Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 26, 2021
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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Supply or not - Levy of GST - activities carried by the Applicant's Head office located outside India and rendered to the Applicant - requirement to obtain registration in India under Section 24 of the Central Goods and Service Tax Act, 2017 - All the three questions raised, answered in the negative - AAR
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Exemption from GST - rent-a-cab service - transportation of passengers excluding tourism, conducted tour, charter or hire of NON Air Conditioned Buses under a contract carriage with our customer - Since the subject activity is not ‘transportation of passengers’ the same is not eligible for exemption - The impugned service provided is ‘rent a cab’ Service - Taxable @5% of GST - AAR
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Levy of GST - reimbursement by Industry Partner to YAS of the stipend paid to students - The applicant is only a conduit for the payment of stipend and the actual service is supplied by the trainees to the trainer companies (industry partners) against which stipend is payable. Hence the amount of stipend received by the applicant from the industry partners and paid in full to the trainees is not taxable at the hands of the applicant. - AAR
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Seeking pre-arrest bail - input tax credit - fraudulent invoices were raised by the complainant - offences punishable under Sections 420, 406 and Section 34 of the Indian Penal Code - In consideration of the facts of the case and the evidence collected in the course of investigation, there are reason to believe that, goods were supplied by the complainant to the applicant. - No case is made out for granting pre-arrest protection to the applicant - HC
Income Tax
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Treatment of the assessee as Agent of non-resident and assessee in Default for non Deducting TDS u/s 195 - the claim of the assessee that simultaneous proceedings cannot be taken, i.e holding the assessee as an assessee in default under Sec. 201; and at the same time passing an order under s. 163, holding the assessee as a representative assessee, did not merit acceptance. - AT
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Validity of the reassessment order u/s 147 - addition of bogus accommodation entry - AO has not even mentioned as to what was the nature of entry as given in the report and simply saying that assessee received entry (of huge amount) from entry operators during the period is not sufficient. Such a vague reasons cannot justify the reopening and as observed above, the Assessing Officer can validly acquire jurisdiction only when the reasons recorded itself points out or speaks of live link nexus with the material available on record and income escaping assessment and it should not be vague or mere pretence - the reasons recorded does not confer any jurisdiction to him reopen the case - AT
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Validity of satisfaction and proceedings u/s.153C - incriminating material or not - Most of the documents did not pertain to impugned assessment years or does not specify any assessment year or have already recorded in the books of account or a part of assessment years. The documents at least indicate some prima facie that there is same escapement of income or there is an element of undisclosed income, it cannot be said to be incriminating. If the documents found are available in public domain or are statutory records, same cannot be held to be incriminating. - AT
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Special audit u/s 142(2A) - AO Jurisdiction to give directions for a special audit - It is neither permissible to the Court exercising the jurisdiction under Article 226 of the Constitution to enter into the disputed questions of facts, nor is it possible for the Court to analyse each and every direction and come to the conclusion whether it is bad in law or not. The submission of Mr.Soparkar that if some of the questions, which seem to be bad in law cannot be segregated, the entire impugned order containing the directions be quashed and set aside, also cannot be accepted. - HC
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TDS u/s 194H - commission payment - rendering medical services - to fall within the explanation to Section 194H, the commission payment must have been received by a person who is acting on behalf of the assessee. As rightly observed by the Tribunal, the doctors were not bound to prescribe the medicines as suggested by the assessee. As such there was no legal compulsion on the part of the doctors to prescribe a particular medicine suggested by the assessee, and therefore, the doctors could not be said to have acted as the agent of the assessee. - Provisions of Section 194H are not applicable - HC
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Waiver of interest u/s 220(2A) - The Revenue in the present case recorded the non-cooperation of the petitioner assessee. The observations made in this regard would establish that consequent to search notice under Section 153A of the Income Tax Act dated 09.03.2011 calling for return of income within 45 days of the receipt of the notice. But the assessee furnished the return of income only on 15.07.2011. The other incidents are also recorded to establish that the petitioner assessee had not cooperated for the completion of the Income Tax proceedings. - No relief - HC
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Assessment in search cases - Approval of JCIT u/s 153D - Period of limitation - JCIT has mentioned at the bottom of the approval that draft assessment order has been received late by him on 31.12.2016 beyond the time limit as per internal action plan and thus having a very little period for proper examination of the facts of the case and further inquiries. The ld JCIT, Central Range, Meerut has mentioned such a fact on the letter of approval sent by the ld AO. - issue of approval is covered in favour of the assessee - AT
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Exemption u/s 11 - assessee has not shown that the amount kept in fixed deposits have been allocated to or earmarked for a charitable purpose - Section 11(1A) is concerned with the capital gains arising on sale of a capital asset and its reinvestment for the purpose of availing exemption, i.e., conversion of one capital asset into another capital asset. Sec. 11(5) prescribes mode of making investments. In our view, those provisions will not support the claim of the assessee, since the deduction has been claimed u/s 11(1)(a) of the Act, as per which the income has to be applied for charitable purposes. - AT
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Bad debts - Allowability towards service tax which was written off as bad debt u/s. 36(1)(vii) - Since service tax payment recovery is denied by the DIP, the assessee has written off it as bad debt. Therefore, we are of the view that the assessee is justified in claiming it as bad debt by writing off in the Profit & Loss account. - Claim allowed - AT
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Income accrued in India - PE in India - business service agreement/single unified agreement - On going through the sequence of activities and commentary of the OECD with regard to the Article 5(2)(1), it can be concluded that the activities consists of same and enter-connected projects. - Thus, based on the unified agreement, consolidated billing pattern, the activities being inter related as found in the preceedings paras, we hereby hold that the existence of the PE of the assessee is undeniable. - AT
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Addition made on account of diversion of fund - disallowance of interest expenses - there cannot be any disallowance of interest expenses provided the own fund of the assessee exceeds the interest free advance. - AO directed to verify whether the own fund of the assessee exceeds the amount of interest free advances and adjudicate the issue afresh - AT
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Deduction of education cess - allowable business expenditure - the effect of the omission of the words "cess" from section 40(a)(ii) of the Act is that, only taxes paid are to be disallowed in the assessment for the assessment years 1962-63 onwards. - Deduction cannot be denied - AT
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Deduction of TDS - Interest u/s 2(28A) - Refund amount with interest to the flat purchasers/Petitioners as per the decree of the High Court - such a relationship does not spell out a debtor-creditor relationship nor is the payment made by the Respondent Nos. 4 to 7 to the Petitioners one in discharge of any pre-existing obligation, so as to attract Section 2(28A) of the IT Act. - Payment to be made without making any deduction of tax at source - HC
Customs
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Validity of confiscation proceedings - Rejection of value of importer - imported goods auctioned without prior notice to the appellant - It is a settled law that once the goods are seized or confiscated and the proceedings against the same are pending before the authority / Court then the only option available to the department is to obtain necessary permission from the court before whom the proceedings are pending and also to issue notice to the assessee from whose possession goods have been seized before auctioning the goods. - AT
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Conversion of shipping bills from duty drawback scheme to advanced authorisation scheme - mistake in the shipping bills occurred - time limitation - The provision of Section 149 of the Customs Act, 1962 or the rules or notifications made thereunder does not provide any time limit for amendment or conversion of the documents and it is only through the circular issued by CBEC a period of three months have been prescribed. It has been consistently held by the Tribunal that the time limit prescribed by the CBEC is not binding on the court if the Circular is contrary to the statutory provision, then the statutory provision would prevail. - AT
IBC
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Seeking for closure of the Liquidation Process - Corporate Debtor was being sold as a going concern in the e-Auction - Whether the Liquidator is authorized to sell the ‘Corporate Debtor’ as a going concern pursuant to Regulation 32 of IBBI (Liquidation Process) Regulations, 2016? - the Liquidator has rightly followed the procedure specified in Regulation 32A of the Liquidation Process Regulations. - AT
Service Tax
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Interest on delayed refund of amount - the amount was paid during the investigation under protest as pre-deposit - The appellant is entitled to claim interest from the date of deposit till its realization - Considering it is a pre-deposit but the appellant is entitled to claim interest on the said amount as the said amount has been paid under protest from its payment till its realization @12 % p.a. - AT
Central Excise
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CENVAT Credit - input services - Travel charges incurred towards the transportation of their senior executives/ employees for attending seminars/ conference for conduct of their business - Aviation Services - For qualifying as input service, the use of the service was to be in manufacture of the finished products. - Aviation Services, do not qualify the test laid down as per the Rule 2 (l), hence CENVAT Credit in respect of these services shall not be admissible. - AT
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Maintainability of appeal - time limitation - appeal filed before Commissioner (Appeals) after a delay of 11 months - More time has been taken by the department for considering appellant’s request under the Scheme which finally was rejected. The appeal before Commissioner (Appeals) has also been within reasonable time. Commissioner (Appeals) himself has held that appellant otherwise has sufficient reason to reach him but beyond the time as prescribed under Section 35(C ) of Central Excise Act. - Delay condoned - AT
VAT
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Input tax Credit - Coal is a raw material for manufacturing of cement or not - in the present case, the coal used in the process of manufacture of cement is indeed an input within the meaning of Section 2(25) of the OET Act and therefore qualifies for input tax credit as claimed by the Petitioner - the Tribunal erred in holding that the coal is not a raw material for manufacturing cement - the Tribunal erred in coming to the conclusion that coal could not be treated as a raw material vis-à-vis the finished product i.e. cement - HC
Case Laws:
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GST
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2021 (8) TMI 1021
Refund of tax - zero-rated supply of goods or services or both without payment of tax - ITC on export of goods and services without payment of Tax - Section 54 of the CGST Act, 2017 - HELD THAT:- The intent of Policy Wing of revenue is to restrict the refund sanction amount by considering the lower value mentioned in the shipping bill or in GST invoices. Further, it is settled position that where there is any ambiguity in the provision of law with reference to any exemption/concession provided by the Govt should be reading it down and the intention of reading down of any provision is to be provide a restricted or narrow interpretation of the said provisions. The proper officer (adjudicating authority) has rightly taken ₹ 13,09,623/- as Net ITC, the FOB value as total turnover of zero rated supply i.e. ₹ 2,89,44,004/- and Adjusted Total turnover as ₹ 4,17,91,104/-. Therefore, the adjudicating authority has decorously processed the refund application in austere compliance of provisions of law - there are no infirmity in the order passed by the adjudicating authority. Appeal disposed off.
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2021 (8) TMI 1020
Supply or not - Levy of GST - activities carried by the Applicant's Head office located outside India and rendered to the Applicant - requirement to obtain registration in India under Section 24 of the Central Goods and Service Tax Act, 2017 - HELD THAT:- For the purpose of operating the LO in India, the HO outside India assists in support of human resources, recruit employees in India in order to launch the LO operations in India, IT support to set up necessary infrastructure, advise on any accounting, internal control processes, project coordination, and other management guidance for the C4IR India Management team and the said activities are in relation to setting up and administering of the LO office and the RBI permissible activities that the applicant undertakes viz. liaising in nature and does not involve any business activities. The said activities undertaken by the Head Office located abroad, no consideration is paid by the applicant to the Head Office. Since the liaison office is restricted under the RBI regulations to undertake any activities other than of liaising (i.e. acting as a communication channel between its head office and parties in India), the applicant is also not allowed to undertake any business or commercial activities, without the permission of the RBI. Further, the services received by the applicant from its Head Office is import of service since the Head Office is located abroad - There is no doubt that both, the Head Office and the Liasion Office are related persons and the provision of Schedule I mentioned above should be applicable in the present case because the supply received by the applicant from the Head Office is a supply of services. However it is seen that the said provision will be applicable only when the said services are imported in the course or furtherance of business. The applicant can only perform the activities mentioned at (i) to (iv) above. No other activities of any kind can be performed without the express permission and approval of the RBI - the applicant is not undertaking any 'business' as defined under Section 2(17) of the CGST Act and therefore the activities/services received by the applicant from its HO cannot be said to be in the course or furtherance of its business and hence cannot be considered as a supply under Section 7 of the CGST Act, 2017. The activities carried by the Applicant's Head office located outside India and rendered to the Applicant will not amount to supply as envisaged under Section 7 of the Central Goods and Service Tax Act, 2017. Whether the activities carried by the Applicants Head office located outside India and rendered to the Applicant would be liable to GST in the hands of the applicant considering that the Applicant is not engaged in any business? - HELD THAT:- The activities carried out by the Applicants HO located abroad and rendered to the Applicant will not amount to 'supply' as defined under Section 7 of the CGST Act, 2017, since the Applicant is not engaged in any business. Therefore so long as the services imported by the applicant from its HO are not such transaction. However, if the applicant undertakes any further supply which is liable to GST then, in such a case the import of services from its Head Office will be liable to GST at the hands of the applicant. To the import of service in this case, not being considered as a supply liable to GST, the applicant would not be required to obtain registration in India under Section 24 of the Central Goods and Service Tax Act, 2017 with respect to activities carried out by the Applicant's Head office located outside India and rendered to the Applicant. Issues answered in negative.
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2021 (8) TMI 1019
Exemption from GST - rent-a-cab service - transportation of passengers excluding tourism, conducted tour, charter or hire of NON Air Conditioned Buses under a contract carriage with our customer - applicability of N/N. 12/2017 dated 28.06.2017 - HELD THAT:- In the instant case, the applicant has an agreement with RIPL for supplying Non-AC buses to transport staff of RIPL and the buses are owned by the applicant. Further, the applicant also incurs expenses on fuel and maintenance of the buses and for all these services provided by the applicant, they are paid fixed hire cost plus fixed fuel cost at predetermined rates of fuel plus mileage. It is RIPL which controls the deployment of the buses. A perusal of the agreement reveals that the applicant shall deploy the buses (already inspected by RIPL) or as per instructions of the Admn. Dept. of RIPL. Thus the applicant cannot run the buses on their own because the overall control of the buses is with RIPL. Further, as per the agreement, Insurance Charges, etc., will be paid by the applicant whereas toll tax, etc will be paid by RIPL. Thus while the ownership of the buses lies with the applicant, the buses shall be operated strictly as per the instructions of RIPL. Therefore in the subject case, there is a clear transfer of right to use the buses by way of effective control as is seen from the fact that the buses are plying strictly as per RIPL s instructions. In the case of transportation of passengers, the recipient of service would be the passenger whereas in the case of renting of any motor vehicle, like buses in the subject case, the recipient would not be the passenger. In the subject case, the consideration for supply of service is charged from RIPL and not the passenger. Therefore in the subject case it is clear that the recipient is RIPL. Hence, there are no hesitation in holding that the subject activity, amounts to renting of motor vehicle and shall qualify as a taxable activity under the provisions of the GST Laws. Since the subject activity is not transportation of passengers the provisions of Notification No. 12/2017-CT (R) dated 28.06.2017 are not applicable in the subject case - All activities of Renting of any motor vehicle/transport vehicle which is designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient are chargeable to either 2.5% GST or 12% GST depending on availment of Cenvat Credit. Therefore in the subject case since there is a Renting of any motor vehicle/transport vehicle which is designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient i.e. RIPL, the applicant will have to pay GST @ 12% , if credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (i.e. service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle) has not been taken.
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2021 (8) TMI 1018
Levy of GST - reimbursement by Industry Partner to the applicant, of the stipend paid to students - HELD THAT:- As per the agreements entered into with industry partners as a NEEM agent they: prepare monthly attendance record of the trainees, getting it certified from the Company; process stipends of the trainees; make payment of stipend to the trainees in their individual bank accounts; provide uniform and safety shoes (as per requirement of industry partner) to the trainees; take Insurance policies towards Employee Compensation and Personal Accident Policy for trainees. The applicant, is registered as Agent under National Employability Enhancement Mission ( NEEM') for facilitating and extending support for mobilizing trainees under NEEM Scheme of Government of India as per regulations under notification issued by All India Council for Technical Education (AICTE), for providing trainees on-the-job practical training in industries to enhance their future employability, For that purpose, for which they enter into agreements with various companies/ organizations (called as industry partner) who impart actual practical training to the students. The stipend is not directly paid to the trainees by the companies, rather the same are routed through the applicant. The applicant has submitted that the entire amounts received as stipend from the companies are paid to the trainees without any amount being retained. Thus, it is seen that the applicant is only acting as an intermediary in collecting the stipend from the companies and then disbursing the same to the trainees in full since the applicant is not allowed to make any deductions from the stipend before disbursing the same to the trainees - The applicant is only a conduit for the payment of stipend and the actual service is supplied by the trainees to the trainer Companies (industry partners) against which stipend is payable. Hence the amount of stipend received by the applicant from the industry partners and paid in full to the traniees, is not taxable at the hands of the applicant. The reimbursement by Industry Partner to the applicant(YAS), of the stipend paid to the trainees, does not attract tax under the GST Acts.
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2021 (8) TMI 1017
Levy of GST - reimbursement by Industry Partner to YAS of the stipend paid to students - HELD THAT:- The applicant, is empanelled with the Ministry of Skill Development and Entrepreneurship, as a Third Party aggregator for mobilizing the trainees under National Apprenticeship Promotion Scheme (NAPS) for providing them on-the-job practical training in various industries, for which they enter into agreements with various companies/ organizations (called as industry partner) who impart actual practical training to the students. The issue in respect of stipend paid to the trainees by the applicant, the industry partner that provides training to the trainees is required to pay stipend to the trainees. This stipend is not directly paid to the trainees by the companies, rather the same are routed through the applicant. The applicant has submitted that the entire amounts received as stipend from the companies are paid to the trainees without any amount being retained. Thus, the applicant is only acting as an intermediary in collecting the stipend from the companies and then disbursing the same to the trainees in full since the applicant is not allowed to make any deductions from the stipend before disbursing the same to the trainees. The applicant is only a conduit for the payment of stipend and the actual service is supplied by the trainees to the trainer companies (industry partners) against which stipend is payable. Hence the amount of stipend received by the applicant from the industry partners and paid in full to the trainees is not taxable at the hands of the applicant. The reimbursement by Industry Partner to the applicant (YAS), of the stipend paid to the trainees, does not attract tax under the GST Acts.
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2021 (8) TMI 1010
Constitutional validity of section 16(2)(c) and section 16(4) of the West Bengal GST Act, 2017 - appealable order or not - HELD THAT:- Since it is an appealable order, this writ petition cannot be entertained on the ground of availability of statutory alternative remedy and petitioner should go before the appellate forum available under the statute. Only on the ground of challenge of constitutional validity of the aforesaid provisions of the act, this writ petition can be entertained. The petitioner is allowed to withdraw the money amounting to ₹ 50,00,000/- from his cash credit ledger only for the purpose of pre- deposit for filing the appeal and it has been submitted that the balance amount of ₹ 50,00,000/- of the demand he has already paid - List this matter for hearing in the month of November, 2021.
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2021 (8) TMI 1007
Constitutional validity of Rule 31A(3) of the CGST Rules, 2017 - HELD THAT:- This Court is of the opinion that the appellants have been able to make out a prima facie case for grant of interim relief. Resultantly, the operation of the impugned order shall remain stayed till the next date of hearing - List on 07.10.2021.
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2021 (8) TMI 1004
Seeking pre-arrest bail - input tax credit - fraudulent invoices were raised by the complainant - offences punishable under Sections 420, 406 and Section 34 of the Indian Penal Code - HELD THAT:- In terms of the GST, Input Tax Credit Rules, that for availing the Input Tax Credit Invoices issued by the supplier of the goods is a mandatory document. Herein, the response of the Assistant Commissioner, CGST in clear terms says, that M/s. Bansal Traders has availed the ITC against Invoices No.106 and 107. Besides, the statements of the Manager of the Warehouse, owner of the trucks and the statements of drivers, prima-facie, show that goods were delivered at the request of M/s. Bansal Traders to and at the godown premises of Sarfaraz. In consideration of the facts of the case and the evidence collected in the course of investigation, there are reason to believe that, goods were supplied by the complainant to the applicant. No case is made out for granting pre-arrest protection to the applicant - Application rejected.
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2021 (8) TMI 1002
Seeking grant of stay on impugned order - Demand of Short Paid Service Tax, Interest and Penalty - HELD THAT:- On the similar facts and the issues involved there is already an interim order by another Co-ordinate Bench which is still in existence, I am inclined to pass the interim order in this case by granting stay of the impugned order dated 24th March, 2021 till 30th September, 2021. The matter will appear for final hearing on 3rd September, 2021 along with W.P. No.20484 (W) of 2019, W.P. No.20488 (W) of 2019, W.P. No.20491 (W) of 2019 and W.P. No.20494 (W) of 2019 and also CAN No.33 of 2020, CAN No.34 of 2020, CAN No.35 of 2020 and CAN No.36 of 2020.
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2021 (8) TMI 1001
Non-consideration of Revocation Applications - seeking for rescinding of Order for cancellation of registration - HELD THAT:- Writ of Mandamus issues directing the jurisdictional respondents to consider and cause to be considered subject Revocation Applications of the petitioner in terms of Sec. 30 of the Act - Petition allowed.
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Income Tax
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2021 (8) TMI 1028
Assessment u/s 144 - Addition u/s 69 - assessee failed to provide details of credit entries in his bank accounts - HELD THAT:- We note that in assessee`s case an enquiry report was received from the Dy. Director of Income Tax (Inv.)-III, Surat regarding huge credits in the bank account of the assessee during the year under consideration. From the enquiry, the AO gathered that the assessee has four bank accounts and total credit entry in the bank accounts. AO treated as unexplained investment and treated income for the year under consideration by passing order u/s 144 r.w.s 147. On appeal, ld CIT(A) directed the assessing officer to calculate the commission @₹ 50 per lacs on the total turnover of ₹ 98,22,26,712/-. We note that investigation Wing, Surat, reported after examining the assessee and recording his statement on oath u/s 131 of the Act, that the assessee was engaged in the business of cheque discounting business and was using 18 bank accounts. The AO in the A.Y. 2009-10 had completed the assessment order dated 25.11.2016 holding that the assessee had earned commission income @₹ 50 per lacs on the turnover of ₹ 29,84,17,709/- and had made addition of ₹ 14,92,088/-. Therefore, we note that in previous year the Department has accepted the claim of the assessee that assessee had earned commission income @₹ 50 per lacs on the turnover of ₹ 29,84,17,709/-. It is a well settled legal position that factual matters which permeate through more than one assessment year, if the Revenue has accepted a particular's view or proposition in the past, it is not open for the Revenue to take a entirely contrary or different stand in a later year on the same issue, involving identical facts unless and until a cogent case is made out by the AO on the basis of change in facts. Assessee is engaged in cheque discounting business. However, considering the time value of money, we note that rate of @₹ 50 per lacs, is lower side, therefore we direct the assessing officer to compute the disallowance @ ₹ 75 per lacs. Principle of consistency are applicable to the assessee on cheque discounting business and not on the rate of ₹ 50 per lacs, therefore, considering the time value of money, we have directed the assessing officer to compute the disallowance @ ₹ 75 per lacs. Appeal of the Revenue is partly allowed.
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2021 (8) TMI 1026
Initiation of proceedings u/s. 153C - Unaccounted on-money payment for purchase of land - Search and seizure u/s. 132 - addition based on loose paper found and seized - persons who have received the on-money payment have taken contradictory stands before different income-tax authorities and, therefore, the appellate proceedings in connected cases have direct bearing on the case of the assessee - CIT-A deleted the addition - HELD THAT:- After perusal of the material on record and order of the AO it is clearly indicated that the information received from search conducted in Himalyan Group was also utilized in making impugned addition in the case of the assessee. The ld. counsel has also submitted that in addition to the fact that addition was not made on the basis of document seized from the office promises of Saumya Construction Pvt. Ltd., the referred documents dated 19-04-2008 as a copy of agreement between the Sandesh Ltd., Pusti Enterprises and Saumya Construction did not pertain to assessment year in question. Reliance upon the decision of Sanhgad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] wherein held that where loose papers found and seized did not establish co-relation document wise with assessment year, notice issued under section 153C had rightly been quashed and set aside. We have considered the judicial pronouncement as supra wherein it is held that where loose paper found and seized did not establish co-relation document wise with assessment year in question notice issued u/s. 153C had rightly been quashed and set aside. Before us, the Revenue could not point out to the contrary. In the light of the above facts and findings and after considering the decision of the ld. CIT(A), the appeal of the Revenue is dismissed. Therefore, this appeal of the revenue is dismissed.
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2021 (8) TMI 1025
Proceedings u/s. 163 - TDS liability u/s 195 - agent of non-resident assessee - assesses being treated as agent of the non resident for assessment of income of that non-resident - remittances made by the assessee towards reimbursement of expenses that were incurred by the latter on behalf of the assessee - As argued CIT(A) has erred in not appreciating that proceedings u/s. 201 are for treating the assesses in default for failure to comply with the provisions of section 195 HELD THAT:- as the amounts remitted by the assessee company, viz. BIPL to Braitrim U.K have been held to be towards reimbursement of expenses (without any mark-up), therefore, in the absence of any Income element therein involved the assessee, viz. BIPL could not be held to be a representative assessee within the meaning of Sec. 160(1)(i) qua the said remittances. Treatment of the assessee as Agent of non-resident and assessee in Default for non Deducting TDS u/s 195 - HELD THAT:- The Tribunal in [ 2010 (11) TMI 393 - ITAT, MUMBAI] has observed that as the liability of an assessee to deduct tax at source under s. 195 is different from the liability of an assessee to file a return of income as an agent of a foreign principal, therefore, the claim of the assessee that simultaneous proceedings cannot be taken, i.e holding the assessee as an assessee in default under Sec. 201; and at the same time passing an order under s. 163, holding the assessee as a representative assessee, did not merit acceptance. We do not find favor with the observation of the CIT(A) that as he had upheld the order passed against the assessee u/s 201 of the Act, therefore, having held so, there cannot be one more assessment in respect of the same income on the assessee pursuant to Sec. 163 of the Act. Pursuant to the amendment made available on the statute vide the Finance Act, 1987 w.e.f 01.06.1987 as the words unless he is himself liable to any income-tax in Sec. 195 stood omitted w.e.f 01st June, 1987, therefore, the innate exception carved out for a person who was himself liable to pay tax as an agent of the non-resident person u/s 163 of the Act qua deduction of tax at source u/s 195 of the Act as per the pre-amended law i.e prior to 01.06.1987, had thereafter been dispensed with or in fact obliterated from the statute. We, thus, in terms of our aforesaid observations set-aside the view taken by the CIT(A) that as he had upheld the order passed against the assessee u/s 201 of the Act, therefore, having held so, there could not have been one more assessment in respect of the same income on the assessee pursuant to Sec. 163 Whether the assessee company, viz. BIPL could principally be held to be the agent of Braitrim U.K u/s 163? - As observed by the ITO(IT)-TDS-3, Mumbai, that the assessee, viz. BIPL was to be held to be an agent of Braitrim U.K u/s 163 of the Act for the reasons, viz. (i). that BIPL has a business connection with Braitrim U.K and its principal business is substantially controlled and managed over by Braitrim U.K ; (ii) that Braitrim U.K is directly or indirectly in receipt of income from or through BIPL; and (iii). that BIPL is the agent office managed on behalf of Braitrim U.K. Although, the assessee has assailed before the CIT(A) the aforesaid observations of the ITO(IT)-TDS-3, Mumbai, on the basis of which it was held to be an agent of Braitrim U.K, however, we find that the CIT(A) by merely confining his adjudication to the aspect that the assessee could not have been subjected to double jeopardy under the two provisions of the Act i.e Sec. 201 and Sec. 163 of the Act, had thus, not dealt with the specific contentions that were raised by the assessee before him, therein, assailing its being treated as an agent of Braitrim U.K under Sec. 163 of the Act. Also no contentions qua the aforesaid issue on merits i.e treating of the assessee as an agent u/s 163 of the Act were advanced by the authorized representatives for both the parties in the course of hearing before us. As we have set-aside the view taken by the CIT(A) that having upheld the order passed against the assessee u/s 201 of the Act, the assessee could not be held to be an agent of Braitrim U.K under Sec. 163 of the Act, therefore, in all fairness we restore the matter to the file of the CIT(A) for adjudicating by way of a speaking order the assessee s claim on merits that it could not have been held to be an agent of Braitrim U.K u/s 163.
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2021 (8) TMI 1024
Revision u/s 263 - long-term capital loss - HELD THAT:- Documentary evidence placed on record clearly establish that even though the claim of the assessee for long-term capital loss was allowed by the AO only to the extent of ₹ 1,19,29,790/-, even the said loss to the extent allowed in the assessment was not allowed to be carried forward by the AO to the subsequent years as per the computation sheet annexed to the assessment order. Even the ld. CIT(DR) has not been able to rebut or controvert this position which is clearly evident from the assessment order passed by the Assessing Officer under section 143(3) read with computation sheet annexed thereto and further corroborated by the application filed by the assessee under section 154 before the Assessing Officer and the appeal filed before the ld. CIT(Appeals). We, therefore, find merit in the contention of the ld. Counsel for the assessee that there was no error in the order of the Assessing Officer dated 28.12.2018 passed under section 143(3) in allowing to carry forward the entire long-term capital loss claimed by the assessee instead of ₹ 1,19,29,790/- only allowed in the assessment order, as alleged by the ld. Principal CIT in his impugned order. The order passed by the Assessing Officer under section 143(3) thus was not erroneous as well as prejudicial to the interest of the revenue and the ld. Principal CIT, in our opinion, was not justified in revising the same vide his impugned order passed under section 263. We, therefore, set aside the order passed by the ld. Principal CIT under section 263. Appeal of the assessee is allowed.
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2021 (8) TMI 1023
Validity of the reassessment order u/s 147 which was sought to be revised by the impugned order u/s 263 - validity of re-assessment proceedings cannot be judged or challenged in revisionary proceeding - main contentions raised by the ld. CIT-DR was that once the assessee has accepted the re-assessment order and has not challenged the validity of reopening u/s.147, then assessee is precluded from agitating this issue especially in the proceedings u/s.263 on the ground that assessment order itself is bad in law - HELD THAT:- The present proceedings being collateral proceedings and if the assessment order is inherently invalid or bad in law, then validity of such an order can be challenged at any stage in the collateral proceedings including the proceedings u/s.263, because invalid order cannot be set aside or can be revised to make it valid. Though assessment order may be said to be erroneous but certainly it cannot be held prejudicial to the interest of the revenue in such circumstances when assessment order itself is unsustainable. The reasons recorded by the AO are totally vague, scanty and ambiguous. The reasons recorded by the AO do not disclose the AO's mind as to what was the nature and amount of transaction or entries, which had been given or taken by the assessee in the relevant year. The reasons recorded by the AO also do not disclose his mind as to when and in what mode or way the bogus entries or transactions were given or taken by the assessee. From the reasons recorded, nobody can know what was the amount and nature of bogus entries or transactions given and taken by the assessee in the relevant year and with whom the transaction had taken place. There is no live nexus with the information received and the formation of belief by the Ld. AO. At least the reason which is the foundation and edifice for acquiring jurisdiction to reopen the assessment, at least should prima facie indicate that there is live link nexus with the material coming on record with the income escaping assessment. The material should not be specific but also should indicate what is the amount which is escaping assessment. As held above, nowhere the reasons refer what was the nature of accommodation entry, the quantum of the amount of entry which has escaped assessment. In fact the reason is purely based on general observation and the modus operandi without any live link nexus with the assessee. Thus it is well settled that only the reasons recorded by the AO for initiating proceedings u/s 147 of the Act are to be looked at or examined for sustaining or setting aside a notice issued u/s 148 of the Act. The reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. Therefore, the details of entries or amount mentioned in the assessment order and in respect of which ultimate addition has been made by the AO, cannot be made a basis to say that the reasons recorded by the AO were with reference to those amounts mentioned in the assessment order. Thus since the reassessment order itself is bad in law, therefore, the same cannot be revised under section 263 of the I.T. Act. Only valid re-assessment order can be revised under section 263 - Decided in favour of assessee. Reopening of assessment - addition of bogus accommodation entry - HELD THAT:- As reasons recorded at least mention what is the nature of accommodation entry and which is the entity from which assessee has received the amount. Whether the entry has been received towards share application money or loan or gift, etc. These reasons are purely vague and show there is a non application of mind on the information which was received and the reason recorded by the AO - he has not even mentioned as to what was the nature of entry as given in the report and simply saying that assessee received entry to the tune of ₹ 20,50,000/- from entry operators during the period is not sufficient. Such a vague reasons cannot justify the reopening and as observed above, the Assessing Officer can validly acquire jurisdiction only when the reasons recorded itself points out or speaks of live link nexus with the material available on record and income escaping assessment and it should not be vague or mere pretence - he should have at least perused the report and examine what is the material pertaining to assessee and what is the nature of entry and whether it is matching with records of the assessee. He should have prima facie seen what is the nature of bogus entry and from which entity assessee has received. Such vague and general observation made by the Assessing Officer in the reasons recorded does not confer any jurisdiction to him reopen the case - Decided in favour of assessee.
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2021 (8) TMI 1022
Validity of satisfaction and proceedings u/s.153C - Satisfaction recorded by the AO of searched person or not? - CIT(A) had held that nothing is incriminating in the documents found and, therefore, additions cannot be made if no incriminating documents exist and no undisclosed income found during the course of search - HELD THAT:- As carefully perused the satisfaction note, written submissions of the appellant and also the contentions of the Ld. CIT (DR). A chart was furnished by the appellant, wherein every seized document was described as to its nature and it was emphasized that all the documents are either statutory records filed with the tax authorities, ROC or are audited accounts and books of the appellant. As perused the chart from which it clearly comes out that the documents belong to the appellant. However, they do not indicate any undisclosed income that has escaped assessment in the impugned assessment years. The appellant had also submitted a chart demonstrating that the assessment years in appeal are completed assessment years which has been reproduced in the submissions of the appellant. The tests that the documents belong to the appellant are duly verified. Section 153C of the Act also states that once the assessment is sought to be opened based on the documents belonging to the appellant, further assessment shall be made in accordance with the provisions of section 153A of the Act. There is a further requirement which states that the Assessing Officer must record a satisfaction note that documents must have a bearing on the determination of the total income of the appellant. Both the conditions lead to the conclusion that the documents found must be indicative of escapement of income and that the total income declared by the appellant in its return of income must necessarily be effected by the findings in the seized documents. From the perusal of the satisfaction note, it cannot be held that it is reflective of any undisclosed income or in the nature of incriminating belonging to the assessee the reason being none of the documents either pertained to the impugned assessment years or are already party of regular books of account. This is fairly clear from the assessee s explanation with regard to each and every document incorporated in the tabulated form in the following paragraphs. Most of the documents did not pertain to impugned assessment years or does not specify any assessment year or have already recorded in the books of account or a part of assessment years. The documents at least indicate some prima facie that there is same escapement of income or there is an element of undisclosed income, it cannot be said to be incriminating. If the documents found are available in public domain or are statutory records, same cannot be held to be incriminating. Order of the ld. CIT (A) holding that the additions made in the impugned assessment order are not based on incriminating material, is affirmed. Hence, the appeal of the Revenue is dismissed
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2021 (8) TMI 1016
Reopening of assessment u/s 147 - Reason to believe - HELD THAT:- There is direct nexus / live link between the material coming to the notice of the Assessing Officer and that, for formation of his belief that there has been escapement of the income of the assessee from assessment in the year under consideration because of his failure to disclose fully and truly all material facts as from the inquiry/investigation by the Investigation Wing of the respondent, some tangible material was found to substantiate the fact that the assessee was the provider of accommodation entries and that, the income from commission, ranging from 0.5% to 1% was not disclosed and thereby, the income chargeable to tax has escaped assessment for the year under consideration. As emerges from the record, the petitioner has filed RoI for the A.Y. 2012-13 disclosing income despite showing a huge turnover in the audited books of account - a detailed investigation is carried out by the Investigation Wing of the respondent and the outcome of the same is referred to herein above, which prima facie substantiates the case of the respondent - we are of the considered opinion that formation of belief by the AO that the income chargeable to tax has escaped assessment, based upon material derived during inquiry/investigation, appears to be justified. A perusal of the same revealed that they are mainly based on the aspects of change of opinion and reason to believe. There cannot be any dispute with regard to the ratio laid down in the same, however, as discussed herein above, the petition has failed so far as such aspects are concerned and accordingly, we deem it proper not to delve deep into them as would be of no avail to the petitioner.
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2021 (8) TMI 1015
Reopening of assessment u/s 147 - validity of the notice issued u/s 148 - case reopened is beyond four years, but within six years - HELD THAT:- In the present case, the petitioner has submitted its objections elaborately and the said objections were disposed of by the respondent by issuing an order and while disposing of the objections, the respondent had considered the objections filed by the petitioner and rejected the objections on the ground that for the AY 2003-04, ADIT, International Taxation, Chennai, issued a Notice u/s 148 on similar ground that claim of the assessee as regards payment made towards geological studies, seismic data acquiring and processing and chartered hire charges would not fall for consideration u/s 44BB of the Act to go for TDA at the rate of 4%. On the contrary, the services fell within the definition of fee for technical services . When the AO could able to trace out the material from and out of the materials submitted by the assessee, such new informations or materials undoubtedly would provide the AO for 'reason to believe' to reopen the assessment. This being the factum established, this Court is of the considered opinion that the respondent could able to establish that the AO has 'reason to believe' for reopening of assessment. The other intricacies raised by the assessee on merits are to be adjudicated elaborately with reference to the original documents and evidences to be made available before the authority. Such an elaborate adjudication on merits need not be entertained by the High Court in a writ proceedings under Article 226 of the Constitution of India. In the present case, the reopening is based on certain materials on record, then further adjudications are to be done before the authority based on the materials available on record. The sufficiency of the reasons need not be gone into by the High Court in a writ proceedings. Thus, the petitioner is bound to co- operate for the completion of the reopening proceedings initiated u/s 147/148 of the Act and the respondent is directed to conclude the assessment / reassessment proceedings as expeditiously as possible by following the procedures as contemplated.
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2021 (8) TMI 1014
Special audit u/s 142(2A) - AO Jurisdiction to give directions for a special audit - necessary approval of the Principal Commissioner of the Income Tax or not? - HELD THAT:- Assessing officer after going through the said material seized during the search operations and after following the due procedure of giving reasonable opportunity of hearing to the petitioners and after obtaining necessary approval of the Principal Commissioner of the Income Tax as contemplated in Sub-section (2A) of Section 142 has directed the respective petitioners vide the impugned directions to get their accounts audited by the nominated accountant, and to furnish the report in the prescribed form, also setting forth the requisite particulars as prescribed in the questionnaire. Such directions could neither be said to be arbitrary, illegal nor beyond the scope of the said provision. It is neither permissible to the Court exercising the jurisdiction under Article 226 of the Constitution to enter into the disputed questions of facts, nor is it possible for the Court to analyse each and every direction and come to the conclusion whether it is bad in law or not. The submission of Mr.Soparkar that if some of the questions, which seem to be bad in law cannot be segregated, the entire impugned order containing the directions be quashed and set aside, also cannot be accepted. It is axiomatic that when an authority has a jurisdiction to pass an order, the exercise of jurisdiction in wrongful manner in certain cases even though held to be illegal, would not necessarily render the order a nullity. All irregular or erroneous or illegal orders cannot be held to be null and void. In the instant case, as set out herein above the Assessing Officer does have the jurisdiction to give directions for a special audit under Section 142(2A). Even the impugned directions also do not suffer from any illegality or infirmity. In any case, even if two-three queries out of forty five queries are found to be unwarranted, as sought to be submitted by Mr.Soparkar, the entire order giving directions can not be set aside treating it to be a nullity. In that view of the matter, both the petitions being devoid of merits deserve to be dismissed. At this stage, the request made by the learned Sr. Advocate Mr.M. R. Bhatt for the respondent to exclude the period during which the present petition remained pending in the High Court after issuance of the notice i.e. from 14.6.20201 till this date, deserves to be considered for the purpose of Section 142(2C) - See VLS FINANCE LTD. ANOTHER VERSUS COMMISSIONER OF INCOME TAX ANOTHER [ 2016 (4) TMI 1133 - SUPREME COURT] Applying the ratio of the afore-stated judgement to the facts of the present petitions, it is directed that the period during which both the petitions remained pending i.e. from the date of issuance of notice on 14.6.2021 till the date of pronouncement of judgement, shall be excluded while counting the period prescribed in the proviso to Sub-section (2C) of Section 142 of the said Act. Subject to the said direction, the petitions are dismissed.
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2021 (8) TMI 1013
Reopening of assessment u/s 147 - disposal of the objections filed on the reasons furnished - HELD THAT:- Disposal of objections submitted by the petitioner on the reasons furnished is to be done based on objective satisfaction and not on subjective satisfaction. An elaborate adjudication is required and such adjudications are to be done during the course of reopening proceedings and certainly not at the stage of disposal of objections filed by the Assessee on the reasons furnished. Once the Assessing Officer prima facie arrived a conclusion that he has reason to believe and reasons are furnished, objections received and disposed of by the authority, the said procedure as directed by the Hon'ble Supreme Court of India in GKN Driveshafts case [ 2002 (11) TMI 7 - SUPREME COURT] is to be construed as completion of compliance of the principles of natural justice. Considering the initiation of reopening proceedings, reasons furnished and the disposal of objections in the impugned proceedings this Court has no hesitation in arriving a conclusion that the respondents have established the reasons to believe for reopening of assessment, which is a pre-condition contemplated under Section 147 of the Act - adjudications with reference to the disputed facts are to be done during the course of reopening proceedings and the High Court cannot venture into an adjudication of such disputed facts with reference to the intricacies in accounting system based on certain original documents in the writ proceedings under Article 226 of the Constitution of India. The power of judicial review under Article 226 of the Constitution of India is to ensure that the processes through which a decision is taken by the Competent Authority in consonance with the provisions of the Act, but not the decision itself. This being the scope of power of judicial review, the High Court is not expected to adjudicate certain disputed facts with reference to original documents and evidences, which is to be done by the Competent Original Authority and thereafter by the Appellate Authority in the manner known to law. Once the adjudications are done by the Original Authority and by the Appellate Authorities as contemplated under the Statutes, then those findings of the Authorities at various stages would be of greater assistance to the High Court for the purpose of exercise of the power of judicial review under Article 226 of the Constitution of India in an effective and efficient manner. Based on the elaborate discussions made in the aforementioned paragraphs, the petitioner has to cooperate for the completion of the reopening proceedings, which is to be done as expeditiously as possible.
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2021 (8) TMI 1009
Deduction of TDS - Interest u/s 2(28A) - Refund amount with interest to the flat purchasers/Petitioners as per the decree of the High Court - whether the Respondent Nos. 4 to 7 are entitled to deduct TDS on the interest payable under the Recovery Warrant dated 15th October 2018, the Consent Terms and the Order of this Court both dated 4th March 2021? HELD THAT:- The amount so payable is in the nature of a judgment debt or akin to a judgment debt, the payment of which cannot establish a debtor-creditor relationship between the parties. As such, the said sum or any part thereof cannot be liable to tax deducted at source under the relevant provisions of the IT Act. This is in line with the decision of the Hon ble Supreme Court in ALL INDIA REPORTER LIMITED VERSUS RAMCHANDRA D. DATAR [ 1960 (11) TMI 21 - SUPREME COURT] as also the judgment of our Court in MADHUSUDAN SHRIKRISHNA VERSUS EMKAY EXPORTS [ 2010 (1) TMI 1200 - BOMBAY HIGH COURT] . In the present case, the amounts payable being in effect a refund of the amounts paid by the Petitioners to the Respondent No. 4 to 7, along with compensatory interest thereon, such a relationship does not spell out a debtor-creditor relationship nor is the payment made by the Respondent Nos. 4 to 7 to the Petitioners one in discharge of any pre-existing obligation, so as to attract Section 2(28A) of the IT Act. The compliance of the Respondent Nos. 4 to 7 with the Schedule of Payments under the Consent Terms dated 4th March, 2021 and our Order dated 4th March 2021, is to be made without making any deduction of tax at source. The Respondent Nos. 4 to 7 are directed to pay to the Petitioners the balance sum of ₹ 5,05,989/- deducted from the 5th instalment which became due on 20th July 2021, in compliance with the Consent Terms, within a period of one week from today. Place the Interim Application No. 2545 of 2020 and Interim Application No. 1151 of 2021 on 25th August 2021 for consideration.
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2021 (8) TMI 1005
TDS u/s 194H - commission payment - payment received or receivable by a person for rendering medical services - HELD THAT:- As rightly held by the Tribunal, the Explanation to Section 194H of the said Act cannot be interpreted so widely as to include any payment receivable, directly or indirectly for the services in the course of buying or selling of goods. To fall within the Explanation, the payment received or receivable directly or indirectly has to be by a person acting on behalf of the assessee for the services rendered, not being professional services or for the services in the course of buying or selling of goods or in relation to any transaction relating to any assets, valuable articles or thing. Therefore, to fall within the explanation to Section 194H, the commission payment must have been received by a person who is acting on behalf of the assessee. As rightly observed by the Tribunal, the doctors were not bound to prescribe the medicines as suggested by the assessee. As such there was no legal compulsion on the part of the doctors to prescribe a particular medicine suggested by the assessee, and therefore, the doctors could not be said to have acted as the agent of the assessee. In absence of the existence of the element of agency between the assessee and the doctors, the provisions contained in Section 194H of the Act could not be invoked.
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2021 (8) TMI 1003
Waiver of interest u/s 220(2A) - petitioner filed rectification petition stating that the interest has been levied without taking into consideration the pre-paid taxes and that the credit of pre-paid taxes was not given in full and interest u/s 234A cannot be levied as the return was filed in time and orders were passed on the rectification application nearly after three years, accepting the contention of the petitioner for refund - petitioner made a request to adjust the refund amount due to the petitioner with the demand if any for the other years from 2014 onwards - HELD THAT:- Assessing Officer while passing the original assessment order need not record any such non-cooperation as the assessment order was not an ex-parte order. Only when an application is filed seeking waiver of interest, then the question arises, whether the assessee co-operated for completion of the income tax proceedings or not. Since for claiming waiver of interest co-operation is contemplated as a condition. Therefore, it is necessitated for the parties, while adjudicating the petition filed by the assessee seeking waiver of interest. Thus, the conduct of the assessee throughout the income tax proceedings are vital for the purpose of claiming waiver of interest. The respondents in the present case recorded the non-cooperation of the petitioner assessee. The observations made in this regard would establish that consequent to search notice under Section 153A of the Income Tax Act dated 09.03.2011 calling for return of income within 45 days of the receipt of the notice. But the assessee furnished the return of income only on 15.07.2011. The other incidents are also recorded to establish that the petitioner assessee had not cooperated for the completion of the Income Tax proceedings. This being the factum established, this Court has no hesitation in arriving at a conclusion that the petitioner has not established all the three conditions stipulated in the provisions for the purposes of grant of waiver of interest. Contrarily, the reasons furnished in the impugned order for rejection of application for waiver of interest are candid and convincing.
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2021 (8) TMI 998
Addition on account of unsecured loan and share capital - AO found that the person from whom the assessee has taken unsecured loan have shown Nil or meager income in the profit and loss account. - Nine different companies amalgamated in the assessee company - It is submitted that, assessee has not received any amount during the year but the same is on account of merger. HELD THAT:- With respect to issue of share capital it is apparent that no share capital has been received during the year but only in exchange of the shares of the transferor companies the shares have been allotted to the share holders of the transferor companies. As there is no sum of money received during the year no addition u/s 68 on account of the share capital can be made. The assessee has also shown form No. 2 of the return of allotment filed with the Registrar of Companies which also clearly shows that the share capital is only on account of amalgamation approved by the Hon ble High Court. Similar is the fact with respect to the addition on account of unsecured loan - The assessee has also submitted the annual audited accounts as well as confirmation of the parties to show the above fact. Even the copies of the income tax returns of the parties shown as unsecured loans were also submitted. Thus, assessee has submitted all these evidence before the ld AO and before the ld CIT(A). The assessee has submitted the details of the transaction with the companies also submitting copies of the return of income as well as the balance sheet of the lenders - most of amount has resulted on account of amalgamation of 9 different companies with the assessee and no fresh sum was received during the year by the assessee with respect to all the loans and advances except as stated above in case of three incidents. Thus addition made by the AO and confirmed by the ld CIT (A) u/s 68 of the Act is despite the facts that no sum are received by the assessee during the year. - Additions deleted - Decided in favour of assessee. Approval of JCIT u/s 153D - Period of limitation - HELD THAT:- We find that the issue is squarely covered in favour of the assessee as the ld JCIT has mentioned at the bottom of the approval that draft assessment order has been received late by him on 31.12.2016 beyond the time limit as per internal action plan and thus having a very little period for proper examination of the facts of the case and further inquiries. The ld JCIT, Central Range, Meerut has mentioned such a fact on the letter of approval sent by the ld AO. Further, he directed the ld AO to ensure that seized documents and papers have been taken in account. We find that this issue with respect to approval is covered in favour of the assessee by several judicial precedents relied upon by the ld about inappropriate approval granted by the approving authority. We agree with that. However, as we have already decided the issue in favour of the assessee deleting the addition made by the lower authorities, though, issue of approval is covered in favour of the assessee, does not need any further adjudication.
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2021 (8) TMI 997
Addition in respect of commission expenses - disallowance of expenses on account of export commission on the ground that it has not deducted tax on the aforesaid foreign commission payment - HELD THAT:- The year under consideration since the assessee has failed to submit the supporting relevant detail to substantiate the genuineness of the commission payment. Therefore, respectfully following the decision of the ITAT Ahmedabad in the case of the assessee itself for assessment year 2013-14 [ 2021 (7) TMI 152 - ITAT AHMEDABAD] this ground of appeal of the assessee is dismissed. Addition u/s. 36(1)(iii) in respect of proportionate interest on capital advances - HELD THAT:- As decided in own case [ 2021 (7) TMI 152 - ITAT AHMEDABAD] the impugned advance was made out of the interest free fund and no borrowed fund has been used therefore respectfully following the decision of Co-ordinate Bench as supra we are not inclined with the decision of the ld. CIT(A). Accordingly, the appeal of the assessee on this issue is allowed. Addition in respect of employees contribution to Provident Fund - employee s contribution to P.F. amounting to ₹ 5,23,396/- to Provident Fund was not paid within the due dates specified u/s. 36(i)(va) - HELD THAT:- The Hon ble Jurisdictional High Court of Gujarat in the case of Gujarat Road Transport Corporation [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] held that assessee is entitled for the deduction only if the amount is credited to the relevant funds before the due date, therefore, respectfully following the decision of the Hon ble Gujarat High Court as referred above, we do not find any infirmity in the decision of the Ld. CIT(A). Therefore, this ground of appeal of the assessee is dismissed.
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2021 (8) TMI 996
Royalty income - Assessment of sale proceeds received on sale of software licenses as Royalty income - DTAA provisions - whether the payments received by non-resident suppliers for selling software licenses are royalty or not? - HELD THAT:- As per the decision rendered by Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] sale proceeds received by the assessee on sale of software licenses cannot be categorized as Royalty within the meaning of provisions of DTAA. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete the addition made as royalty income. Chargeability of interest u/s 234B - CIT(A) has given relief to the assessee - HELD THAT:- As addition relating to sale of software has been deleted by us in the earlier paragraph. According to A.R., it is not liable to pay advance tax at all, since the TDS credit available with it is more than tax payable by it. In view of the above, we are of the view that no interference in the order passed by Ld. CIT(A) on this issue is called for.
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2021 (8) TMI 995
Exemption u/s 11 - allowance of the amount of fixed deposit as application of income u/s 11(1)(a) - HELD THAT:- In the instant case, the assessee has not shown that the amount kept in fixed deposits have been allocated to or earmarked for a charitable purpose in accordance with the objects of the Trust. The assessee is making only a general statement that it should be considered as applied . Hence, in our view, the assessee is not entitled for exemption u/s 11(1)(a) of the Act in respect of deposits made in the banks. We have gone through those sections of the Act. Section 11(1A) is concerned with the capital gains arising on sale of a capital asset and its reinvestment for the purpose of availing exemption, i.e., conversion of one capital asset into another capital asset. Sec. 11(5) prescribes mode of making investments. In our view, those provisions will not support the claim of the assessee, since the deduction has been claimed u/s 11(1)(a) of the Act, as per which the income has to be applied for charitable purposes. In any case, reference to the other sections, which have been enacted for some other purpose, may not be appropriate. Accordingly, we reject these contentions of the assessee. In view of the above said discussions, we confirm the order passed by Ld. CIT(A) on this issue. Tax authorities have not accepted application made in form No.10 for accumulation of funds u/s 11(2) - We notice that the time limit for furnishing form No.10 has been prescribed in section 11(2)(c) of the Act by Finance Act, 2015 w.e.f. 1.4.2016. Hence the amendment shall take effect from AY 2016-17 only. It is pertinent to note that Rule 17(2) of the Income tax Rules as amended from 1.4.2016 and also earlier Rule 17 prescribed that the Form No.10 shall be furnished before the expiry of time limit u/s 139(1) for furnishing return of income. We notice that the Chandigarh Bench of Tribunal has held in the case of Infrastructure Development Fund vs DCIT [ 2020 (12) TMI 542 - ITAT CHANDIGARH ] that the amendment has been brought into the Income tax Act with effect from 1.4.2016 and hence it will apply only from AY 2016-17. The Tribunal did not give much credence to the time limit prescribed in the Income tax Rules earlier, since there was no corresponding condition prescribed in the substantive law. The year under consideration being assessment year 2012-13, the amended provisions will not be applicable to the assessee for the year under consideration. The AO has only doubted the date of Form No.10, but the undisputed fact remains that the Form no.10 and resolution have been filed before him during the course of assessment proceeding itself, i.e., before completion of the assessment. AO should have entertained Form No.10 and resolution filed by the assessee. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore this issue to the file of the A.O. with a direction to consider Form No.10 and resolution filed by the assessee and examine the claim of the assessee u/s 11(2) of the Act in accordance with law.
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2021 (8) TMI 994
Deduction u/s 80P - AO has disallowed the claim for deduction for the reason that the assessee has failed to furnish the details called for - HELD THAT:- Admittedly, the assessee did not furnish the details called for by the A.O., more particularly that the produce marketed by it was grown by its members. Before us, the Ld. A.R. submitted that the assessee is admitting farmers as members, only after satisfying itself that he/she owns agricultural lands - we notice that the assessee has failed to furnish any details before the A.O. to support the claim for deduction u/s 80P(2)(a)(iii) more particularly, the fact that the agricultural produce was grown by its members. Since the assessee had been allowed deduction u/s 80P(2)(iii) in the earlier years, we are of the view that, in the interest of natural justice, the assessee may be provided with an opportunity to furnish the relevant details before the A.O. to support the claim for deduction u/s 80P(2)(a)(iii) of the Act. We set aside the order passed by Ld CIT(A) and restore this issue to the file of the AO for examining the claim of the assessee afresh in accordance with law. The assessee is also directed to furnish relevant details before the AO - Appeal filed by the assessee is treated as allowed for statistical purposes.
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2021 (8) TMI 993
Deduction claimed u/s 10AA - whether expenses that were reduced from export turnover should also be reduced from the total turnover or not? - assessee reduced communication expenses from both export turnover and total turnover and accordingly computed quantum of deduction - HELD THAT:- The decision rendered in the case of Tata Elxsi Ltd. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] has since been upheld by Hon'ble Supreme Court in the case of CIT Vs. HCL Technologies Ltd.. [ 2018 (5) TMI 357 - SUPREME COURT] wherein held what is excluded from 'export turnover' must also be excluded from total turnover', since one of the components of 'total turnover' is export turnover. Any other interpretation would run counter to the legislative intent and would be impermissible. Nature of expenses - disallowance of software expenses by treating the same as Capital in nature - disallowance of Provision for software expenses claimed by the assessee treating the same as contingent liability - HELD THAT:- With regard to the question whether the Provision for software is a contingent liability or not, we notice the same has been decided in favour of the assessee by this bench of Tribunal in the assessee s own case in AY 2011-12 [ 2020 (12) TMI 470 - ITAT BANGALORE] . As assessee has furnished break-up details of Provision for software expenses identifying the provision so made with the vendors, who had supplied software. CIT(A) has extracted the relevant details in paragraph 6.0 of his order passed for both the years under consideration. Hence the reasoning given by the Tribunal in AY 2011-12 for allowing the identical claim is applicable to these two years also. Accordingly, we hold that the Provision for software expenses cannot be considered as contingent liability. Accordingly, we set aside the orders passed by Ld CIT(A) on this aspect in both the years under consideration. Disallowance u/s 40(a)(i) for non-deduction of tax at source on provision for software expenses - HELD THAT:- The issue relating to disallowance u/s 40(a)(i) requires to be set aside to the file of the AO for deciding this issue in accordance with the decision rendered by Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd [ 2021 (3) TMI 138 - SUPREME COURT] after duly examining the relevant agreements. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO. Disallowance u/s 40(a) of the Act in respect of software purchases - HELD THAT:- A.R placed his reliance on the decision rendered by Hon ble Supreme court in the case of Engineering Analysis Centre of Excellence (P) Ltd [ 2021 (3) TMI 138 - SUPREME COURT] and contended that there is no necessity to deduct tax at source from the payments made for software purchases. As noticed earlier, the details relating to this disallowance made in both the years are not forthcoming from the assessment record or from the submission made by the assessee. The decision rendered by Hon ble Supreme Court shall apply only to the payments made for non-resident suppliers of software or through their distributors (Indian or foreign), since the provisions of sec. 195 is applicable on sum chargeable under the provisions of this Act , subject to the principles discussed in an earlier paragraph. If the assessee has purchased the software from the domestic supplier, then the decision rendered by the Hon ble Supreme Court will not apply. In that case, the nature of payments needs to be examined in accordance with the provisions of sec. 9(1)(vi) of the Act. In the absence of relevant details, we are unable to decide this issue.Accordingly, we restore this issue also to the file of the AO for examining it afresh in the light of discussions made supra. Rejection of claim for credit of Foreign Tax Credit - HELD THAT:- What is required to be seen is whether the income u/s 10AA is chargeable to tax u/s 4 and is includible in the total income u/s 5. The fact that the assessee is not paying tax due to exemption or deduction granted under the Act is not relevant. Accordingly, we set aside the order of Ld CIT(A) in so far as it is contrary to the decision rendered in the case of Wipro Ltd [ 2015 (10) TMI 826 - KARNATAKA HIGH COURT] -The other directions given by Ld CIT(A) with regard to the accounting year, claim of state tax , do not require any disturbance - We restore this issue to the file of AO to determine the Foreign Tax credit in the light of decision rendered by Hon ble Karnataka High Court in the case of Wipro Ltd and also the direction given by Ld CIT(A) with regard to the accounting year, claim of state tax. Disallowance u/s 14A - HELD THAT:- It is imperative that the AO should examine the claim of the assessee having regard to the accounts of the assessee and if he is not satisfied with the said workings, then only the AO can have resort to the provisions of Rule 8D of I T Rules. The Mumbai bench of Tribunal has also expressed identical view in the case of Tata Projects Ltd vs. ACIT [ 2021 (1) TMI 393 - ITAT MUMBAI] . In the instant case, admittedly the AO did not examine the correctness of the workings furnished by the assessee by having regard to the accounts of the assessee. Hence the AO could not have resorted to apply provisions of Rule 8D for computing disallowance as required u/s 14A of the Act. For the above said reason, the Ld CIT(A) was not justified in confirming the working made by the AO. We set aside the order passed by Ld CIT(A) on this issue in AY 2013-14 and direct the AO to delete the addition made by him u/s 14A of the Act.
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2021 (8) TMI 992
Disallowance of Bad debts on account of TDS - amount which credited was not given to the assessee u/s. 199 of the Act, though relevant income was taxed in the hands of assessee - HELD THAT:- In the present case, the assessee has not furnished the details of TDS from deductor by furnishing valid TDS certificates. It is incumbent upon the assessee to show that the amount has actually been deducted by the deductor towards TDS due from the assessee. Once the assessee establishes that it has been actually deducted from the deductor, the corresponding write off by the assessee on non-recovery of TDS credit is to be allowed. With these observations, we remit this issue to the file of Assessing Officer for fresh consideration. Accordingly, the main ground and additional ground raised by the assessee on this issue is disposed of. Allowability towards service tax which was written off as bad debt u/s. 36(1)(vii) - contention of the ld. AR is that the claim of bad debt was allowable to the assessee if the same has been written off as irrecoverable by the assessee and it was not necessary to establish that the debt has actually become bad - HELD THAT:- In this case, the consideration paid as service tax was to be claimed as receivable from DIP. In the assessment year under consideration, the assessee came to know that it is not recoverable and has written off as bad debts in the books of account. The only contention of the ld. DR is that since it has not routed through Profit Loss account, it cannot be allowed as bad debt - argument of the ld. DR is not tenable and cannot be accepted on the reason that service tax is shown as receivable from the DIP which was not received on the fact that DIP is not paying service tax in view of the guidelines of the DAVP of the Central Govt. and it is also not paying service tax to any other advertising agencies. However, the assessee has already paid this amount to the Government. Since service tax payment recovery is denied by the DIP, the assessee has written off it as bad debt. Therefore, we are of the view that the assessee is justified in claiming it as bad debt by writing off in the Profit Loss account. Accordingly we allow the claim of the assessee - Decided in favour of assessee.
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2021 (8) TMI 986
Income accrued in India - PE in India - business service agreement/single unified agreement - multiple agreements entered as argued by assessee - Addition based on the billings scheme showing consolidated invoices and various SOF have been operated as a single project - AR argued that Article 5 of the Treaty defines PE to mean a fixed place of business through which the business of an enterprise is wholly or partly carried on - HELD THAT:- With regard to the contention that services specified in various SOFs constituted specific project and their services governed by uniform terms conditions agreed between the parties and mere mention of the varying services and common agreement does not make it consolidated project cannot be found to be correct on the facts of the case as the agreement dated 18.08.2010 between the assessee namely Telenor SA and Uninor. It is this contract which defines the mutual obligations and implementation. There is no other inter-se agreement with any of the parties or among the parties. This gives rise to a conclusion that the business service agreement is a single unified agreement. On going through the clauses of the agreement, we find that no single clause is giving it a shape of multiple agreements. With regard to the contention that different services under SOFs are not inter related and are unique, it is necessary to go through the entire activity of the assessee with relation to the UNINOR - The launch of UNINOR services happened after Telenor Group finalized the transaction with Unitech Group and made the first investment into UNINOR. The statement of the Stein-Erik Vellan, Managing Director of UNINOR at the time of launch with launch in seven circles and roaming agreements in place for the rest, we have started our service in India on day one as a pan-Indian national operator. This is a proud achievement of a committed and talented team. While our launch today is indeed a milestone in a longer journey to become a significant operator in India, we are delighted to have made such a strong start augments the fact that there are only two entities involved UNINOR and Telenor, the assessee. With regard to the scheme of billing, the bills are raised on quarterly basis, consolidated invoices raised irrespective of the SOFs under which the services were rendered. The common billing by the recipient and the common payments gives rise to a conclusion that this is one single contract. We have gone through the various service order forms wherein it has been mentioned continuously that the contracts are performed in accordance with the service agreement between UNINOR and Telenor ASA, referred as the contractor and UNINOR referred as the recipient for all the services. On going through the sequence of activities and commentary of the OECD with regard to the Article 5(2)(1), it can be concluded that the activities consists of same and enter-connected projects. Activities of the assessee with regard to the recipients for services can be said to be inter-connected, inter laced, sequential technical services. It cannot be said that they are unrelated to each other as none of the activity could stand in isolation with the other activity and no single activity can give rise to performance and achieving of the purpose of the recipient. The activities start with preparation, execution and negotiation of the Global System for Mobile Communication (GSM) to devising the strategy development, preparation of IT solutions architect, benchmarking the same, recruiting the manpower for the purpose of implementation and training them for various activities in relation to GSM role out to customers. It is a clear commercial coherence between the said activity as no single activity mentioned above doesn t serve any purpose individually, when segregated. All these activities are different facet of one seamless function. The project as defined in the Article 5 (2)(1) consists of bundle of inter- connected and inter- related services with the underlying theme of completion of projects. In the instant case, the implementation of one SOF leads to the other and it can be observed that they are well integrated, the outcome of one SOF become the inputs for the other SOF. Thus, based on the unified agreement, consolidated billing pattern, the activities being inter related as found in the preceedings paras, we hereby hold that the existence of the PE of the assessee is undeniable. What is the taxable income earned by the assessee in India - As find from the records that the AO made ad-hoc disallowance of 60% of the revenues received by the assessee allowing only the 40% of the receipts as expenditure. The assessee argued that only the mark- up of 3.5 % of the cost which translates to 3.38% of the revenues could at best be considered as the income attributable to the revenues pertaining to the PE in India. We are also in agreement with the assessee that the revenues raised out of the services rendered from Norway cannot be attributed to the PE of the assessee in India. The issue of determination of the profits is remanded back to the file of the Assessing Officer to pass an order by taking into consideration, the services rendered by the assessee from India and also from Norway, the evidence of the expenses incurred as submitted by the assessee. - Appeal of assessee dismissed.
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2021 (8) TMI 983
Rejection of books of accounts - disallowance of loss for after rejecting the book of accounts by treating the loss claimed by it as bogus in nature - HELD THAT:- As decided in own case [ 2017 (1) TMI 1759 - ITAT AHMEDABAD] AO was erroneous as he has selected only few transactions on which only loss has incurred without giving cognizance to the fact that assessee has gained in other transactions with the impugned parties which are very well evidenced with the independent itemwise transaction details forming part of the books of account of assessee -In the present case when the assessee is maintaining regular books of account which are audited and all transactions are fully supported by bills and vouchers, impugned transactions have taken place through banking channels, confirmations have been received from the alleged parties no adversity has been found in the statements recorded by the Revenue of the alleged parties, quantitative records are regularly maintained, similar transactions have not been disputed even in the subsequent assessment u/s 143(3) of the Act as supported by the copy of the order u/s 143(3) of the Act for Asst. Year 2012-13 framed on 13.2.2015. We, therefore, hold that the impugned 15 transactions giving rise to loss of are genuine and cannot be termed as colourable with the intention of evasion of tax and ld. Assessing Officer erred in disallowing the same. - Decided in favour of assessee. Addition made on account of diversion of fund - disallowance of interest expenses - AR before us contended that the own fund and interest free fund of the assessee exceeds the interest-free advances, therefore he was of the view that disallowance of interest is not warranted - HELD THAT:- Admittedly the assessee has given interest free loan and advances amounting to ₹ 31,61,09,415/- and simultaneously incurred interest cost of ₹ 14,51,773/- only. The ld. AR before us contended that interest free funds were available with assessee which exceeds the amount of loan and advances given without charging interest. There cannot be any disallowance of interest expenses in a situation where the own fund exceeds the amount of interest free advances provided by the assessee. As such, there is a presumption that the interest free advances has been made by the assessee out of its own without involving any borrowed fund. In holding so we draw support and guidance from the judgment of Hon ble jurisdictional High court in the case of CIT vs. Torrent Power Ltd [ 2010 (6) TMI 414 - BOMBAY HIGH COURT] Thus we hold that there cannot be any disallowance of interest expenses provided the own fund of the assessee exceeds the interest free advance. Accordingly, we direct the AO to verify whether the own fund of the assessee exceeds the amount of interest free advances and adjudicate the issue afresh in accordance with the provisions of law. Hence, the ground of appeal of the assessee is allowed for the statistical purposes.
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2021 (8) TMI 982
Deduction of education cess - allowable business expenditure - HELD THAT:- We find that provisions of Section 40(a)(ii) of the Act, the education cess paid on Income Tax doesn't come under the purview of the definition as it is levied on the amount of Income Tax, but not on profits of business. We also find that the assessee also relied on the CBDT Circular No. 91/58/66-ITJ(19) dated 18th May 1967, which states that the effect of the omission of the words cess from section 40(a)(ii) of the Act is that, only taxes paid are to be disallowed in the assessment for the assessment years 1962-63 onwards. The assessee also relied on the judgment of Hon'ble Rajasthan High Court wherein identical issue was decided in favour of the assessee and particularly held that education cess is an allowable expenditure. We also note that the learned CIT(A) has also allowed the claim by referring to the contents of the CBDT Circular 91/58/66-ITJ(19), dated 18th May 1967 as while relying upon the judgment of CHAMBAL FERTILISERS AND CHEMICALS LTD. [ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT] . We further notice that in the case of Sesa Goa Ltd. vs. JCIT, [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] , held the similar view. In view of the aforesaid, we see no legal infirmity in the impugned decision of the learned CIT(A) - Decided against revenue. Nature of receipts - Fertilizer Subsidy received - whether receipt is capital in nature and is chargeable to tax - HELD THAT:- This scheme is introduced with the object of passing the benefit to the farmers at the same time, there is no fresh investment and innovations were not coming to the industry due to low profitability in this industry. In order to attract the new investments, to increase the productivity and to reduce the manufacturing cost by bringing new innovation in the industry in order to achieve ultimate reduction in the price of the fertilizers. Therefore, the scheme was mainly to attract the investment in the industry and the purpose test is that the attraction of new players in the industry and also attracts the existing players to bring new investment. How the benefit of scheme is passed on to the industry matters. Sometime, Govt. introduces direct concession in the investments or introduces mechanism in relation to the ultimate achievement of the objects of the scheme. In this scheme, the ultimate object is to make available the required fertilizers and at appropriate price to the farmers, this can be achieved only by bringing new investments in the industry. It is only the mechanism to pass on the capital subsidy to the companies, who bring in new investments and innovation. The subsidy calculated and MRP are under constant monitoring of the Ministry. Therefore, we are inclined to accept the adoption of purpose test by the learned CIT(A) in this case and the subsidy can be classified as capital in nature. In our considered opinion, a receipt that is held to be a capital in nature and not chargeable to tax under the normal provisions of the Act. Hence the same lies outside the purview of Act. When a receipt is not in the nature of income, it cannot form part of taxable profit - Decided against revenue.
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2021 (8) TMI 981
Stay of recovery proceedings - Grant of stay for six months or till the disposal of the appeal, whichever occurs first - HELD THAT:- We find that the facts and circumstances which prevailed with our Coordinate Bench in granting stay on the recovery of the demand, continues to prevail. It is also borne out from the records that the delay in disposal of appeal pending before the tribunal cannot be attributable to the conduct of the applicant-assessee. Now, it has been brought out that the corresponding appeal is listed for hearing before a regular bench on 06.09.2021 and applicant is ready to argue the same. In these circumstances, we deem it fit and proper to extend the stay on the recovery of outstanding demand for a period of 180 days from today or till the disposal of the appeal, whichever is earlier.
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2021 (8) TMI 979
TP Addition - addition towards interest on debentures/CCDs - HELD THAT:- Since the facts and circumstances of the instant appeal are mutatis mutandis similar to those of the preceding year, respectfully following the precedent [ 2020 (12) TMI 779 - ITAT PUNE] we approve the view taken by the ld. CIT(A) and hold that the AO was not justified in re-characterising the transaction of issue of debentures/CCDs as that of equity shares. As regards the ALP determination, we again follow the view taken by the Tribunal for the immediately preceding year and direct the AO/TPO to recompute the ALP of the transactions of payment of interest on debentures/CCDs. Thus the departmental grounds are dismissed. Since the matter of ALP determination has been sent back to the AO/TPO, the direction given by the ld. CIT(A) in this regard, which forms the subject matter of the assessee s ground, has become infructuous. Education Cess and Secondary and Higher Secondary Cess - whether claim may be allowed as a deduction while computing the total income of the assessee company? - HELD THAT:- The issue raised through the additional ground is no more res integra in view of the judgment of Hon ble jurisdictional High Court in Sesa Goa Lt. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] in which it has been held that Education Cess is not disallowable expenditure u/s.40(a)(ii) - Similar view was earlier taken in Chambal Fertilisers and Chemicals Ltd. [ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT] . We, therefore, direct the AO to ascertain the correct amount of education cess and then allow a deduction for it, after allowing opportunity of hearing to the assessee.
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Customs
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2021 (8) TMI 999
Validity of confiscation proceedings - Rejection of value of importer - imported goods auctioned without prior notice to the appellant - HELD THAT:- In the present case, since the goods have been auctioned during the pendency of the appeal before the Tribunal and the said seized goods are not available for redemption, therefore, at this stage, the question of going into the issue of undervaluation is not required as the goods being not available for assessment and home clearance, hence the question of assessment does not arise. Precisely, for this reason, the learned counsel for the appellant has even though made submissions on undervaluation but did not press the issue of undervaluation and has only confined to the restitution of value of the seized goods along with interest. It is not in dispute that the goods worth ₹ 28,26,001/- seized on the allegation of mis- declaration of the country of origin and undervaluation have been auctioned by the department for ₹ 20,000/- in a very haste manner and that too without prior notice and without seeking permission from the Tribunal when the appeal was pending before the Tribunal on the date of auction. It is a settled law that once the goods are seized or confiscated and the proceedings against the same are pending before the authority / Court then the only option available to the department is to obtain necessary permission from the court before whom the proceedings are pending and also to issue notice to the assessee from whose possession goods have been seized before auctioning the goods. This Tribunal has inherent power under Rule 41 of CESTAT (Procedural) Rules, 1982 to pass any order or direction to secure the ends of justice and that power has also been upheld by various decisions. Therefore, in view of the settled position of law, the impugned order is not sustainable in law and we set aside the same by allowing the appeal of the appellant and direct the department to pay the assessed value along with interest as prescribed under law till the date of refund - Appeal disposed off.
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2021 (8) TMI 991
Conversion of shipping bills from duty drawback scheme to advanced authorisation scheme - mistake in the shipping bills occurred - time limitation - HELD THAT:- It is an undisputed fact that the appellant is a manufacturer and exporter of linen and silk fabrics since 1988 and there has not even a single remark or dispute either with the Customs Department or DGFT which has been approved by the respondent. Further, it is found that the mistake in the shipping bills occurred on account of change of the employee who was looking after the import and export of the appellant and as soon as the appellant came to know about the fact of filing of shipping bill under duty drawback in stead of advance authorisation scheme, they immediately reported to Deputy Commissioner seeking amendment of the shipping bill but the same was declined by the Principal Commissioner on the ground that there is a delay in filing the application and secondly export documents were not endorsed by the Customs officer and thirdly that the appellant has not been able to establish the foreign exchange receipt against these exports. Section 149 confers discretionary power to the proper officer to amend the document but that discretion has to be exercised judiciously in order to deliver justice to the parties who makes an application before him. Appellant has produced documents in Volume-I and volume-II along with appeal papers which clearly proves that the goods were exported and the bank realisation certificate are produced evidencing the proof of export to the developed countries like USA, UK, Germany where stringent export laws are followed. Time limitation - HELD THAT:- The provision of Section 149 of the Customs Act, 1962 or the rules or notifications made thereunder does not provide any time limit for amendment or conversion of the documents and it is only through the circular issued by CBEC a period of three months have been prescribed. It has been consistently held by the Tribunal that the time limit prescribed by the CBEC is not binding on the court if the Circular is contrary to the statutory provision, then the statutory provision would prevail. The concerned Customs officer is directed to allow the amendment in the shipping bills but before that the appellant would pay back the duty drawback claimed by them along with interest which will be quantified by the Departmental officer and after the payment of the said amount, the concerned officer allow the amendment in the shipping bills as prayed by the appellant - Appeal allowed.
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Corporate Laws
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2021 (8) TMI 985
Reduction of share capital - cancellation of equity shares - HELD THAT:- Various directions regarding issuance of various notices issued. Application disposed off.
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2021 (8) TMI 984
Scheme of Amalgamation - Section 230(1) read with Section 232(1) of the Companies Act, 2013 - HELD THAT:- Various directions regarding holding, convening and dispensation with various meetings issued - directions with regard to issuance of notices also issued. The scheme is approved - Application allowed.
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Insolvency & Bankruptcy
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2021 (8) TMI 1000
Seeking for closure of the Liquidation Process - Corporate Debtor was being sold as a going concern in the e-Auction - Whether the Liquidator is authorized to sell the Corporate Debtor as a going concern pursuant to Regulation 32 of IBBI (Liquidation Process) Regulations, 2016? - Regulations 39C of CIRP Regulations and 32A, 45(3) of the Liquidation Process Regulations are inconsistent with Section 54 of the Code or not - interpretation by the Adjudicating Authority of the provisions of the Code and Liquidation Process Regulations in the Order impugned is contrary to the scope and spirit of the I B Code or not - HELD THAT:- It is seen that the Hon ble Apex Court in a catena of Judgements has time and again observed that Liquidation should be the last resort only if the Resolution Plan submitted is not up to the mark and even in Liquidation, the Liquidator can sell the business of the Corporate Debtor as a going concern - Regulations 32A and 45(3) which were inserted in the Liquidation Process Regulations subsequent to ARCELORMITTAL INDIA PRIVATE LIMITED VERSUS SATISH KUMAR GUPTA ORS. [ 2018 (10) TMI 312 - SUPREME COURT] and SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT] specifically define the process for sale of Corporate Debtor or its business as a going concern. IBBI in furtherance of its delegated power has framed the regulations in accordance with the objectives and also as empowered under Section 240 of the Code. As per Section 241 of the Code, every rule and regulation made under the Code will be placed before the Parliament. For a total period of 30 days for both Houses to make any modification or annulment - Regulation 32-A(1) emphasizes the importance placed on the transfer of the Corporate Debtor or its business on a going concern basis. Regulation 39C of CIRP Regulations read with Regulations 32, 32A and 45(3) of Liquidation Process Regulations, it is clear that under Regulation 39C, the CoC may recommend that the Liquidator may first explore sale of the Corporate Debtor as a going concern under Clause (e) of Regulation 32 or Sale of the business of the Corporate Debtor under Clause (f) of Regulation 32. 32A provides that if the Liquidator is of the opinion that sale under Clause (e) or (f) of Regulation 32 shall maximize the value of the Corporate Debtor , he shall endeavor to sell under the said Clauses 32-(A)-2 provides that for the purpose of sale under Sub-Regulation (1) the group of assets and liabilities of the Corporate Debtor , as identified by the CoC under Sub-Regulation (2) of Regulation 32C of the CIRP Regulations, shall be sold as a going concern - the Liquidator has rightly followed the procedure specified in Regulation 32A of the Liquidation Process Regulations. It is a well settled proposition that the legality and propriety of any Regulation/Notification/Rules/Act cannot be looked into by NCLT or NCLAT. The Tribunal can only ascertain whether the procedures provided for under the Code/Companies Act, 2013 are being followed or not. The Adjudicating Authority cannot go beyond this. The sale of the Corporate Debtor Company was carried out by the Liquidator in accordance with the Regulations and we are constrained to observe that the Adjudicating Authority, has, apart from travelling beyond its jurisdiction in making observations regarding the power and functions of framing of Regulations by IBBI - Appeal allowed.
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2021 (8) TMI 989
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 Operational Creditor has been able to make out a case for initiation of CIRP in respect of the Corporate Debtor. The plea of the Corporate Debtor that it had suffered heavy losses or is having cash crunch due to market response in the business or that it is trying to resolve the financial problems is in a way admission on the part of the Corporate Debtor. The Corporate Debtor had never raised any dispute prior to receipt of notice under section 8 of the Code. The Corporate Debtor has failed even to response to the Demand Notice sent under section 8 of the Code, whereby the dispute, if any existed, could have been raised, there is no hindrance in the admission of the application filed by the Operational Creditor. That application having complied with the provisions of Section 9(3)(b) and 9(3)(c) of the Code, is complete in all respect - application admitted - moratorium declared.
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2021 (8) TMI 988
Scope of Company - company within the meaning of the Companies Act, 2013 - whether the Liquidator was justified in cancelling the e-auction after the auction was successfully concluded and the highest bidder stood identified? - HELD THAT:- There was no reason for the Liquidator to cancel the e-auction under consideration in the present matter especially when we see that the two earlier rounds of the auction process did not fructify and the reserve price had to be decreased on each auction. There is no material on record to sustain the perception of the Liquidator that cancelling the present auction would have resulted in a better price for the assets in question. There cannot be an endless wait to get the best price for the asset, especially when there is no material to support a conjecture that there may be a better price for the asset. Application disposed off.
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2021 (8) TMI 987
Prayer to direct the Respondent to unconditionally remit/refund the amount to the Corporate Debtor's account - HELD THAT:- It is felt that arrangement of ₹ 32.50 lakhs immediately by an MSME may be difficult. Hence, his submission is accepted to the extent that the ICICI Bank, Chandrashekharpur, Branch Bhubeneswar is hereby directed to remit ₹ 32.50 lakhs to the CD's account immediately and thereafter the said account may be made free for the Respondent herein to operate the same. Since the matter is to be listed before the Hon'ble Supreme Court on 20.08.2021, the Respondent is hereby directed to send the copy of this Order to the ICICI Bank for immediate compliance and the Respondent is also directed to file compliance report of remittance of ₹ 32.50 lakhs by an Affidavit on or before 17.09.2021 - List the matter on 17.08.2021.
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2021 (8) TMI 980
Non-compliance with the order - non-submission of amount in the account of the Corporate Debtor - HELD THAT:- The amount of ₹ 32.50 lakhs has not been made over. Considering the facts and circumstances on record, in our view, it would be better if an application is preferred by the petitioner before the NCLT, Gauhati. - List the matter on 20.08.2021.
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Service Tax
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2021 (8) TMI 990
Interest on delayed refund of amount - the amount was paid during the investigation under protest as pre-deposit - HELD THAT:- It is an amount paid by the appellant as service tax under protest during the course of investigation. This fact is not in dispute. When any amount paid under protest, it is neither pre-deposit nor service tax; it is only a deposit made by the appellant and the said amount was retained by the Revenue without any authority of law as held by this Tribunal that the appellant was not liable to pay service tax. The order of this Tribunal has attained finality. The appellant is entitled to claim interest from the date of deposit till its realization - Considering it is a pre-deposit but the appellant is entitled to claim interest on the said amount as the said amount has been paid under protest from its payment till its realization @12 % p.a. - Appeal allowed.
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Central Excise
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2021 (8) TMI 1029
CENVAT Credit - input services - place of removal - Clearing charges paid to the Custom House Agent for export of goods - Commission on export sale - Material Handling Charges - Terminal Handling Charges - Bank Commission Charges - Aviation Charges - Courier Services - CBEC circular 999/6/2015-CX dated 28.02.2015 - HELD THAT:- In view of the Board Circular and Larger Bench decision in M/S HONEST BIO-VET PVT. LTD. VERSUS CCE AHMEDABAD-I [ 2014 (11) TMI 579 - CESTAT AHMEDABAD] , it is held that the place removal in case of the exports, would be upto the point when goods are loaded on the ship or the depot from where the goods are finally sold, and all the services that are received for exporting the goods till that point shall be covered by the definition of input services as per Rule 2 (l) of The CENVAT Credit Rules, 2004. Hence the services of Custom House Agent (Clearing Charges), Material Handling Charges, Terminal Handling Charges will be admissible to the Appellant. Commission paid on export sales - HELD THAT:- Commission on the Export Sales is the commission paid by the Appellant to their foreign commission agent for promoting the sale of their products in that country. Service Tax in respect of these services is paid by them on reverse charge basis. The issue in respect of admissibility of CENVAT Credit of the Service Tax paid on the Commission Charges paid for export of goods has been considered by Hon ble Madras High Court in THE COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI VERSUS INTIMATE FASHIONS INDIA (P) LTD. [ 2019 (8) TMI 1311 - MADRAS HIGH COURT] where it was held that the service tax paid on commission to foreign agents could not denied the benefit of Cenvat credit under Cenvat Credit Rules, 2004 - the Commission paid on export sales is nothing but for sale promotions and is covered by the definition of input services under Rule 2 (l) of the CENVAT Credit Rules, 2004. Bank Commission charges - HELD THAT:- Issue in respect of Bank Commission charges has been considered by tribunal on number of occasions, and tribunal has constantly held in the favour of allowing the CENVAT Credit of Service tax paid on these charges - reliance can be placed in the case of M/S SUNDARAM CLAYTON LTD. VERSUS CCE, CHENNAI - II [ 2016 (6) TMI 161 - CESTAT CHENNAI] where it was held that finance being the necessary input for the purpose of carrying out the manufacturing activity and money is invested to carryout manufacture, credit cannot be denied for such services availed - the Service Tax paid on Bank Commission Charges shall be admissible as CENVAT Credit to the Appellant. Courier Services - HELD THAT:- Courier Services are utilized by the appellants for the delivery of documents to the customers and statutory bodies. In fact these services are used for conducting their business by the Appellants - courier services are input services for appellant for conducting their business. Hence CENVAT Credit will be admissible of Service Tax paid on these services. Travel charges incurred towards the transportation of their senior executives/ employees for attending seminars/ conference for conduct of their business - Aviation Services - HELD THAT:- For qualifying as input service, the use of the service was to be in manufacture of the finished products. The services in respect of which the CENVAT Credit is claimed by putting them under the category of Aviation Services, do not qualify the test laid down as per the Rule 2 (l), hence CENVAT Credit in respect of these services shall not be admissible. Extended period of limitation - penalties - HELD THAT:- There was no suppression etc, in the case for invoking extended period of limitation - as we have held in favour of the Appellants on merit in respect of all the disputed services except for those under category of Aviation Services the issue of limitation becomes infructuous in respect of these services - there was no case for invoking extended period of limitation, as there was no suppression the penalties imposed on the Appellant equivalent to the demand confirmed cannot be upheld. Appeal allowed in part.
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2021 (8) TMI 1027
Maintainability of appeal - time limitation - appeal filed before Commissioner (Appeals) after a delay of 11 months - section 35 (1) of Central Excise Act, 1944 - HELD THAT:- The SVLDR Scheme for settling disputes was introduced prior the period of 60 days to file the appeal before Commissioner (Appeals) could expire. This Scheme talks about amount in arrears (as discussed above) to also be settled. Appellant availed the said benefit within reasonable time without any inordinate unexplainable delay. More time has been taken by the department for considering appellant s request under the Scheme which finally was rejected. The appeal before Commissioner (Appeals) has also been within reasonable time. Commissioner (Appeals) himself has held that appellant otherwise has sufficient reason to reach him but beyond the time as prescribed under Section 35(C ) of Central Excise Act. Also, under the statutory mandate of Section 35 of Central Excise Act that Commissioner (Appeals) is not empowered to condone the delay of more than 30 days over and above the period of 60 days from the date of receipt of Order in Original. Apparently the appeal in the present case could not have been filed before the Commissioner (Appeals) within the said period of 90 days. The matter is ordered to be remanded back to the Commissioner (Appeals) directing him to consider the appeal as the one which has been filed within time and to adjudicate the same on merits - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2021 (8) TMI 1012
Levy of sales tax - sale of oil exempted under the provisions of the Orissa Sales Tax Act - applicability of fourth proviso to Section 5(1) of the Orissa Sales Tax Act - sale of containers of exempted goods u/s6 of the said Act - rate of Tax in respect of container when sold with exempted goods u/s 6 of the O.S.T. Act - HELD THAT:- The Court finds that the AO erroneously observed that the dealer should have shown the sale price of such container separately and should have also paid the tax. However, the fact remains that the tins in which the exempted oil were sold was not shown separately. The AO himself noted that the sale price of said containers was not to be found in the invoices. Consequently, there was no question of presuming the sale of the tin containers and requiring the Petitioner to be taxed thereon. The tin containers are exempt from payment of sales tax in terms of the 4th proviso to Section 5 (1) of the OST Act - the 4th proviso to Section 5 (1) of the OST Act is applicable to the sale of tin in which exempt oil was sold and the containers were not separately sold - nil rate of tax would apply to the sale of tin containers. Revision petition allowed.
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2021 (8) TMI 1011
Input Tax Credit - Coal is a raw material for manufacturing of cement or not - rejection of the report of a technically qualified person or not - applicability of decision in the case of COLLECTOR OF C. EX. VERSUS BALLARPUR INDUSTRIES LTD. [ 1989 (9) TMI 102 - SUPREME COURT] - HELD THAT:- In the present case, the coal is used not merely as a fuel but when it gets burnt up in the process of preparation of clinker, it produces coal ash which gets absorbed by clinker. Clinker is a raw material goes into the composition of cement. The report of the Senior Manager (Technical) of the Petitioner which was available with the ACST, explained the use of coal as a raw material in the manufacture of cement. It was pointed out that clinker cannot be produced without coal and the cement cannot be produced without clinker. This makes coal a vital and necessary raw material for manufacturing cement. This Court in M/S. NATIONAL ALUMINUM COMPANY LIMITED, VERSUS DEPUTY COMMISSIONER OF COMMERCIAL TAXES, BHUBANESWAR-III, CIRCLE, [ 2012 (11) TMI 835 - ORISSA HIGH COURT] where the question was whether coal, alum, caustic soda and other consumables used as inputs for manufacturing of aluminum, aluminum ingots and sheets would enable the Petitioner in that case to avail input tax credit on such inputs. That question was answered in the affirmative in favour of the said Petitioner. The Court concludes that in the present case, the coal used in the process of manufacture of cement is indeed an input within the meaning of Section 2(25) of the OET Act and therefore qualifies for input tax credit as claimed by the Petitioner - the Tribunal erred in holding that the coal is not a raw material for manufacturing cement - the Tribunal erred in coming to the conclusion that coal could not be treated as a raw material vis- -vis the finished product i.e. cement. Revision petition disposed off.
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2021 (8) TMI 1006
Maintainability of petition - availability of alternative remedy - proper opportunity for hearing provided or not - Input Tax Credit against output tax liability - Works Contract - Section 5(2) r/w Section 19(1) proviso of the Tamil Nadu Value Added Tax Act - HELD THAT:- The importance of appellate remedy at no circumstances be undermined. The valuable right of an assessee to redress his grievances in an appeal under statute need not be taken away in a routine manner. If such remedy is taken away, the aggrieved person is deprived of one opportunity of effective adjudication before the Appellate Authority with reference to the disputed facts and perusal of the original documents. Therefore, exhausting the appellate remedy in such circumstances is not only relevant, but valuable both for the assessee as well as to the Revenue. The power of judicial review of the High Court under Article 226 of the Constitution of India is to scrutinize the processes through which a decision is taken by the competent authority by following the procedures as contemplated, but not the decision itself. Therefore, the routine entertainment of a Writ Petition by dispensing with appellate remedy is not preferable and such an exercise would cause injury to the institutional hierarchy and the importance attached to such appellate institutions - The point of delay may be an acceptable ground for the purpose of entertaining a Writ Petition. The practise of filing the Writ Petition without exhausting the statutory remedies are in ascending mode and such Writ Petitions are filed with a view to avoid pre-deposits to be made in statutory appeals and on the ground that the appellate remedies are time consuming. The petitioner is at liberty to prefer an appeal before the Competent Appellate Authority within a period of four weeks from the date of receipt of a copy of this order in a prescribed format and by applying with the provisions of statutory rules - Petition disposed off.
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Indian Laws
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2021 (8) TMI 1008
Dishonor of Cheque - delay in filing complaint - time limitation - Section 138 of Negotiable Instruments Act - HELD THAT:- The question of delay in filing the complaint shall suitably be considered during the course of trial. The laches in filing the present application has also not been properly explained, as such, impugned summoning order dated 18.12.2014 passed by the trial court is just, proper and legal and do not call for any interference by this Court at this belated stage. Present application under Section 482 CrPC is devoid of merit and it is accordingly dismissed.
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