis of purchase bills and Out on the basis of delivery challans. Both are internal documents of the assessee itself and have no evidentiary value therefore for the purpose of proving that gift items were actually distributed by the assessee. The Out entry, we have noted, also records the branch of the assessee, i.e. Punjab, Indore etc where issued or certain names against it, which the assessee pleads are those of its MR's some of whom have confirmed distributing gifts. Again all of these are of no assistance to the assessee being its own internal recordings and documents. As for confirmation/receipts from dealers receiving gift items, the same we have noted, was examined by the AO who had contended that the veracity of the said documents was not verifiable since they did not bear any address of the recipient. He also pointed out that even the nature of the article gifted was not mentioned in the said receipt. The details of MR's who distributed the gifts also therefore does not establish the fact of gift having been actually distributed by the assessee. These are only self serving documents and no cognizance of the same can be taken for finding whether the assessee had in fact distributed gift articles to its customers/clients. The bills being found bogus by the Ld. CIT(A) which finding has remained unchallenged before us, the stock record being a self serving document, the receipts from recipients of gifts not mentioning the goods received, there is nothing to even suggest what was actually purchased and distributed by the assessee as gift. There is no way to establish in this case that what was purchased was distributed by the assessee as gift. It is impossible to apply any profit theory in this situation, to restrict the disallowance to profit earned thereon, which theory, we have noted from the orders of the Hon'ble High Courts rests on the premise that the sale from the alleged bogus purchases being admitted, the purchases must have been made though from the grey market at comparatively lower rates saving taxes and duties thereon and hence earning extra profits in the process not disclosed in the books. The reasoning of the ld. CIT(A) therefore for restricting the disallowance to the extent of 12.5% of the total expenses is therefore we hold flawed, illogical and not sustainable. Since the ld. CIT(A) has himself found the entire purchases of sales promotion articles from these two parties as bogus, and there is no evidence to prove distribution of these gifts, there is no recourse left but to disallow the entire expenses. We draw support from the findings in this regard, the decision of N.K. Industries Ltd [ 2016 (6) TMI 1139 - GUJARAT HIGH COURT] where in identical set of facts, held that there was no case for restricting the disallowance to a particular percentage and the entire expenses need to be disallowed. Thus we hold that the entire sales promotion expenses pertaining to these two parties M/s. Gajanand Traders and M/s. Devanand Enterprise need to be disallowed and direct the A.O. to do so. - Decided in favour of Revenue.
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2022 (8) TMI 781
Penalty proceedings u/s. 271(1)(c) - addition on account of sundry creditors - HELD THAT:- This amount has been deleted by the ITAT in the quantum appeal against the order of Ld. CIT(Appeals) in the assessee's own case [ 2020 (7) TMI 94 - ITAT AHMEDABAD ] - Since the issues has been decided in favour of the assessee by IT AT in quantum proceedings, penalty u/s. 271(1)(c) of the Act is hereby directed to be deleted. Addition being the expenditure incurred for increase in the authorised share capital - We are of the considered view that even if the assessee did not press this issue in quantum proceedings before Ld. CIT(Appeals), since various Tribunals have held that expenses incurred towards increased in authorised share capital is eligible for deduction under section 35D of the Act, and therefore since the issue is debatable one, hence penalty u/s. 271(1)(c) of the Act on this issue is hereby being set aside. Addition as per AIR information - Addition has been made purely on account of the AIR report and no income has been received by the assessee. In our considered view, looking at the quantum of addition, and in view of the fact that the assessing officer has not been able bring anything on record to substantiate that this amount either accrued to the assessee/or has been received by the assessee, but relied only on the AIR report to hold the assessee has under-reported this income, in the interests of justice, we are hereby deleting the addition u/s. 271(1)(c) of the Act. Appeal of assessee allowed.
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2022 (8) TMI 780
Depreciation on capital subsidy grant - Reduction of the amount of Capital Grants Subsidies and Consumers' Contribution from the total cost of the Plant Machinery for the purpose of allowing depreciation - HELD THAT:- The facts of the present assessee's case are identical to that of Madhya Gujarat Vij Company Limited [ 2022 (2) TMI 1277 - ITAT AHMEDABAD] decided by the Tribunal. Here also, the uniform rate of 15% was adopted by the CIT(A). As per provisions of Section 43(1) of the Act the capital grant should be reduced from the cost/WDB of the relevant asset and thereafter the depreciation has to be calculated which is capital grant receipt in respect of asset on which depreciation is allowable at the rate different from 15% should be worked out as per the applicable rate. Here also the Ld. DR could not point out any mistake in the above submissions of the assessee which are in consonance with law. Therefore, we restore the matter back to the file of Assessing Officer for adjudication after verifying the proportionate amount and grant relating to different asset and applying the actual rate of depreciation which relate to these assets. Ground No. 1 is partly allowed for statistical purpose. Nature of expenditure - Disallowance under head small low value items written off on the ground that the same is not revenue expenditure - HELD THAT:- It is pertinent to note that the assessee had claimed small and low value items written off under the head other misc expenses in the Profit Loss account and the same was properly quantified by the assessee. Similar expenses were allowed in subsidiary company i.e. Madhya Gujarat Vij Company Limited [ 2022 (2) TMI 1277 - ITAT AHMEDABAD] - The facts are identical and hence ground No. 2 is allowed. Miscellaneous losses and write offs - disallowance on the ground that the claim has not been substantiated by any documentary evidences - HELD THAT:- In the subsidiary company of the assessee, similar miscellaneous losses and write-offs were allowed on the ground that these losses are on account of loss of materials through pilferage, shortage of material in transit, shortage arising on physical verification, obsolescence of material/stores, loss in sale of scrap etc. These are loss which incurred in the day-to-day business activities and is purely revenue in nature. Thus, following the observation made in Madhya Gujarat Vij Company Limited 2022 (2) TMI 1277 - ITAT AHMEDABAD] by the Tribunal the facts are similar in the present assessee's case as well. Hence, ground No. 3 is allowed. Addition as prior period income already taxed as income in earlier years - HELD THAT:- It is pertinent to note that the CIT(A) has directed the Assessing Officer to verify the contentions of the assessee and if the prior period income was already taxed then the said relief should be granted to the assessee in the present Assessment Year. There is no need to interfere with the said finding and the Assessing Officer was rightly directed to verify the issue, so if any prior period income was already taxed then the said relief should be given to the assessee. Ground No. 4 is dismissed. Correct head of Income - Interest income from other loans - income from other sources OR business income - AR submitted that the loan to staff members and the interest incurred from the said loans are in the nature of business income as the staff members are part and parcel of the business activities of the assessee - HELD THAT:- The Hon'ble High Court of Gujarat in the case of Gujarat Urja Vikas Nigam Limited[ 2020 (3) TMI 232 - GUJARAT HIGH COURT] has categorically held that the interest earned on loan and advance from deposits with Mega Power Project towards SITS sharing and power are directly related to business of the assessee. But the said component does not include interest on small loans and advances. The decision given by the Ld. AR in case of Odisha Power Generation Corporation Limited [ 2022 (3) TMI 539 - ORISSA HIGH COURT] has also not specifically mentioned about the nomenclature of interest derived from loans and advances to the staff. Though the contentions of the assessee therein were quoted by the Hon'ble Orissa High Court but whether the same was accepted is not mentioned in the order. Thus, the decisions quoted by the Ld. AR will not be helpful in the present assessee's case. Loans to staff members cannot be treated as business expenses and therefore interest on these loans and advances given to staff members cannot be treated as business income. The CIT(A) has given detailed finding to this issue and there is no need to interfere with the same. Ground No. 2 for A.Y. 2011-12 filed by the assessee is dismissed. Disallowance and increase in power purchase cost - DR submitted that the purchase claim made by the assessee is without any support of documentary evidences and the assessee failed to prove genuineness of the entire purchase cost of fuel power debited in its books of account - HELD THAT:- There is a categorical finding given by the CIT(A) after calling the remand report from the Assessing Officer that the assessee furnished ledger account of power purchase, reconciliation of actual and estimated units of power purchase, together with copies of journal vouchers and invoices for power purchase which were not produced before the Assessing Officer at the time of assessment proceedings. The CIT(A) further observed that the claim of the assessee was rightly proved with the additional bills, reconciliation of bills and invoices was produced before the CIT(A). In the remand report the Assessing Officer has not pointed out any discrepancy to these details but simply submitted that the addition be sustained without verifying these documents. The CIT(A) has given detailed finding and there is no need to interfere with the same. Hence, ground No. 1 of Revenue's appeal for A.Y. 2011-12 is dismissed. Miscellaneous receipts - business income OR income from other sources - HELD THAT:- The miscellaneous receipts received from the assessee from the customers/suppliers relating to penalty and other charges were received during the regular course of business of the assessee and thus the same are taxed as business income. The evidences produced by the assessee during the assessment proceedings were totally ignored by the Assessing Officer and hence the CIT(A) has rightly directed the Assessing Officer to tax this amounts as business income. There is no need to interfere with the findings of the CIT(A). Penalty proceedings under section 271(1)(c) - HELD THAT:- Penalty in respect of excess depreciation which was disallowed by the Assessing Officer, in respect of Ground No. 1 therein we are remanding back the main quantum issue to the file of the Assessing Officer. Therefore, the penalty issue at present does not sustain. Besides this, the CIT(A) has rightly deleted the penalty as the final computation under Section 115JB of the Act and disallowance of depreciation made by the Assessing Officer had no effect on income computed under Section 115JB of the Act. Hence Appeal filed by the Revenue is dismissed.
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2022 (8) TMI 779
Addition u/s 41(1) - Outstanding creditors / debts - assessee has not filed the confirmation from parties before the lower authorities. This balance is outstanding since 3 to 4 years - According to the AO, this credit was not proved by assessee - HELD THAT:- It cannot lead to the conclusion that the debt was ceased to exist on this reason and thereby it cannot be treated as income u/s 41(1). In this case the debts were appearing in the assessee s books of accounts and also reflected in the assessee s balance sheet for the year ended on 31.3.2008 and the balance sheet was duly signed by the assessee. Once the assessee signed the balance sheet, it means that all the debts therein was acknowledged by the assessee. As such, these debts cannot be considered as ceased to exist. Further, Hon ble jurisdictional High Court in the case of CIT Vs. Alvares and Thomas [ 2016 (5) TMI 1150 - KARNATAKA HIGH COURT] - we are inclined to delete this addition on similar lines. Addition u/s 68 - difference in the brought forward opening balance in the cash book on 17.9.2007 - HELD THAT:- In our opinion, the closing balance as on 13.9.2007 should be the opening balance as on 17.9.2007 since there was no transaction between these two dates, though there was deposit into bank account on 17.9.2007. Thus, AO has taken only the difference between these two balances as income of the assessee. He ought to have considered the difference at Rs.4,30,130/- (Rs.2,05,130 + Rs.2,25,000/-). We are not enhancing the additions, since the revenue is not in appeal before us. However, we confirm the addition to the extent of Rs.2,05,130/- only. This ground of appeal is dismissed. Addition as unexplained cash credit u/s 68 - only reason for treating this amount as unexplained u/s 68 of the Act is that the assessee has not filed the confirmation letter from Bindu Promoters, Bangalore - HELD THAT:- The balance sheet of the assessee as on 31.3.2007, wherein this amount is duly reflected as receivable and same has been received by the assessee in AY 2008- 09. This claim of the assessee cannot be rejected without bringing any material on record to suggest that this is only accommodation entry. The plea of the assessee is to be considered as genuine unless proved otherwise. In the present case, revenue authorities have no material to suggest that the assessee has not received this amount from M/s. Bindu Promoters, Bangalore in this AY 2008-09. If the AO had any doubt, he could have very well verified the same with Bindu Promoters, Bangalore, which he failed to do so. In these circumstances, we have no hesitation in deleting addition by the AO to the tune of Rs.4.5 lakhs. Accordingly, this addition is deleted. Addition u/s 69 - unexplained investment - HELD THAT:- The valuation report collected by the AO from Mr. E. Umesh Sajjan dated 25.9.2007 shows no investment on this count. Hence, the assessee disputing the investment made by assessee at Rs.30,87,709/.-. The valuation report also does not show the investment made by assessee s wife at Rs.11,85,000/-. Being so, there is inconsistency in the valuation report and the information obtained from the bank. In view of this, we are of the opinion that it is appropriate to remit the issue to the file of AO to consider the issue afresh after furnishing all the details of information collected by AO from bank to the assessee and to decide it afresh.
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2022 (8) TMI 778
TDS on interest u/s 194A - addition made u/s 40(a)(ia) - Exemption to cooperative society from deducting TDS - non-deduction of TDS on interest paid on deposit received from the nominal members of the society - HELD THAT:- Whether a nominal member, who is not a registered member of the society, can be treated as a member of the cooperative society whether the exemption is available under clause (v) of sub-section (3) of section 194A - There is no dispute as to the fact that the above categories of persons mentioned above are nominal members of the societies as per bye-laws of the appellant society. The provisions of Maharashtra Cooperative Societies Act also permit admission of such nominal members. The term member has been defined by the Maharashtra Cooperative Societies Act to include a nominal members. The Hon ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] which dealt with the exemption u/s 80P in respect of society registered under the provisions of Kerala Cooperative Societies Act, while interpreting the term member of society after making reference to the judgement of the Hon ble Supreme Court in the case of U.P. Co- op. Cane Union Federation Ltd. [ 1997 (1) TMI 7 - SUPREME COURT] In the present case also, the provisions of Maharashtra Cooperative Societies Act provides that the members includes nominal members and, therefore, we do not see any reason as to why the exemption under clause (v) of sub-section (3) of section 194A of the Act cannot be given in the case of members referred to above. Therefore, the reasoning of the lower authorities cannot be appreciated in the eyes of law. Accordingly, the orders of the lower authorities are hereby reversed and direct the Assessing Officer to delete the addition made u/s 40(a)(ia) of the Act for non-deduction of TDS on interest paid on deposit received from the nominal members of the society. Appeal of assessee allowed.
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2022 (8) TMI 777
Long term capital gain - addition after holding the assessee to have sold/transferred area measuring 3277.2 sq. mtrs at Yerangal - CIT( A) held that the assessee had vide sale deed dated 05.01.2011 actually transferred only 777.20 Sq.Mts. of land to the purchaser and erred in directing the AO to adopt the proportionate Stamp Duty value as the sale consideration and recompute the capital gain after giving benefit of indexation - HELD THAT:- As it has come on record that the CIT(A) has held the assessee as having sold/transferred the area measuring 777.2 sq. mtrs of land only than 3277.2 sq. mtrs taken at the Assessing Officer s behest. We sought to verify the factual position ourselves from the corresponding sale deed executed in the relevant previous year. Mr. Walimbe produced the said documents before us dated 5-1-2011 during the course of hearing. It very well emerges therefrom that the assessee indeed sold area measuring 777.2 sq. mtrs only. That being the case, we find no merit in the Revenue s sole substantive grievance since going against the clinching recital made in the sale deed
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2022 (8) TMI 776
Addition made on account of disallowance of administrative services charged to TACO - HELD THAT:- Respectfully following the Order of Hon ble Bombay High Court [ 2019 (5) TMI 200 - BOMBAY HIGH COURT] and ITAT Pune in assessee s own case [ 2016 (4) TMI 993 - ITAT PUNE] , the appeal of the revenue regarding Administrative service charges is dismissed. Thus, Ground Number 1 of the revenue is dismissed. Eligibility for deduction u/s.80IC - Whether assembly would constitute manufacturing? - HELD THAT:- Revenue has not raised any ground of violation of rule 46A. AR argued that the Assessing Officer has never challenged the installation of machinery, but the AO has not allowed the deduction only on the ground that the Assessee is merely doing assembly and not manufacturing. DR could not rebut this fact. It is a fact that in the assessment order the assessee has not challenged the installation of machinery. The Audit Report filed under Rule 18BBB was before the AO and he has not pointed out any discrepancies in the Audit report. CIT(A) has allowed the appeal of the assessee stating that assembly would constitute manufacturing if new product is formed the clientele are different relying on various judicial pronouncement - CIT(A) has given the finding that both these conditions are fulfilled by the assessee. On perusal of the submission of the assessee we agree with the findings of the ld.CIT(A). It is observed that in the case of Tata Motors Locomotive company Ltd [ 1967 (2) TMI 22 - BOMBAY HIGH COURT] has held that assembly of imported CKD parts into finished products constitute assembly. Therefore, we uphold the findings of the Ld.CIT(A) regarding assessee s eligibility for deduction u/s.80IC. Accordingly, the Ground No.2 of the Revenue is dismissed.
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2022 (8) TMI 775
Long term capital gain computation - Fair market value as on 1.4.81 - Evidence / Poof of cost of improvement incurred after 1.4.1981 - assessee adopted the cost of acquisition of land and building as per valuation determined by the registered valuer - HELD THAT:- On perusal of the affidavit, it is not known as to what kind of improvement has been carried out by the brother of the assessee. No particulars whatsoever is available on record in this regard. While it is the claim of the assessee that the improvement has taken place immediately after the cut of date for adoption of fair market value of cost of acquisition as on 01.04.1981, it is equally plausible that such cost, if any, has been incurred prior to the cut of date and thus already taken into account for the purposes of fair market value of cost of acquisition of the property in question. The affidavit is vague and non-descript. It is not clear from affidavit as to what is the basis for affirming the contents on oath. Needless to say, an affidavit should clearly spell out how much is the statement to the deponents knowledge and how much is a statement of his belief based on information and source thereof. The grounds of belief must be stated with sufficient particularity to enable the court/administrating authority to judge whether it would be safe to act on deponents belief . The affidavit filed by the assessee appears to be only a self serving document and no weight can be attached to such standalone paper in the absence of any other material or corroboration about the improvements carried out to support assertions made in this regard. The burden of proof lies on the assessee to produce evidence which is rightly considered unsatisfactory and devoid of any factual basis by the lower authorities. Appeal of the assessee is dismissed.
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2022 (8) TMI 760
Reopening of assessment u/s 147 - petitioner has deposited cash in the Bank account with Bank of Baroda, Shivrajpur Branch, Kanpur - HELD THAT:- The petitioner has filed copy of his Bank account with the Bank of Baroda, Shivrajpur Branch, Kanpur for the F.Y. 2016-17 relevant to the A.Y. 2017-18 which shows that there is no such cash deposit in the aforesaid Bank. Copy of the bank account has already been filed along with certificate of Chartered Accountant with supplementary affidavit dated 30.05.2022, yet the respondents have neither replied the contents of the writ petition nor the contents of the supplementary affidavit. A short counter affidavit has been filed by the respondents. Even in the short counter affidavit, the respondents have not filed any evidences which may even indicate remotely that any cash was deposit by the petitioner in his Bank account with Bank of Baroda, Shivrajpur Branch, Kanpur. Thus, the initiation of re assessment proceedings and the impugned assessment order are not only without jurisdiction and perverse but also, the impugned reassessment order and re assessment proceeding violate fundamental right of the petitioner guaranteed under Article 14 and 21 of the Constitution of India. Since despite time granted for the last more than one month, no counter affidavit has been filed by the respondent nos. 2,3 and 4, therefore, we direct the respondent no.1 to file counter affidavit by means of his personal affidavit along with copies of the evidences of cash deposit by the petitioner in his bank account. The respondent no.1. shall also clearly state in his affidavit justification, if any, for initiation of the reassessment proceedings against the petitioner under the facts and circumstances of the case. Respondent No.1 shall further state the action he proposes to take against the respondent Nos. 2, 3 and 4 in case he finds that there was absolutely no valid material before the Assessing Officer for reason to believe that income of the petitioner has escaped assessment to tax. The respondent Nos.2, 3 and 4 shall also file a detailed counter affidavit annexing therewith the evidence of cash deposit by the petitioner in his bank account. On the next date fixed, the respondents shall also produce records before this court relating to the petitioner showing cash deposit by the petitioner in his bank account.
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2022 (8) TMI 759
Peak credit Theory - Addition u/s 68 - Unexplained cash credit - application of theory of peak credit on cash receipts and cash withdrawals - HELD THAT:- Tribunal in assessee s group case [ 2017 (4) TMI 1441 - ITAT CHENNAI] upheld the application of theory of peak credit on cash receipts and cash withdrawals. Subsequently, the revenue s appeal against this decision has not been admitted by Hon ble High Court of Madras. We find that similar facts exist in the present case and Ld. CIT(A) has rightly applied this case law to adjudicate the issue. Therefore, no infirmity could be found in the impugned order to that extent. The peak credit has to be worked out properly by considering only cash receipts and cash withdrawals and the same is required to be verified by Ld. AO. The same is the plea of Ld. Sr. DR who has submitted that peak credit was not made available to Ld. AO and therefore, modification in directions is required. We find that the assessee has made deposited cash and withdrawn the same throughout the year. Accepting the plea of Ld. Sr. DR, the working of the peak credit shall be furnished by the assessee to Ld. AO who is directed to consider the same and restrict the addition to the extent of peak credit of cash receipts and cash withdrawals. The cheque entries shall be separately examined and readjudicated. The directions given in the impugned order stand modified to that extent.
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2022 (8) TMI 758
Addition u/s 43CA - AO s findings wherein all the transfer instance indicate tolerance margin(s) of less 10% as per section 43CA(1) 1st proviso - Seven residential units sold / transferred in the relevant previous year - HELD THAT:- We find no merit in the Revenue s instant arguments as the legislature has incorporated similar tolerance margin(s) of 5 and 10% in section 50C(1), third proviso by the very Finance Act, 2020 w.e.f 01.04.2021. Case law Maria Fernandes Cheryl [ 2021 (1) TMI 620 - ITAT MUMBAI] holds the same as having retrospective effect since curative in nature. We wish to clarify the only difference between section 43CA and section 50C is that the former is applicable in case of transfer of assets other than capital assets whereas the latter provision comes into play in case of transfer of a capital asset in the specified circumstances, respectively. We accept the assessee s instant sole substantive grievance to delete the impugned section 43CA addition.
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Customs
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2022 (8) TMI 769
Condonation of delay in filing appeal - appeal dismissed on the ground of delay in filing the appeal beyond the period that could have been condoned by the Commissioner (Appeals) in terms of Section 128 of the Customs Act - HELD THAT:- From the declaration made by the appellant of C.A.-1 Form, it is quite evident that the appellant had received the order in the end of May 2017. Accordingly the appeal should have been filed within 90 days of the date of receipt of the order-in-original. The Commissioner (Appeals) could have at the most condoned a delay of 30 days in filing the appeal. In the present case the appeal has been filed by the appellant on 14.08.2019 before the Commissioner (Appeals). Thus the appeal has been filed approximately 866 days from the date of order-in-original i.e. 31.03.2017. As per Section 128 the Commissioner (Appeals) could have condoned the delay of 30 days beyond the 90 days allowed for filing the appeal. Hon ble Supreme Court in the case of Singh Enterprises [ 2007 (12) TMI 11 - SUPREME COURT] has held that From the application for condonation of delay, it appears that the appellant has categorically accepted that on receipt of order the same was immediately handed over to the consultant for filing an appeal. If that is so, the plea that because of lack of experience in business there was delay does not stand to be reason. There are no merits in the appeal - appeal dismissed.
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2022 (8) TMI 768
Violation of principles of natural justice - request of cross-examination of the appellant was not considered by the Adjudicating Authority in terms of Section 138 B of Customs Act, 1962 - Valuation of imported goods - enhancement of value - HELD THAT:- The lower authorities have not considered the request of the appellant for cross-examination. Though the lower authorities have relied upon ample evidences for deciding the case but the request of cross-examination of also ought to have been considered as mandated under section 138 B. From the statutory provision of section 138 B, it is not the option for the Adjudicating Authority to allow or not to allow the cross- examination, if the appellant has requested for cross- examination, it is in the interest of principle of natural justice the Adjudicating Authority is duty bound to conduct the cross-examination of the witnesses - since the lower authorities have relied upon the Panchnama dated 12.09.2017 and under which the various documents were recovered and those documents were used as evidence against the appellant, it is necessary that the cross-examination of Panch witnesses should be allowed. The entire matter needs to be re-considered after allowing the cross- examination of the witnesses as requested by the appellant - Appeal allowed by way of remand.
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Corporate Laws
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2022 (8) TMI 767
Disqualification of Director - Seeking direction to the respondents to activate the petitioner s Director Identification Number 01858905 in order to enable him to continue as and be re-appointed as Director in active companies that have complied with the statute - HELD THAT:- The guidelines require the Registrar to examine the application for striking off before issuing notice to the company under Section 560(3) of the Companies Act, 1956. The further requirement under Section 560(3) is that, on expiration of 30 days and on being satisfied that the application is otherwise in order, the Registrar shall strike the company s name off the Register and send a notice for publication in the Official Gazette. The applicant company will stand dissolved from the date of publication of the notification. Ext.P6 reveals that the notice regarding striking off and dissolution of Margin Free Kuries Pvt Ltd was forwarded to the Government of India Press. As such, the entire procedure contemplated under Section 560, and the guidelines stood complied with, the company s name stood struck off from the register and the company itself got dissolved. It is preposterous for the respondents to contend that the petitioner was disqualified for failure to submit returns with respect to a dissolved company. It is disheartening to note that even when the anomaly with respect to the status of the company was informed to the second respondent, absolutely nothing was done by the respondents. Petition allowed.
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Insolvency & Bankruptcy
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2022 (8) TMI 766
Financial Debt or Operational Debt? - mobilization advance given by the Appellant to the Corporate Debtor - HELD THAT:- Mobilization advance which was given by the Appellant to the Corporate Debtor was for mobilization of material and workforce on the site. Mobilization advance was not disbursed against the consideration for the time value of money. The submissions which has been pressed by the Learned Counsel for the Appellant is that the Corporate Debtor having given guarantee by the Guarantee Deed dated 14.02.2011 which was extended up 23.11.2021 transaction becomes a Financial Debt within the meaning of Section 5(8)(i). When we look into Section 5(8)(i) it is clear that the guarantee referred to in Section 5(8)(i) relates to any of the items referred to in sub-clauses (a) to (h) of Section 5(8) of the Code. The mobilization advance is not covered by any of the sub-clauses (a) to (h) of sub-section 8 of Section 5 of the Code hence the provisions of Section 5(8) (i) does not lend any support to the Appellant. The guarantee referred to in Section 5(8)(i) must relate to any of the items referred to in sub clauses (a) to (h). The mobilization advance given by the Appellant to the Corporate Debtor does not fall in any of the clauses (a) to (h) hence no benefit can be availed of the Appellant of provisions of Section 5(8)(i). Whether the mobilization advance by the Appellant to the Corporate Debtor was an Operational Debt? - HELD THAT:- In view of the law laid down by the Hon ble Supreme Court in M/S CONSOLIDATED CONSTRUCTION CONSORTIUM LIMITED VERSUS M/S HITRO ENERGY SOLUTIONS PRIVATE LIMITED [ 2022 (2) TMI 254 - SUPREME COURT ], the mobilization advance given by the Appellant to the Corporate Debtor is clearly an Operational Debt and the Adjudicating Authority committed error in rejecting the claim of the Appellant as an Operational Debt. As noted above, in the present case, the Resolution Plan has already been approved by the Adjudicating Authority on 28.10.2021. The present Appellant has also filed an Appeal Company Appeal (AT) Ins. No. 1092 of 2021 challenging the Order dated 28.10.2021 which Appeal stood withdrawn by the Appellant vide Order dated 04th August, 2022. In view of the withdrawal of the Appeal filed by the Appellant, Resolution Plan has to be implemented. The claim of the Appellant is to be treated as an Operational Debt and the Resolution Applicant is under obligation to include the claim of the Appellant as an Operational Debt and make payment to the Appellant also as an Operational Creditor - appeal allowed.
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2022 (8) TMI 765
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The parties are in multiple litigation and hence the Operational creditor in order to bring pressure on the CD has adopted the provisions of the Code to get disputed payment realized from the CD. The provisions of the Code cannot be used for chasing of payment and moreover where there is a business dispute. The Hon ble Supreme Court has already settled the matter that the provision of the Code is not intended to be a substitute to be a recovery forum. There is a dispute between the parties in relation to either issue of Form-C or in the issue of dues payable. The Code is very much clear and settled that Section 9 of the Code can be invoked only if there is no notice of dispute has been received by the Operational Creditor as per Section 9(5)(d) of the Code. Appeal dismissed.
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2022 (8) TMI 764
Seeking to transfer the right, title and interest in subject properties and hand over vacant and peaceful possession in the subject properties to the Petitioner along with a Possession Letter - failure or negligence to execute the sale deeds in respect of the subject properties - execution of sale deeds conveying all right, title and interest in the Petitioner s favour - seeking order and injunction restraining Respondent No. 1 from dealing with and/or creating any rights whatsoever (including parting with possession) over the subject properties - time limitation. HELD THAT:- The SICA Repeal Act came into effect on 01.12.2016 and the Petitioner was bound to file the Petition within 180 days from the same. Thus, the Petitioner is well in time and within limitation. It is pertinent to note that this Tribunal can invoke the provisions of Rule 11 of the NCLT Rules, 2016. The said inherent powers have been conferred over the Tribunal under Section 469 of the Companies Act, 2013. Hence, the Respondent No. 2 has failed to clarify the provision which debars the applicability of Rule 11 to Sections 424 and 434 of the Companies Act, 2013 - the repeal of SICA shall not affect the order of BIFR and thus the order dated 30.06.2016 shall stand confirmed as on today. It is important to take a note that in this case where the case has been decided by the Board, the Tribunal is not bound to adhere to Rules 21 to 26 of NCLT Rules, 2016, which deals with the manner and procedure in which the petition or application is ought to be drafted and filed. The Respondent had earlier stated that they shall resume with their role as an operating agency once the case is filed before the NCLT. However, now the Respondent has challenged the jurisdiction of the NCLT to entertain this Petition, claiming that the civil courts have the jurisdiction to entertain the same, thereby contradicting their own statement. This shows that the Respondent is unnecessarily trying to delay the process and mislead the authorities. Respondent No. 1 are directed to transfer the right, title and interest in subject properties to the Petitioner after duly executing the Conveyance Deed, hand over all the documents showing the prior ownership relating to the subject properties in original, give the proof of liabilities settled in respect of the subject properties including electricity, MIDC, Land Revenue, labour, telephone, water, Panchayat tax, arrears of property tax, etc and to hand over vacant and peaceful possession in the subject properties to the Petitioner along with a Possession Letter - petition allowed.
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2022 (8) TMI 763
Seeking approval of the Resolution Plan - Section 30, 31 and other applicable provisions of the Insolvency Bankruptcy Code, 2016 (hereinafter referred to as Code) read with Regulation 39 of IBBI (Insolvency Resolution Process for Corporate Persons), 2016 - HELD THAT:- It is noted that all requirements provided under Section 30(2) of IBC, 2016 and Regulation 36 to 39 of CIRP Regulations, 2016 have been complied with. It is also found that the Resolution Plan addresses the key challenges and trends in industries, implementation schedule and monitoring of the resolution plan and also contains measures to run the Corporate Debtor in future It is noted from records of the matter that application bearing IA 613 of 2021 filed by the resolution professional under Section 43 66 read with Section 25(2)(J) and any other applicable provision of the Insolvency and Bankruptcy Code, 2016 for seeking appropriate directions for avoidance of certain transactions entered by the corporate debtor and consequential directions, are pending before this Adjudicating Authority listed on 28.07.2022. If any amount is realized on disposal of the above pending application, the same shall be distributed among the creditors as per provisions of section 53 of the Code. The Resolution Plan is approved - Application allowed.
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2022 (8) TMI 762
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Time Limitation - service of demand notice - whether the demand notice in Form 3 dated 10.01.2019 was properly served? - HELD THAT:- The petitioner has filed its written submissions vide diary No. 00255/2 dated 05.07.2022, whereby it has been stated that the Demand notice as per Form 3 4 was duly served upon corporate debtor before filing of the present petition and no reply to that has been duly received. Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- It is to be noted that none appeared on behalf of the corporate debtor despite repeated service and has been set ex parte vide order dated 26.04.2022. Moreover, the petitioner has appended affidavit u/s. 9(3)(b) stating that even no reply to the demand notice and the corporate debtor has not cleared the outstanding dues, which is reflected in the certificate issued under Section 9(3)(c) of the Code, for which the present petition has been filed by the operational creditor. Whether this application is filed within limitation? - HELD THAT:- This application was filed on 28.02.2019 vide Diary No. 1032. Whereas the date of default is 18.07.2018, therefore, this Adjudicating Authority finds that this application has been filed within limitation. There is a total unpaid operational debt (in default) is of Rs. 49,90,671/- (Principal amount of Rs. 45,30,671 plus interest at the rate of 12% p.a. from 14.03.2018 upto 10.01.2019). The operational creditor has supplied goods to the corporate debtor and raised invoices attached as Annexure A-3 to A7. Accordingly, the petitioner proved the debt and the default, which is more than Rupees one lakh (prior to the amendment in threshold limit of one crore vide notification No. S.O. 1205(E) dated 24.03.2020) by the respondent-corporate debtor - the corporate debtor has failed to make payment of the aforesaid amount due as mentioned in the statutory notice till date. Thus, the conditions under Section 9 of the Code stand satisfied. It is evident from the above-mentioned facts that the liability of the corporate debtor is undisputed. Accordingly, the petitioner proved the debt and the default, which is above threshold limit. It is seen that the petition preferred by the petitioner is complete in all respects. The material on record clearly goes to show that the respondent committed default in payment of the claimed operational debt even after demand made by the petitioner - Petition admitted - moratorium declared.
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Service Tax
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2022 (8) TMI 774
CENVAT Credit - input services - security agent services - air travel services - hotel stay services - period 2015 to June 2017 - Demand in terms of Rule 14 of Cenvat Credit Rules read with Section 73(2) of the Finance Act, 1994 - HELD THAT:- It is found that the same issue for the period 2005, 2014-15 has been considered and finalized by the Commissioner (Appeals) in the remand proceedings in respect of these three services holding the credit is allowed on these services. Since the Commissioner (Appeals) has in the remand proceedings allowed the credit in respect of these services, there are no reason to differ with the order of the Commissioner (Appeals) in the case of the appellant itself - appeal allowed.
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2022 (8) TMI 761
Refund of unutilized CENVAT Credit - export of legal services - services on which no tax was payable by the Respondent - service provided by the Respondent fell under the definition of Output service as defined under Section 2(p) of the CENVAT Credit Rules, 2004 or not - HELD THAT:- A plain reading of Rule 2(p) of the 2004 Rules would show that the definition of output service has the following attributes: First, the service should be provided by a provider of service who is located in the taxable territory. Second, the service provided by the service provider should not fall in the negative list of services, as adverted to in Section 66D of the 1994 Act. Third, in cases where the whole i.e., the entire service tax is liable to be paid by the recipient of service, such service would not fall within the definition of output service . Insofar as the assessee is concerned, there is no dispute that it is located within the taxable territory i.e., in India. It is also not disputed that the assessee does not fall within the negative list of the services provided under Section 66D of the 1994 Act. Thus, it cannot but be concluded that the said exclusionary provision i.e., Subrule (2) of Rule 2(p) of the 2004 rules, is not applicable to the assessee, as in respect of legal service exported by it, service tax is not paid by the recipient of service. The recipient of service is located outside the taxable territory and therefore, this provision can only apply to legal services offered by the assessee to the recipient of service located within the taxable territory. Clearly, the definition of exempted service excludes services which are exported in terms of Rule 6A of the 1994 Rules - the questions of law framed hereinabove are answered in favour of the assessee and against the revenue - the appeal filed by the revenue is dismissed.
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Central Excise
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2022 (8) TMI 773
CENVAT Credit - input services - services of Commission Agent received from Larsen Toubro Ltd. - sales commission paid to M/s L T Ltd, who were marketing their products in India, as per Sole selling Agreement entered - extended period of limitation - suppression of facts or not - penalty - HELD THAT:- It is found that general tenor and purport of the Agreement is sales and not sales promotion. It can inferred from the Agreement that the terms of payment are only as a percentage of sales and the payment terms have no relation with any activity of sale promotion like advertisement etc. for which the appellants have not paid any money to M/s L T Ltd. Even though there is a mention of filed campaign in the Agreement, it is on a case to case basis and on a specific offer letter to be issued by the appellants; no payments for such activity have been agreed upon in an Agreement. Therefore, it is a clear-cut understanding between the parties that M/s L T Ltd would work as Commission Agents for sales and get a fixed percentage of the sales turnover. The learned Commissioner has correctly held that the impugned service does not qualify as Input Service as the same was not used in or in relation to manufacture of goods by the appellants and therefore, the credit availed is illegal. Gujarat High Court has gone into this issue in an elaborate manner and had made a final distinction between Sales Promotion and Sales Commission Services in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD II VERSUS M/S CADILA HEALTH CARE LTD. [ 2013 (1) TMI 304 - GUJARAT HIGH COURT] has held that though the business activities mentioned in the definition are not exhaustive, the service rendered by the commission agents not being analogous to the activities mentioned in the definition, would not fall within the ambit of the expression activities relating to business . The appellants are not eligible to avail CENVAT credit on the Sales Commission paid to M/s L T Ltd. We find that the appellants have also submitted that in case the bench takes a contrary view to the judgments of tribunal in M/S ESSAR STEEL INDIA LTD. VERSUS COMMISSIONER OF C. EX. SERVICE TAX, SURAT-I [ 2016 (4) TMI 232 - CESTAT AHMEDABAD] and Federal Mogul [ 2019 (2) TMI 1485 - CESTAT BANGALORE] , they may refer the issue to a larger Bench - in view of the elaborate discussion and categorical finding of the Gujarat High Court in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD II VERSUS M/S CADILA HEALTH CARE LTD. [ 2013 (1) TMI 304 - GUJARAT HIGH COURT] , no such reference to larger bench is warranted. Time Limitation - suppression of facts or not - penalty under Section 11AC of the Central Excise Act, 1944 and Rule 25 of Cenvat Credit Rules, 2004 - HELD THAT:- The extended period is not invokable in respect of the first show cause notice that is the part of the proceedings in Appeal No. E/639/2010 and for that reason, suppression, fraud, collusion etc. with intent to evade payment of duty cannot be alleged and therefore, penalty under Section 11AC cannot be imposed - as the issue involved does not pertain to clandestine removal etc. and therefore, the question of confiscation and penalty under the provisions of Rule 25 of the Central Excise Rules do not arise - penalty imposed under Section 11AC of Central Excise Act and Rule 25 of Central Excise Rules are not sustainable. The appellants are not eligible to avail the impugned credit and therefore, availment of credit, before the amendment carried out with effect from 03.02.2016, does constitute a contravention of Central Excise Rules and therefore, penalty under Rule 15 of CENVAT Credit Rules, 2004 is rightly imposed. Duty demand confirmed within normal period; extended period not invokable; However, penalty under Section 11AC is set aside - Duty demand of Rs.10, 96, 33,738 is confirmed; however, penalty under Rule 25 of Central Excise Rules is set aside - duty demand of Rs.20, 85, 94,049 is confirmed; however, penalty under Section 11AC is set aside - duty demand of Rs.8, 12, 82,621 is confirmed; however, penalty under Rule 25 of Central Excise is set aside - Appeal allowed in part.
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CST, VAT & Sales Tax
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2022 (8) TMI 772
Validity of assessment order - Validity of notice issued - Refund claim alongwith interest - undue and disproportionate reliance upon the report/proposals of the enforcement authorities and not enough independent application of mind by the authority - HELD THAT:- While an assessing officer is certainly entitled to refer to the findings and observations of the enforcement authorities, the finalisation of the assessment must be on his own initiative and application of mind - The assessment must be a function of the independent labour of the assessing officer rather than containing mere reference to the materials found by enforcement and their conclusions. Pursuant to the remand, the petitioner has received the impugned notice dated 18.03.2019, calling upon it to file its objections to the assessment proposals with supporting records. Though styled as notice, the impugned communication, conveys as much finality as an order and the petitioner thus apprehends that the officer has pre-determined the issues - seeing as the communication impugned is a notice it would be appropriate for the petitioner to appear before the Authority and make its case. The Assessing Authority will ensure that the proceedings before him are completed in close compliance with the observations and conclusions of the Appellate Authority. Initiation of proceedings of recovery by issuance of Form-U to the Bank - HELD THAT:- The appellate order had been received by the Assessing Authority only on 28.02.2017. In the meanwhile, based upon the Form-U issued to the Bank, the Bank had handed over the Demand Draft to the Assessing Authority on 09.12.2016 that had been sent for encashment on 12.12.2016 and encashed on 20.12.2016 - there are no irregularity in the procedure followed. Though the proceedings for recovery are unfortunate seeing as the original order of assessment has been set aside and remanded for de novo consideration, in the preceding paragraphs, a time frame has been set for completion of the proceedings in remand. Thus, and as the conclusion of the de novo proceedings is imminent, mandamus, as sought for, is not issued now. Petition disposed off.
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2022 (8) TMI 771
Validity of assessment order - benefit of concessional rate of tax - turnover from sale of scientific equipments and instruments to educational institutions, hospitals, laboratories and institutions, premised upon the satisfaction of certain conditions - benefit of Notification No. II (1)/CT RE/38/76 dated 11.02.1976 - HELD THAT:- There is no dispute on the position that the certificates as required under the appendix to the Notification have been furnished by all the recipient colleges. Thus, one condition of the Notification has, admittedly, been complied with. The dispute arises with regard to the second condition, that is, as to whether the goods supplied,being a lathe, drillingand hopping machines,satisfy the definition of 'scientific equipment and instruments' that form the thrust of the Notification. As regards the lathe, drilling machine and hopping machine at issue, there is no dispute posed that the recipient colleges are technical/engineering colleges that have utilized/deployed these machines in the teaching/instruction of the respective courses. The impugned order of assessment also does not make any adverse observation in regard to this aspect of the matter, that is to say, there is no allegation that the machines in question have been used for any purpose other than education. The conclusion arrived at by the authority fails, the impugned assessment orders are set aside - Petition allowed.
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Indian Laws
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2022 (8) TMI 770
Seeking grant of Bail - when the question relating to determination of quantity of narcotic/psychotropic substances in a mixture has been referred to a Larger Bench, the High Court could not have decided the issue of law in granting bail to the respondents without considering the judgment rendered by this Court in HIRA SINGH ANR. VERSUS UNION OF INDIA ANR. [ 2017 (7) TMI 1427 - SUPREME COURT] ? HELD THAT:- The above question was answered by the three-Judge Bench in Hira Singh and Another v. Union of India Another [ 2020 (4) TMI 671 - SUPREME COURT] , where it was held that In case of seizure of mixture of Narcotic Drugs or Psychotropic Substances with one or more neutral substance(s), the quantity of neutral substance(s) is not to be excluded and to be taken into consideration along with actual content by weight of the offending drug, while determining the small or commercial quantity of the Narcotic Drugs or Psychotropic Substances. The ends of justice would be met if the impugned order passed by the High Court granting bail to the respondents herein is set aside. The impugned order passed by the High Court is, accordingly, set aside. The respondents are directed to surrender before the Trial Court within a period of two weeks from today - appeal disposed off.
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