TMI Tax Updates - e-Newsletter
August 26, 2022

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Securities / SEBI Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. LIMITATION IS REFRESHED EACH YEAR WHEN CORPORATE DEBTOR ADMITS DEBT IN ITS FINANCIAL STATEMENTS

   By: DR.MARIAPPAN GOVINDARAJAN

2. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

3. Taxability of Ocean Freight Charges under Service Tax

   By: Bimal jain

4. Utilisation of ITC excise duty with output tax, considered as actual payment and allowed as deduction u/s 43B of IT Act

   By: Bimal jain

News

1. Edited excerpts of the Governor’s interview with ET Now on August 23, 2022

2. Corporate Bond Markets in India – Challenges and prospects (Keynote address delivered by Shri T. Rabi Sankar, Deputy Governor, Reserve Bank of India - August 24, 2022 - at the Bombay Chamber of Commerce & Industry, Mumbai)

3. Cabinet approves Export Policy for Wheat or Meslin Flour

Notifications

DGFT

1. 28/2015-2020 - dated 25-8-2022 - FTP

Amendment in Import Policy Artemia Cyst under ITC (HS) Code 0511 91 40 of Chapter-05 of ITC (HS), 2022, Schedule-I (Import Policy)

GST - States

2. 06/2022-State Tax - dated 1-7-2022 - Chhattisgarh SGST

Seeks to extend the due date of payment of tax, in FORM GST PMT-06, for the month of April, 2022

3. 05/2022-State Tax - dated 1-7-2022 - Chhattisgarh SGST

Seeks to extend the due date of filing FORM GSTR-3B for the month of April, 2022

4. 8/2022-State Tax - dated 6-8-2022 - Himachal Pradesh SGST

Seeks to provide waiver of interest for specified electronic commerce operators for specified tax periods

5. 14/2022-State Tax - dated 22-7-2022 - Himachal Pradesh SGST

Himachal Pradesh Goods and Services Tax (Amendment) Rules, 2022.

6. 12/2022-State Tax - dated 22-7-2022 - Himachal Pradesh SGST

Amendment in Notification No. 73/2017–State Tax, dated the 16th January, 2018

7. ERTS (T) 65/2017/Pt. III/227 - dated 13-7-2022 - Meghalaya SGST

Amendment in Notification No. 14/2019-State Tax, dated the 7th March, 2019

8. ERTS (T) 65/2017/Pt. III/226 - dated 13-7-2022 - Meghalaya SGST

Seeks to rescind Notification No. ERTS (T) 65/2017/45, dated the 15h November, 2017

9. 11/2022-State Tax (Rate) - dated 16-7-2022 - Tripura SGST

Seeks to rescind Notification No. 45/2017-State Tax (Rate), dated the 14th November, 2017

10. 10/2022-State Tax (Rate) - dated 16-7-2022 - Tripura SGST

Amendment in Notification No. 02/2022-State Tax (Rate), dated the 1st April, 2022

11. 09/2022-State Tax (Rate) - dated 16-7-2022 - Tripura SGST

Seeks to amend Notification No. 5/2017-State Tax (Rate), dated the 29th June, 2017

Income Tax

12. 103/2022 - dated 24-8-2022 - IT

Specified income arising to a body or authority or Board or Trust or Commission - Andhra Pradesh Pollution Control Board, a Board constituted by the State Government of Andhra Pradesh notified u/s 10(46).

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/DOF2/P/CIR/2022/111 - dated 25-8-2022

Disclosure requirement for Asset Management Companies (AMCs)

Highlights / Catch Notes

GST

• High Court Allows Petition: Authorities Must Consider Extension Requests for Refund Claims Amid COVID-19 Circumstances.

  Case-Laws - HC : Refund claim - rejection of refund claim without even dealing with the request of the petitioner seeking extension of time - The extension of time had been granted by virtue of a Notification to cover all situations relating to the Covid-19 pandemic and the difficult circumstances arising therefrom. Even if the reply in the present case to the show cause notice had to be filed online, it goes without saying that certain documents/material had to be collected/collated for the purpose of filing a comprehensive reply. - The authorities were obligated to grant extension in time to the petitioner for submission of a reply to the show cause notice dated 23.04.2020 up to 30.06.2020 and thereafter to deal with the issue on merits - Petition allowed. - HC
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• Appeal Dismissed for Late Filing: Registration Cancellation Appeal Filed Over a Year Late, Beyond Permissible Time Frame.

  Case-Laws - HC : Maintainability of appeal - appeal rejected on the ground of time limitation - It is undisputed fact on record that as the petitioner has received the order of cancellation of registration on 5th December, 2019, the last date for filing of appeal was 4th April, 2020 but the appeal being filed on 13th April, 2021, the appeal should have been treated as filed within the period of limitation in view of Category-III specified in the Order of the Hon’ble Apex Court - HC
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• GST Rates for DMRC Contract 'RS-10' Depend on Activity Type; Awaiting Karnataka High Court Decision.

  Case-Laws - AAR : Classification of supply - The supplies made under Cost Centres D, G and H (to the extent of training services) of Contract 'RS-10' to DMRC are to be considered as independent supplies of goods and services and GST rate applicable depending upon the nature of activity performed under such cost centres. This ruling is subject to the outcome of the judgment of the Hon'ble High Court of Karnataka in the appeal filed by M/s BMRCL. - AAR
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Income Tax

• TDS Payable Not a Liability; Meant for Government Deposit per Relevant Provisions; Not a Creditor's Due.

  Case-Laws - AT : Addition to the returned income on account of TDS payable - What remains in the hands of assessee is not on account of any payment due to such persons but the tax deducted at source is left to be deposited to the Government in accordance with the relevant provisions. It was for the purpose of accounting that the amount has been shown in the form of provision not as ‘payable’ on any account to any creditor or on a contingency but held merely to be ‘deposited’ in due course. Even otherwise, the heads of expenses against which the payments were made when stand allowed through P&L account, some part of it, being TDS, cannot be left standing alone, by holding it as still ‘payable. - AT
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• Assessee Denied Tax Exemption u/s 11 Due to Profit Motive Despite Section 12A Registration.

  Case-Laws - AT : Exemption u/s 11 - Revenue Authorities have clearly observed that the assessee”s claim of relief to the poor or help to the poor is not correct since the income and expenditure statements filed by the assessee reflects substantial profits from the activities of the assessee and therefore the profit motto exists very much. It is a fact that granting of registration u/s. 12A does not confer any benefits of exemption of tax u/s. 10 or 11 of the Act which has to be independently decided. - the exemption U/s. 11 of the Act cannot be granted to the assessee - AT
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• Tax Exemption Denied Due to Lack of Section 12A Registration; CIT(A) Mistaken on Society Registration Status.

  Case-Laws - AT : Taxability of amount received for specific purpose - Revenue Authorities have not disputed the contributions received but denied the exemption only due to the fact that the assessee is not registered u/s. 12A - observation of the CIT(A) that the assessee is not registered under any Law either as a Society or as a Trust is not factually correct - AR has produced a copy of the Registration Certificate duly registering the assessee-society under the Societies Registration Act vide Registration No.464 of 1995 - contributions received for a specific purpose cannot be treated as income u/s. 2(24)(iia) of the Act - AT
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• Court Dismisses Tax Evasion Charges for Investing in Industrial Property; Actions Found Bona Fide u/s 54F.

  Case-Laws - HC : Offences u/s 276C(1) and 277 - assessee has not invested the sale consideration to acquire residential house as provided u/s 54F of the Act, since he has invested in an industrial property - as in this case income has not suppressed only exemption has been claimed. It is also observed in the penalty proceedings that no suppression of materials it is only bona fide. In such a view of the matter this Court is of the view that continuation of the prosecution is nothing but futile exercise and abuse of process of law. - HC
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• High Court Overturns Chief Commissioner's Decision on 23-Day Income Tax Filing Delay, Citing Bona Fide Reasons u/s 119(2.

  Case-Laws - HC : Condonation of delay of 23 days in filing the return of the income u/s 119(2) - bonafide reasons of delay - The respondent Chief Commissioner of Income Tax misdirected himself in appreciating the facts of the case of the assessee and reached to the erroneous conclusion that it was not a good case of genuine hardship. - HC
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• High Court Upholds Reopening of Assessment u/s 147 Due to Non-Disclosure of Material Facts in Initial Scrutiny.

  Case-Laws - HC : Validity of reopening of assessment u/s 147 - accommodation entries - In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after receipt of information and conducting an investigation and after forming a reason to believe that the petitioner did not truly and fully disclose all the material facts at the time of limited scrutiny assessment, and it has been discovered subsequently during investigation that all the companies through which the entire share business has been dealt with by the petitioner, are bogus shell companies - We are satisfied that there is prima facie material available on record before the AO - HC
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• Late Income Tax Return Disqualifies Deduction Claim u/s 80P(2)(a)(i) for Filing After Assessment Completion.

  Case-Laws - AT : Deduction u/s. 80P(2)(a)(i) - Since the return of income has been filed after completion of the assessment, the return should have been held as invalid and hence the claim made by the assessee for deduction u/s. 80P(2)(a)(i) cannot be held as an admissible deduction under the Act. - AT
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• Additional Depreciation for Plant and Machinery Under 180 Days Can Be Carried Forward: Clause (iia) Explained.

  Case-Laws - AT : Carry forward of additional depreciation - Asset put to use for less than 180 days - if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10% additional deduction can be availed in the subsequent assessment year, otherwise the very purpose of insertion of Clause (iia) would be defeated because it provides for 20% deduction which shall be allowed. - AT
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• TDS Not Required on Payments to Amazon: Services Rendered Not Royalties u/s 195, Income Tax Act.

  Case-Laws - AT : TDS u/s 195 - DTAA between India and US - disallowance u/s 40(a)(ia) - the assessee did not acquire any right from Amazon for which the payments have been made but the payments have been made on the basis of services done by Amazon. Therefore, the payments so made do not fall under the category of Royalty and therefore, the assessee is not liable to deduct any tax from such Royalty. - the provisions of section 195 of the I.T. Act are not applicable - AT
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• Court Rules Goodwill Depreciation Allowed for Pre-2021 Period; Finance Act 2021 Amendment Not Retroactive.

  Case-Laws - AT : Depreciation on goodwill - Scheme of amalgamation sanctioned - So far as objection of ld CIT-DR for the revenue that due to the amendment in section 32, the goodwill is no more depreciable asset, we are of the view that the amendment brought in the Act by way of Finance Act 2021 will be applicable prospectively and not in the year under consideration. - AT
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• Court Rules Against Estimating Future Earnings for Tax; Only Real Income Taxable Under Income Tax Act.

  Case-Laws - AT : Accrual of income - method of accounting to recognize the revenue - Addition made for excess interest spread ('EIS') income earned on assignment of receivables - AO has arrived at estimated income under such arrangement by applying the present value factor on future estimated earnings, the receipt of which was uncertain. We concur with the submissions of Ld. AR that such a methodology has not been recognized under Income Tax Act and only the real income has to be assessed to tax. - AT
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Customs

• Court Rules Export Benefit Manipulation with Tourist Funds is Unlawful; Joint Liability Deemed Unenforceable.

  Case-Laws - AT : Manipulation of exports - wrongful availment of export benefits - collection of money from the visiting tourists from CIS countries and deposited such amounts in to the accounts of various manufacturers showing the same to be advance payment for the fabrics / clothes purchased or imported by such tourists - The impugned order confirms the demands Jointly and/or severally; this action is neither legally acceptable nor practically implementable. - AT
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• Appeal at Risk: Non-compliance with Section 129E Pre-deposit Requirement Under Customs Act 1962 Challenges Maintainability.

  Case-Laws - AT : Maintainability of appeal - requirement of mandatory pre-deposit contemplated under Section 129E of the Customs Act, 1962, not complied with - it is not possible to maintain the appeal without making the required pre-deposit - AT
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Direct Taxes

• Court Reviews Constitutionality of Benami Property Act Amendments; Retroactive Confiscation May Breach Article 20(1) on Retrospective Laws.

  Case-Laws - SC : Constitutional validity - Amendment to Prohibition of Benami Property Transactions Act, 1988 - This Court is aware of the fact that the ‘Right to Property’ is not a fundamental right, rather it is a constitutional right that can be abridged by law. However, this Court is not concerned with the constitutionality of such a measure, wherein such considerations have to be balanced. Rather, the focus is only on the characterization of retroactive confiscation, which in these facts and circumstances, are punitive. - it was conceded before this Court that Sections 3 and 5 of the 1988 Act in reality, dehors the legality, remained only on paper and were never implemented on ground. Any attempt by the legislature to impose such restrictions retroactively would no doubt be susceptible to prohibitions under Article 20(1) of the Constitution. - SC
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IBC

• Balance Sheets Acknowledgment Valid u/s 18 Limitation Act; Ensures Section 7 IBC Application Not Time-Barred.

  Case-Laws - AT : CIRP - Period of limitation - When the acknowledgment is unequivocal and Auditor’s opinion in any manner does not detract it from being an acknowledgment under Section 18 of the Limitation Act, the mere fact that the financial document contains a counter claim shall not in any manner take away the acknowledgment under Section 18 of the Limitation Act. The Adjudicating Authority has rightly held that the balance sheets contain the acknowledgment under Section 18 hence the Application under Section 7 was not barred by time - AT
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• Section 10A CIRP Suspension: Applies Only to Corporate Debtors, Not Personal Guarantors, Reflecting Legislative Intent.

  Case-Laws - AT : Suspension of initiation of CIRP - On the basic principle of statutory interpretation, the provision of Section 10A is capable of only one meaning that is suspension of initiation of CIRP was only for a Corporate Debtor. Had the legislature intended suspension of initiation of CIRP against the Personal Guarantor also, similar amendment was also required to be made in Chapter III of Part III of the Code - Whether the suspension of insolvency resolution process has to be for Corporate Debtor and also for individuals including Personal Guarantor is the legislative policy which policy has to be looked into from the amendment brought in the Code by insertion of Section 10A. - AT
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• Court Denies Appellant's Request for Document Disclosure Due to Lack of Privity with Corporate Debtor; Decision Upheld.

  Case-Laws - AT : Power of the Bench to call for further information or evidence - In the present case, the Appellant has filed an application seeking directions to the Corporate Debtor to disclose certain documents. The Adjudicating Authority after considering the application has given reasons especially that there is no privity of contract between the Appellant and the Corporate Debtor, hence, he is not entitled to call for documents. - The Adjudicating Authority has exercised its discretion in accordance with law after giving due reasons which does not warrant any interference in exercise of our Appellate jurisdiction - AT
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Service Tax

• High Court Rules Show Cause Notice Invalid Due to Expired Limitation Period in Business Auxiliary Service Tax Case.

  Case-Laws - HC : Validity of show cause notice - the respondent was registered with the service tax department in the year 2004; during 2006 the Director General of Central Excise and Intelligence conducted search and seizure in the premises of the respondent and seized various records. It is thereafter in August 2006, the Officer from Dhanbad alleged that conversion charges for conversion of coal into coke attracted service tax under the category “Business Auxiliary Service” - t is only in the year 2010, the SCN was issued invoking the extended period of limitation - SCN was barred by limitation. - HC
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• Capital gains tax applies to amounts received for surrendering tenancy rights under Income Tax Act, 1961.

  Case-Laws - AT : Taxable services - refrain from an act or agreed to tolerate any act - surrender of tenancy rights or benefits - the view of adjudicating authority that ‘capital gains’ can be earned only against change in ownership, not otherwise, cannot be agreed upon. It is now established law that any amount received on account of surrender of tenancy rights is also liable to capital gains tax as per the Income Tax Act, 1961. - By the surrender of the agreement rights in the property by the appellants it cannot be said that the appellants agreed to refrain from an act or agreed to tolerate any act of the eventual buyer or tolerated any act or situation. - AT
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Central Excise

• Duty Remission Denied for Molasses Tank Leak; Late Application and No Evidence of Marketable Brown Sugar Cited.

  Case-Laws - HC : Remission of duty - leakage of the tank where molasses were stored - remission rejected on the ground that the application was not filed within the prescribed period of 24 hours - In the present case there is no material to allege or establish that the brown sugar was marketable and once there is no foundation to hold that brown sugar, on which the remission was claimed, was marketable goods, no question of payment of duty arises. Even otherwise, no allegation was levelled in the show-cause notice with regard to clandestine removal, which was required to be established while raising a demand under Section 11A of the Act. - HC
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• Subordinate authorities must comply with appellate orders unless a court suspends them, regardless of departmental disagreement.

  Case-Laws - HC : The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority was not acceptable to the department in itself would be an objectionable phrase and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. - HC
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• Battery Value Excluded from UPS Assessable Value as Batteries Supplied Directly from Godown, Confirms Evidence.

  Case-Laws - AT : Valuation - SSI Exemption - As regard the batteries supplied with offline UPS there is no dispute as the appellants were including the value of such batteries in the offline UPS. On the appreciation of the above fact supported with various evidences, it is found that the batteries were directly supplied from the godown by the appellant company M/s. XPSPL. For this reason the value of batteries was not includible in the assessable value of UPS system. - AT
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Case Laws:

• GST

• 2022 (8) TMI 1046
  Release of seized goods - compliance with Section 67 (8) of the Central Goods and Services Act, 2017 and Rule 141 of the relevant Rules - respondents submits that the respondent is willing to pay the legitimate dues, including to opt for compounding, if any - HELD THAT:- The appeal is disposed off.

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• 2022 (8) TMI 1045
  Refund claim - Ocean Freight - RCM - Constitutional Validity of N/N. 8/2017-Integrated Tax (Rate), dated 28-6-2017 and entry 10 of the Notification No.10/2017-Integrated Tax (Rate), dated 28-6- 2017 - whether the same lack legislative competency, ultra vires to the Integrated Goods and Services Tax Act, 2017 and hence unconstitutional? - services supplied by a person located in non-taxable territory to a person located in nontaxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India - importer under clause 2(26) of the Customs Act on services supplied by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India - HELD THAT:- The issue in question is no longer res integra in view of of the judgment in the case of UNION OF INDIA ANR. VERSUS M/S MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR [ 2022 (5) TMI 968 - SUPREME COURT ] where it was held that The impugned levy imposed on the service aspect of the transaction is in violation of the principle of composite supply enshrined under Section 2(30) read with Section 8 of the CGST Act. Since, the Indian importer is liable to pay IGST on the composite supply , comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the supply of services by the shipping line would be in violation of Section 8 of the CGST Act. Since, the instant petition is squarely covered by the judgment rendered by the Hon ble Supreme Court, the same is accordingly allowed and respondent No.1 is directed to refund the amount along with interest strictly in accordance with the judgment in M/s Mohit Minerals Pvt. Ltd. s case as expeditiously as possible and in any event by 30.11.2022 - application disposed off.

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• 2022 (8) TMI 1044
  Refund claim - rejection of refund claim without even dealing with the request of the petitioner seeking extension of time for purposes of filing a reply to the show cause notice - petitioner placed reliance upon a CGST Notification No.35/2020-Central Tax issued by the Government on 03.04.2020 and as per which extension was envisaged even for purposes of filing a reply up to 30.06.2020 - principles of violation of natural justice - HELD THAT:- The distinction being sought to be drawn in the extension Notification dated 03.04.2020 is not discernible from the plain language of the Notification itself. Even otherwise such distinction does not stand to reason. The extension of time had been granted by virtue of a Notification to cover all situations relating to the Covid-19 pandemic and the difficult circumstances arising therefrom. Even if the reply in the present case to the show cause notice had to be filed online, it goes without saying that certain documents/material had to be collected/collated for the purpose of filing a comprehensive reply. Even otherwise it is by now well settled that the validity and legality of an order has to be tested in terms of reasons assigned in the order itself. The distinction that is now sought to be drawn has been taken only at the stage of filing a reply and counter to the writ petition. Such distinction does not find a mention in the impugned order. The authorities were obligated to grant extension in time to the petitioner for submission of a reply to the show cause notice dated 23.04.2020 up to 30.06.2020 and thereafter to deal with the issue on merits - Petition allowed. The matter is remanded back to the Adjudicating Authority.

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• 2022 (8) TMI 1043
  Detention of vehicle - Aluminum scrap - mis-declaration of description of goods - it is alleged that the documents, which were being carried in the vehicle, were with a patently fraudulent declaration that the goods under transit was Aluminum scrap whereas actually, brand new brand Aluminum Sections wrapped in protective plastic packaging material was being transported - Section 68 read with Section 129 of the CGST Act - HELD THAT:- Considering the facts of the case at hand, it is clear that by portraying the goods in transit to be Aluminum scrap in the documents, the petitioner was indulging in blatant evasion of GST. By no stretch of imagination, can brand new Aluminum sections be placed on equivalence with Aluminum scrap. Apparently thus, the goods in question were fraudulently described as Aluminum scrap and hence, the respondent authorities were perfectly justified in detaining the petitioner s vehicle and the goods after noticing this blatant mis-description during interception. Otherwise also, the show cause notice dated 08.06.2018 is appealable under Section 107 of the CGST Act and hence the instant writ petition is not maintainable. The writ petition fails and is dismissed as being devoid of merit.

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• 2022 (8) TMI 1042
  Maintainability of appeal - appeal rejected on the ground of time limitation - it is alleged that appeal was presented beyond the statutory period prescribed under Section 107(1) of the Central Goods and Services Tax Act, 2017- Cancellation of registration of petitioner - HELD THAT:- This Court, having the opportunity to peruse the Order dated 23rd September, 2021 [ 2021 (11) TMI 387 - SC ORDER ] of the Hon ble Supreme Court, finds that the said Court in no ambiguous terms specified that the period from 15th March, 2020 to 2nd October, 2021 stands excluded for the purpose of computing the periods prescribed under any law which prescribes period(s) of limitation for instituting proceedings and outer limits (within which the Court or Tribunal can condone delay) . It is undisputed fact on record that as the petitioner has received the order of cancellation of registration on 5th December, 2019, the last date for filing of appeal was 4th April, 2020 but the appeal being filed on 13th April, 2021, the appeal should have been treated as filed within the period of limitation in view of Category-III specified in the Order of the Hon ble Apex Court in [ 2021 (11) TMI 387 - SC ORDER ]. The impugned Appellate Order dated 29th July, 2021 is hereby set aside and the appeal is restored to file. The Appellate Authority may proceed with the appeal for hearing after giving opportunity of hearing to the Petitioner in accordance with law and decide the case on merits - petition disposed off.

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• 2022 (8) TMI 1041
  Permission to petitioners to manually file Form GST TRAN-1 - Seeking transmission towards unutilised accumulated CENVAT credit balance of the Education Cess and Secondary Higher Education Cess - HELD THAT:- The issue involved and required to be addressed in this petition has been answered by the Apex Court in case of UNION OF INDIA ANR. VERSUS FILCO TRADE CENTRE PVT. LTD. ANR. [ 2022 (7) TMI 1232 - SC ORDER] where it was held that Goods and Service Tax Network (GSTN) is directed to open common portal for filing concerned forms for availing Transitional Credit through TRAN-1 and TRAN-2 for two months i.e. w.e.f. 01.09.2022 to 31.10.2022. It goes without saying that the decision of the Supreme Court shall govern the right of the parties - petition disposed off.

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• 2022 (8) TMI 1040
  Classification of supply - rate of GST depending upon the nature of activity performed under such cost centres - Composite supply or principal supply - independent supplies of goods and services or not - supplies made under Cost Centres D, G and H (to the extent of training services) of Contract RS-10 to DMRC - HELD THAT:- The applicant, being a successful bidder to the tender invited by Delhi Metro Rail Corporation Limited (DMRC) for design, manufacture, supply, testing, commissioning and training of 504 Standard Gauge Cars (passenger rolling stock) including training of operation maintenance personnel and supply of spares manuals, entered into a contract No.RS-10 dated 24.05.2013 with DMRC for the purpose of execution of the contract awarded - The applicant, to undertake the scope of work as agreed in the contract, is required to supply various goods and services to DMRC in a phased manner. The facts and circumstances brought out in the application are similar to those on which advance ruling was sought by M/s BEML, Bengaluru [ 2021 (4) TMI 565 - AUTHORITY FOR ADVANCE RULING, KARNATAKA] . M/s BEML had a similar contract with M/s BMRCL. It is observed that the contracts in both the cases are for supply of rolling stock, its installation/integration and testing, training the staff etc., and the cost centres in both the cases have similar schedule of activities. The Advance Ruling Authority, Karnataka had ruled that the supplies made by the applicant under cost centres form a composite supply, wherein the principal supply is the supply of intermediate cars. It is learnt that M/s BMRCL, being the aggrieved party, filed an appeal against the ruling of AAAR, Karnataka, before the Hon ble High Court of Karnataka and no stay has not been granted. Since stay has not been granted in the said case, we are inclined to follow the observations drawn by the AAAR, Karnataka as the facts and circumstances are similar. The supplies made by all the Cost Centres of RS-10 contract of DMRC are not to be considered as composite supply , and hence the instant question is redundant.

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• Income Tax

• 2022 (8) TMI 1039
  Estimation of income - profit was estimated @ 12% on entire turnover - HELD THAT:- Tribunal was of the view that the CIT-A has exercised his powers which are coterminous to that of the powers of the AO. However, on going through the order passed by the CIT-A, we find that there is no such exercise done by the CIT-A and all that is observed is that it would be reasonable and in the interest of principles of natural justice to estimate the profit at 12%. In the absence of any reasons given by the CIT-A, we are of the view that the order suffers from perversity which has been perpetuated by the order passed by the Tribunal. We are of the clear view that the order impugned calls for interference. In the result, the appeal filed by the revenue is allowed and the orders passed by the Tribunal as well as the CIT-A are set aside and the assessment order stands revived.

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• 2022 (8) TMI 1038
  Reopening of assessment against dead person - validity of notice in the name of the deceased under Section 142(1) Scope of proceedings against legal representatives - HELD THAT:- Assessee died on 21.12.2012 in whose name, notice was issued by the income tax authorities on 12.03.2019 under Section 148 seeking to reopen assessment in respect of assessment year 2012-13 by communication dated 03.05.2019, the petitioner herein who happens to be the legal representative intimated to the income tax officer concerned that the noticee Kandarp Yasashvibhai Mehta had died long back and that the notice was without jurisdiction. The income tax authorities did not pay heed to the said intimation. The facts of the case did not offer any fact or circumstances to suggest that the legal representative of the deceased assessee in any manner submitted to the jurisdiction of the income tax authorities or in any way participated in the proceedings to persuade the court to hold otherwise. On the contrary, the intimation in form of communication dated 03.05.2019 was sent to the income tax officer by the legal representative that the noticee Kandarp Yasashvibhai Mehta had died. This intimation was repeated in form of communication dated 13.09.2019. Present petition deserves to be allowed. It is hereby allowed by holding that the impugned notice, which was against the dead assessee could not be sustained. - Decided in favour of assessee.

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• 2022 (8) TMI 1037
  Estimation of profit on on money receipt - Tribunal estimated of 6% of net profit on the total on-money receipts - HELD THAT:- Tribunal was justified in upholding the contention of the assessee that considering the fact that entire money receipts cannot be taxed in entirety and only the profit embedded therein and such receipts is to be considered for arriving at correct, true and real income to be taxed under the provisions of the Act, 1961. Tribunal, after following the decision of PANNA CORPORATION [ 2014 (11) TMI 797 - GUJARAT HIGH COURT] ,ABHISHEK CORPORATION [ 1999 (10) TMI 742 - GUJARAT HIGH COURT] AND PRESIDENT INDUSTRIES. [ 1999 (4) TMI 8 - GUJARAT HIGH COURT] and after considering that the assessee had shown net profit at 4.55% for the assessment year under consideration and 4.59% for A.Y. 2010-11 in the books of account and considering the fact that the project undertaken by the assessee comes under deduction of Section 80IB(10) of the Act, 1961, there was no intention on the part of the assessee to disclose the lower rate of profit and in that view of the matter, the Tribunal estimated 6% net profit of total on-money receipts. Tribunal has not committed any error in estimation of 6% of net profit on the total on-money receipts of the respondent assessee and as such there is no legal infirmity in the impugned order of the Tribunal giving rise to any question of law, much less any substantial question of law, proposed or otherwise. The present Tax Appeal is therefore, summarily dismissed.

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• 2022 (8) TMI 1036
  Addition to the returned income on account of TDS payable - Cash basis of accounting - Provision versus Payable - HELD THAT:- Tax Authorities below have not discussed as to what were the payments which were made giving rise to TDS. It appears that Ld. AO was carried by the fact that the assessee is following cash system of accounting, therefore, the TDS being one part of expenses debited in P L Account therefore, to the extent of TDS the expenses being not actually incurred and paid in the relevant financial year, have to be disallowed. The Bench is of considered opinion that such an opinion of Tax Authorities below is not sustainable because the assessee has shown the expenditure as a whole in his accounts having been paid. What remains in the hands of assessee is not on account of any payment due to such persons but the tax deducted at source is left to be deposited to the Government in accordance with the relevant provisions. It was for the purpose of accounting that the amount has been shown in the form of provision not as payable on any account to any creditor or on a contingency but held merely to be deposited in due course. Even otherwise, the heads of expenses against which the payments were made when stand allowed through P L account, some part of it, being TDS, cannot be left standing alone, by holding it as still payable. As relying on M/S DELOITTE HASKINS SELLS VERSUS THE ASST. CIT, CIRCLE-37 (1) , NEW DELHI. [ 2021 (1) TMI 738 - ITAT DELHI] case the appeal is allowed with direction to delete the impugned addition.

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• 2022 (8) TMI 1035
  Exemption u/s 11 - expenditure incurred towards help to the poor - case was selected for scrutiny under CASS - AO concluded that considering the business nature of the assessee s operation on commercial principles and hallow claims of help to the poor by the assessee , it is seen that the assessee is not engaged in any charitable activity at all - since the assessee is not operating as per its objects, the assessee is not entitled to claim any exemption u/s. 11 - HELD THAT:- We noted that the objects of the assessee-society ie., establishing and running a small scale unit for training and self sufficiency of rural poor women is of the nature of business activity which is not of charitable nature. The onus is on the assessee to prove with documentary evidence to establish that the assessee s activities are not of business nature but of charitable as claimed by the assessee. Revenue Authorities have clearly observed that the assessee s claim of relief to the poor or help to the poor is not correct since the income and expenditure statements filed by the assessee reflects substantial profits from the activities of the assessee and therefore the profit motto exists very much. It is a fact that granting of registration u/s. 12A does not confer any benefits of exemption of tax u/s. 10 or 11 of the Act which has to be independently decided. Decisions of the Ld. Revenue Authorities are fair and reasonable and does not call for any interference since the assessee s activities are not charitable in nature and therefore the exemption U/s. 11 of the Act cannot be granted to the assessee. Accordingly, we upheld the decision of the Ld. CIT(A) and dismiss the grounds raised by the assessee.

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• 2022 (8) TMI 1034
  Taxability of amount received for specific purpose - contributions received treated as income u/s. 2(24)(iia) as assessee is not registered u/s. 12A - HELD THAT:- The admitted facts are that the assessee has received voluntary contribution towards corpus for the construction of building and for plantation expenses - Disclosure was also rightly made while filing the return of income for the AY 2019-20. Revenue Authorities have not disputed the contributions received but denied the exemption only due to the fact that the assessee is not registered u/s. 12A - observation of the CIT(A) that the assessee is not registered under any Law either as a Society or as a Trust is not factually correct - AR has produced a copy of the Registration Certificate duly registering the assessee-society under the Societies Registration Act vide Registration No.464 of 1995 - contributions received for a specific purpose cannot be treated as income u/s. 2(24)(iia) of the Act. Accordingly, we set-aside the order of the Ld. CIT(A) on Grounds no.3 and 4 raised by the assessee and these grounds raised by the assessee are allowed. Depreciation and bank charges on the basis that the assessee is not entitled to the benefit of section 32 - We find that since the asset has not been claimed as a deduction or exemption in the same year or in any previous year, the depreciation claimed by the assessee should be allowed as expenditure u/s. 32 of the Act. Therefore, we are of the considered view that the assessee is eligible to claim depreciation and bank charges as revenue expenditure and allow the same. Accordingly, Ground raised by the assessee is allowed.

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• 2022 (8) TMI 1033
  Addition on account of deposits in bank - assessee was not able to explain the deposits of demonetized currency notes in his bank account - CIT-A deleted addition as cash deposits in the bank account were represented by the sales made by the assessee and the AO had accepted the claim of sales made by the assessee - HELD THAT:- From the findings recorded by CIT(A), we find that CIT(A) was convinced with the arguments of the assessee and therefore, he gave substantial amount of relief to the extent of Rs.40 lacs. However, he confirmed an addition by holding that there is some merit in the contention of AO as the assessee had disclosed abrupt jump in sales during the months of October and November. While confirming the part addition the CIT(A) has not given any specific explanation for confirming the part addition. Therefore, the confirmation of part addition is based only on surmises and is arbitrary in nature and therefore, is liable to be deleted. Assessee appeal allowed.

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• 2022 (8) TMI 1032
  Offences u/s 276C(1) and 277 - assessee has not invested the sale consideration to acquire residential house as provided u/s 54F of the Act, since he has invested in an industrial property - Penal proceedings were also initiated under Section 271[1][c] for wrong claim of deduction u/s 54F - case of the prosecution that the accused has willfully attempted to evade the tax by making a false claim, which were not allowable under the provisions of the Income Tax Act - HELD THAT:- To attract the offence, the prosecution must establish the fraudulent removal and concealment, transfer or deliver of any property or any interest thereon with intend to prevent the property and interest thereon in order to evade the tax. The very crux of the allegation in the complaint indicate that the accused has sold house property to construct a building in the industrial site. The prosecution case is that the amount ought to have been invested in the house property. It is also admitted by the prosecution that the assessee has claimed exemption under Section 54F. The very averment in the complaint itself indicates that there is no concealment or willful suppression of any materials, what was sought for is exemption under Section 54F of the Income Tax Act. Of course, an Assessment Officer has not accepted the claim for exemption under Section 54F of the Act. Accordingly, the Assessment Order passed by the authorities were upheld by the Tribunal which is not disputed. It is the fact that the accused has not purchased residential house. It is the bona fide claim of assessee that on the sale of property he has purchased the another property. The fact remains that the another property, which is supported his case, only a residential house not an industrial property. On relying upon the judgment of the CIT vs. Reliance Petroproducts (P) Ltd.,[ 2010 (3) TMI 80 - SUPREME COURT] wherein the Apex court explained that whether a claim simply not accepted by the A.O., it does not mean that it is a concealment of income or furnishing of inaccurate particulars of income so that penalty can be levied. Accordingly, the penalty imposed is set aside by the Appellate Tribunal. The penalty proceedings also reached finality, no further appeal is filed. As it is not observed anywhere that the assessee claimed false or bogus it cannot be said that there is concealment or wilful evasion of the Tax. When the Tribunal has held that the Assessee has made bona fide claim it cannot be held that there was willful evasion of tax. It is not the case of the Assessing Officer that the Claim is false or bogus. Thus as in this case income has not suppressed only exemption has been claimed. It is also observed in the penalty proceedings that no suppression of materials it is only bona fide . In such a view of the matter this Court is of the view that continuation of the prosecution is nothing but futile exercise and abuse of process of law. Accordingly, the complaint in E.O.C.C.No.12 of 2018 pending on the file of the learned Additional Chief Matropolitan Magistrate, Economic Offences- II, Egmore, Chennai for the the offence under Section 276C(1) and 277 of the Income Tax Act, 1961 is quashed and the Criminal Original Petition is ordered.

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• 2022 (8) TMI 1031
  Condonation of delay of 23 days in filing the return of the income u/s 119(2) - bonafide reasons of delay - HELD THAT:- As the assessee explained by cogent reasons that the accountant who was handling the work to file Return etc. suffered Covid 19 virus and due to his indisposed health the completion of work was delayed resulting into delayed filling of return. Chief Commissioner of Income Tax could not have been insensitive to the cause which was genuine. In the matters of condonation of delay, where the condonation is to be permitted to avoid the genuine hardship, liberal rather than technical approach is expected from the authorities. It is the substantive consideration and not the pedantic approach which should govern the decision under section 119(2)(b) of the Act. Commissioner has come to a conclusion that there was nothing on record to suggest that it was a case of genuine hardship. There is no basis for arriving at such conclusion by the respondent. Not only that, the respondent Commissioner proceeded to observe that the application of the assessee did not contain any convincing evidence to prove that the return could not be filed within extended date of 15.2.2011 and that despite the ground of sufferance of assessee s accountant from Covid there was sufficient time. The respondent Chief Commissioner of Income Tax misdirected himself in appreciating the facts of the case of the assessee and reached to the erroneous conclusion that it was not a good case of genuine hardship. The impugned order of the respondent refusing to condone the delay of 23 days in filing the return of the income of the petitioner assessee deserves to be set aside. Accordingly, it is set aside. The Return of Income of the petitioner assessee for the Assessment Year 2020-2021 shall be accepted and shall be dealt with in accordance with law by the Assessing Officer. This petition is allowed accordingly. Rule is made absolute.

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• 2022 (8) TMI 1030
  Validity of reopening of assessment u/s 147 - initiation of the proceedings after expiry of more than four years - reasons to believe OR reasons to suspect - HELD THAT:- Petitioner did not furnish the PAN of the companies, the mode of receipt of the amount and the account number in which the money was received even after receipt of a notice under Section 133 (6) of the Act. Thus it appears that the petitioner did not make a full and true disclosure of facts before the A.O. It has been discovered subsequently during investigation that all the companies through which the entire share business has been dealt with by the petitioner, are bogus shell companies, through which the operators provide accommodation entries for routing the unaccounted money of the petitioner company through banking channels so as to give it a prima facie appearance of a genuine transaction, though actually it is not. Thus they manage taxable income to escape assessment. A.O. had completed the assessment under Section 143 (3) on the basis of the facts available on record at that time and the A.O. could not examine the facts which were discovered later on and, therefore, the case has been re-opened on the basis of fresh material on record. Whether initiation of the proceedings under Sections 147 / 148 of the Act is based on a review of the existing material, which is not permissible in law? - From the discussion made above, it is clear that during investigation carried out subsequent to the limited scrutiny assessment, it was found that all the companies through which the entire share business has been dealt with by the petitioner, are bogus shell companies, through which the operators provide accommodation entries for routing the unaccounted money of the petitioner company through banking channels, thereby causing taxable income escaping assessment. This fact could not be examined by the AO during the original assessment for want of a full and true disclosure of facts by the petitioner. Therefore, the A.O. did not examine the aforesaid issues and he did not form an opinion regarding the same during the limited scrutiny assessment proceedings. In such a situation, it is not a case of change of opinion or the drawing of a different inference from the same facts as were earlier available but the A.O. has acted on fresh information and it is not a review of the existing material. In the present case, during the limited scrutiny assessment under Section 143 (3) the petitioner did not make a full and true disclosure of all the material facts and, therefore, the A.O. could not form any opinion regarding the fact that the companies through which the entire share business has been dealt with by the petitioner, are bogus shell companies, through which the operators provide accommodation entries for routing the unaccounted money of the petitioner company. This fact came to light only after investigation conducted subsequent to the limited scrutiny assessment and it was only thereafter that the A.O. had formed an opinion in this regard. Therefore, the present case would not fall in the category of change of opinion . Submission advanced on behalf of the petitioner, that the case of M/s Arohul Foods Pvt. Ltd., which is a sister concern of the petitioner, was re-opened under Section 148 of the Act for A.Y. 2012-13 on similar issues and reopening of the case in the matter of M/s Arohul Foods Pvt. Ltd. was quashed by the ITAT, Lucknow Bench [ 2021 (8) TMI 695 - ITAT LUCKNOW] - The respondents have stated in the Counter affidavit that the department has not accepted the order of the ITAT and has challenged the order by filing an appeal under Section 260 A of the Act. Even otherwise, an order passed by the ITAT would not be relevant when the validity of the re-assessment is being examined by this Court in a Writ Petition. Therefore, this submission of the petitioner is also rejected. Proceedings initiated after a lapse of more than four years are barred by the First Proviso appended to Section 147 - As is evident from the discussions made in the preceding paragraphs of this judgment, the facts regarding the petitioner s dealings with shell companies for routing its own unaccounted money into its books of accounts had not been truly and fully disclosed by the petitioner during the original assessment and scrutiny assessment. The petitioner did not furnish complete information regarding its share transactions, particularly the information regarding the mode of receipt of amount for share transfer, the date of receipt of the amount and the account number in which the money was received. The present case falls within the exception carved out in the First proviso, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assesse to disclose fully and truly all material facts necessary for his assessment, for that assessment year and the bar of initiating re-assessment proceedings after a lapse of four years since the original assessment contained in the First Proviso appended to Section 147 of the Act, would not apply to the present case. Therefore, the submission to this effect made by the learned Counsel for the petitioner cannot be accepted. In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after receipt of information and conducting an investigation and after forming a reason to believe that the petitioner did not truly and fully disclose all the material facts at the time of limited scrutiny assessment, and it has been discovered subsequently during investigation that all the companies through which the entire share business has been dealt with by the petitioner, are bogus shell companies, through which the operators provide accommodation entries for routing the unaccounted money of the petitioner company through banking channels in a manner which prima facie makes it appear as a genuine transaction, though actually it is not. Thus taxable income has escaped assessment. We are satisfied that there is prima facie material available on record before the assessing officer for issuing a notice for reassessment. - Decided against assessee.

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• 2022 (8) TMI 1029
  Deduction u/s. 80P(2)(a)(i) - assessee has failed to file its return of income claiming the deduction - HELD THAT:- As per sub-section (5) of section 80A of the Act it is imperative to the assessee to make a claim in its return of income for any deduction under any provisions of the Chapter under the heading C-deduction in respect of certain incomes . Since the assessee has failed to file its return of income claiming the deduction prima facie no deduction is permissible under the Act. Similarly, the assessee has filed return of income manually on 5/3/2022 which was sent by speed post to CPC, Bangalore on 15/3/2022. It is noticed from the submissions made by the AR that the return has been filed u/s.139(4) - As per section 139(4) of the Act Any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return for any previous year at any time before three months prior to the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. It is noted from the paper book page no. 21 the assessee has filed its return of income for the AY 2017-18on 5/3/2022 u/s. 139(4). Since the return of income has been filed after completion of the assessment, the return should have been held as invalid and hence the claim made by the assessee for deduction u/s. 80P(2)(a)(i) cannot be held as an admissible deduction under the Act. As assessee has never filed its return of income. We therefore are inclined to uphold the order of the Revenue Authorities and dismiss the appeal of the assessee.

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• 2022 (8) TMI 1028
  Carry forward of additional depreciation - Asset put to use for less than 180 days - whether additional depreciation if claimed @ 10% in one year, being the plant and machinery installed and put to use for the purposes of business for a period of less than 180 days, the balance 10% of the additional depreciation can be claimed in the succeeding year or not? - HELD THAT:- As decided in Cosmo Films Ltd. [ 2012 (9) TMI 281 - ITAT DELHI] assessee deserves to get the benefit in full when there is no restriction in the statute to deny the benefit of balance on 50% when the new plant and machinery were acquired and use for less than 180 days. One time benefit extended to assessee has been earned in the year of acquisition of new plant and machinery. It has been calculated @ 15% but restricted to 50% only on account of usage of these plant machinery in the year of acquisition. In section 32(l)(iia), the expression used is shall be allowed . Thus, the assessee had earned the benefit as soon as he had purchased the new plant and machinery in full but it is restricted to 50% in that particular year on account of period of usages. Such restrictions cannot divest the statutory right. Law does not prohibit that balance 50% will not be allowed in succeeding year. The extra depreciation allowable u/s 32(l)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s 32 shall definitely not exceed the total cost of plant and machinery. In CIT vs. Rittal India (P) Ltd [ 2016 (1) TMI 81 - KARNATAKA HIGH COURT] held that benefit which is to be granted is 20% additional depreciation. By virtue of the proviso referred to above, only 10% can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10% additional deduction can be availed in the subsequent assessment year, otherwise the very purpose of insertion of Clause (iia) would be defeated because it provides for 20% deduction which shall be allowed. CIT(A) has followed the decisions (supra) in coming to the conclusion that the impugned disallowance made by the Ld. AO is unsustainable. We, therefore endorse the view of the Ld. CIT(A). Accordingly, the appeal of the Revenue is dismissed.

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• 2022 (8) TMI 1027
  Addition u/s 68 - share application money/un-secured loans received by the assessee from various entities observing that the assessee did not prove identity, creditworthiness and genuineness of the loan creditors and identity and source of share application money was not established - HELD THAT:- Before the ld. CIT (Appeals) the assessee could not establish the genuineness of the share application money and the un-secured loans by filing the necessary evidences and the ld. CIT (Appeals) sustained additions The notice issued by the Registry fixing the date of hearing 20.06.2022 returned un-served with the endorsement Left without address . The assessee even before us could not produce any evidence to substantiate its claim. None of the averments made in the assessment order were rebutted with evidences before us. In the circumstances, we uphold the order of the Assessing Officer as well as the ld. CIT (Appeals) and reject the grounds raised by the assessee.

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• 2022 (8) TMI 1026
  Addition u/s 68 - proof with documentary evidences - rental receipts received were deposited in cash in Hyderabad - HELD THAT:- A perusal of the computation of income filed by the assessee in the paper book shows that the assessee has declared the income from house property on the basis of annual lettable value and not on actual rent receipt. Therefore, when the assessee failed to file the details of rent receipts and the names of the tenants etc., the CIT (A) without verifying the contents of the remand report accepted the claim of the assessee regarding availability of cash as available for deposit in the Bank A/c which, in our opinion, is not justified. Similarly, the explanation of the assessee as available for deposit in the Bank A/c out of the accumulated cash was also not properly verified by the learned CIT (A) especially when the assessee in his balance sheet is showing cash in hand and cash balance differently. In our opinion, the matter requires a revisit to the file of the learned CIT (A) to decide as to how rent declared on the basis of annual lettable value can be available for cash deposit in the Bank A/c especially when the assessee is showing rent receivable at nil. Since the reasoning given by the CIT (A) while deleting both the additions are cryptic and merely based on the submissions filed by the assessee, therefore, considering the totality of the fact of the case and in the interest of justice, we deem it proper to restore the issue to the file of the CIT (A) with a direction to adjudicate the issue afresh after going through the computation of total income filed by the assessee for the impugned A.Y. CIT (A) shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Grounds of appeal No. 1 2 are accordingly allowed for statistical purposes. Addition u/s 69B read with 115BBE - unexplained investment - HELD THAT:- Receipt of money from one company through banking channel, in our opinion, does not absolve the assessee from proving the three ingredients i.e., identity capacity of the creditor and genuineness of the transaction. In the instant case, it is not stated as to why the MOU was not filed before the Assessing Officer and what was the reason for Mr. K. Venkatanarayana to transfer the money to the two companies which in turn has been transferred to the account of the assessee instead of directly giving the amount to the assessee. CIT (A) in the instant case has failed to go into these issues. We find the CIT (A), in the instant case, without appreciating the observations made by the AO in the remand report deleted the addition merely on the ground that the amount was transferred through proper banking channel without ascertaining the creditworthiness of the two companies and Mr. K. Venkatanarayana - we deem it proper to restore the issue to the file of the learned CIT (A) with a direction to re-adjudicate the issue. CIT (A) shall give due opportunity of being heard to the assessee and decide the issue as per fact and law - ground raised by the Revenue is accordingly allowed for statistical purposes.

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• 2022 (8) TMI 1025
  TDS u/s 195 - DTAA between India and US - disallowance u/s 40(a)(ia) - Royalty - expenditure includes the payment towards AWS Data Transfer, Amazon Simple Storage Services, AWS Premium Support, Amazon Elastic Compute Could etc - HELD THAT:- The assessee is utilizing the services of Amazon Web Services for data transfer, storage services which are related to process contained in the definition of royalty. According to him, the expression process includes transmission by satellite (including up-linking, amplification, conversion for downlinking of any signal), cable, optic fibre or by any other similar technology and also including use of any patent, invention, model, design, secret formula or process or trademark or similar property. The assessee acquired the right to use the said services/ servers. The right to use server was in turn transferred to its clients. The end user clients have made TDS on the payments made to appellant company. The payments thus fell under the definition of royalty liable for TDS and since the assessee has not deducted any tax from the payments so made, the AO invoked the provisions of section 195 and made disallowance u/s 40(a)(ia). We find the CIT (A) upheld the action of the AO, the reason of which have already been reproduced in the preceding paragraph. It is the submission of the assessee that the charges paid to Amazon for various services provided by it are not under the nature of royalty. According to him, these are monthly charges which are fluctuating from month to month and there is no regular payment being made to Amazon. Further, the assessee did not acquire any right from Amazon for which the payments have been made but the payments have been made on the basis of services done by Amazon. Therefore, the payments so made do not fall under the category of Royalty and therefore, the assessee is not liable to deduct any tax from such Royalty. We find some force in the above argument of the assessee. From the various clauses of the agreement which are already reproduced in the preceding paragraphs and the copies of invoices raised, it can be safely concluded that cloud base services do not involve any transfer of rights to the assessee in any process. The grant of right to install and use the software included with the subscription does not include providing any copy of the said software to the assessee. The assessee in the instant case does not get any right of reproduction. The services, in our opinion, merely facilitate the flow of user data from the front run user through internet to the providers system and back. Therefore, the subscription fee in our opinion is merely a consideration for the online access of the cloud computing services for process and storage of data or run the applications but cannot be considered as Royalty within the meaning of section 9(1)(vi) of the Act. We find an identical issue had come up before in the case of EPRSS Prepaid Recharge Services India (P) Ltd [ 2018 (10) TMI 1434 - ITAT PUNE] where the Tribunal following the decision of the Hon ble Madras High Court in the case of Skycell Communications Ltd. [ 2001 (2) TMI 57 - MADRAS HIGH COURT] held that the amount paid to Amazon for various service provided by it are not in the nature of royalty and hence provisions of section 40(a)(ia) are not applicable. We are of the considered opinion that the payments made by the assessee company towards the services used relating to data storage, transfer etc., from Amazon Web Services are not in the nature of royalty within the meaning of section 9(1)(vi) of the I.T. Act. Therefore, the provisions of section 195 of the I.T. Act are not applicable and accordingly, the assessee, in our opinion, is not required to deduct any TDS from payments so made. Therefore, the disallowance made by the Assessing Officer u/s 40(a)(ia) of the Act and sustained by the learned CIT (A) is directed to be deleted. Grounds raised by the assessee are accordingly allowed. - Decided in favour of assessee.

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• 2022 (8) TMI 1024
  Validity of rectification order passed u/s. 154 - GP Estimation - HELD THAT:- It is noticed that the Ld. CIT(A), Vijayawada while passing the original order dated 10/08/2018 has considered the decision of the Hon ble ITAT [ 2018 (7) TMI 872 - ITAT VISAKHAPATNAM] by allowing the estimation of gross profit @ 15% of the turnover for the AY 2007-08. Since the facts are similar for the AY 2009-10, we find that the rectification order passed u/s. 154 of the Act by the Ld. CIT(A), Vijayawada did not have legs to stand. Therefore, we are of the considered view that the rectification order passed by the Ld. CIT(A) dated 26/07/2019 deserves to be set-aside the original order of the Ld. CIT(A), Vijayawada dated 10/08/2018 be restored and the appeal of the assessee is hereby allowed. It is ordered accordingly. Appeal of assessee allowed.

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• 2022 (8) TMI 1023
  Estimation of net profit - estimation of assessee turnover - Assessing Officer s estimation of net profit rate at 8% - HELD THAT:- As in applying the net profit rate of 8%, arbitrarily and illegally ignored the history of net profit rates of the assessee himself. Undisputedly, in the immediately preceding assessment year 2013 14, the assessee s case stands assessed in scrutiny assessment under section 143(3) of the I.T. Act, at a net profit rate of 0.172%, which has been accepted by the assessee. The Assessing Officer s order was thus a result of complete non-reading of material documentary evidence in the shape of comparable case of the assessee s own assessment order for assessment year 2013 14, non-applicability of res judicata to the income tax proceedings notwithstanding. It goes without saying that where the books of account have been rejected, the history of the case, of both earlier as well as succeeding assessment years, becomes the most relevant criterion for estimation of income. The transactions for assessment year 2013 14 having not been found to be a sham or malafide, the ld. CIT(A) has correctly applied that year s net profit rate of 0.172% to the year under consideration. CIT(A) has duly taken into consideration the afore-discussed shortcomings in the assessment order. It cannot, as such, be said that the ld. CIT(A) did not give any reasonable cause for deleting the addition, or that he did not point out any discrepancy in the view expressed by the Assessing Officer in his order. - Decided against revenue.

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• 2022 (8) TMI 1022
  Addition u/s 69 - Share of the assessee paid for purchase of Savargaon land - addition based on seized material - seller parties Kokani Group filed a petition before Settlement Commission who passed an order u/s 245D(4) wherein the seller admitted of having received sale consideration in cash from Thakker Group - CIT-A allowed the appeal of the assessee by following the order of the coordinate bench in the case of the other co-owners which were decided on the same set of facts and the same transaction involving same seized material - HELD THAT:- As decided in the case of other co buyers M/S. DHANANJAY MARKETING PVT. LTD. [ 2021 (5) TMI 664 - ITAT PUNE] and M/S. ASIAN FOOD PRODUCTS [ 2021 (6) TMI 719 - ITAT PUNE] coordinate bench has considered the above issue and held that that the learned assessing officer has failed to bring on record any reliable evidence to prove that the respondent assessee has made investment in purchase of land over and above the stated consideration - it cannot be said that the Co-ordinate bench did not consider the seized documents properly. The coordinate bench also considered the statement recorded u/s 132 (4) of the act of the company family as well as the preliminary restatement recorded u/s 131 - The coordinate bench in paragraph number 12 has dealt with such statement. In paragraph number 25 26 has considered the statement of the sellers as well as the statement of cross examination wherein all the buyers of confirmed that they have not received any own money consideration on the sale of land from Thakkar group. Further with respect to the disclosure made by them of additional income the affidavit is were filed which were considered in paragraph number 29 of the order that the same disclosure was made with an intention to buy peace and avoid further litigation and also denied the knowledge of receipt of the own money consideration is the subject transaction of sale of land to Thakkar group. It also dealt with in paragraph number 32 with respect to the additional income disclosed by the vendor s before the settlement commission. In view of this the coordinate bench has clearly taken into consideration all the statements of the family members of the Kokani group as well as disclosure made by them before the settlement commission. Merely because there is an error in mentioning the date of search in the order of the coordinate bench does not make the findings of the coordinate bench not binding on us. Further merely as the orders were passed either u/s 153A on u/s 153C, the findings of the coordinate bench does not change because the same was rendered after considering seized material, statement of the vendors, disclosure of the vendors before the settlement commission, the statement in cross examination by the vendors denying receipt of any on money consideration. Thus in the present case, the learned it authorised representative has produced before us 2 orders of the coordinate bench in case of the joint buyers of the property along with the respondent assessee is in this appeal. On the identical facts, same transaction, on the basis of same seized material, on the basis of same statements of the buyer and disclosure made by them before the settlement commission, in those cases of the joint buyers the additions have been deleted. Therefore, those orders become binding on us as there is no change in any of the facts pointed out before us which is a material bearing on the findings given by the coordinate bench. Therefore judicial discipline demands that those judicial precedents is to be followed. CIT (A) has followed two decision of coordinate benches in case of two different joint buyers of the same property on the same set of facts, no infirmities can be found therein. Therefore, we respectfully following the decision of the coordinate bench in case of Dhananjaya marketing private limited and Asian Foods products Ltd, confirm the orders of the ld CIT (A) and accordingly all the grounds of appeal are dismissed.

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• 2022 (8) TMI 1021
  Depreciation on goodwill - Scheme of amalgamation sanctioned - CIT-A allowed depreciation claim - HELD THAT:- AO has made remarks on this issue merely on assumption and without considering the detail written submission made by assessee on the scheme of amalgamation approved by the Hon ble jurisdictional High Court and the effect of the same was given in the books of account of the assessee in accordance with the direction of Hon ble jurisdictional High Court. We also find that Hon ble jurisdictional High Court in para-9(vii) of its order approving the scheme made observation; Upon sanction of the scheme, the shares held by the transferee company in the transferor company shall get cancelled and no new shares shall be issued by the transferee company against such shares. The issue of depreciation on goodwill no more res integra after the decision of Hon ble Supreme Court in the case of Smifs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT ] wherein it has been held that goodwill is an asset within the meaning of Section 32 of the Act and depreciation on goodwill is allowable. We find that Hon ble Delhi High Court in the case of Triune Energy Services (P.) Ltd. [ 2015 (11) TMI 1218 - DELHI HIGH COURT ] wherein it was held that goodwill is an intangible asset providing a competitive advantage to an entity, this includes a strong brand, reputation, a cohesive human resources, dealer network, customer base etc. So far as objection of ld CIT-DR for the revenue that due to the amendment in section 32, the goodwill is no more depreciable asset, we are of the view that the amendment brought in the Act by way of Finance Act 2021 will be applicable prospectively and not in the year under consideration. In view of the aforesaid factual and legal discussion, we do not find any legality in finding of Ld. CIT(A), which we affirm. In the result, the grounds of appeal raised by the revenue are rejected. - Decided in favour of assessee. Nature of expenditure - expenditure on account of replacement of certain parts of the machineries - AO held that on replacement of such parts the assessee will get long term benefit which is enduring in nature and the expenses are not in the nature of current repairs - HELD THAT:- CIT(A) after considering the submissions of the assessee held that the assessee has replaced the exiting part of machine or replaced the parts which have become obsolete and the replacement was essential. It was held that the replacement has not increased the existing capacity, so entire expenditure was treated as revenue expenditure. We find that on similar disallowance the assessee was allowed relief by Tribunal and granted relief to the assessee in earlier AYs. AO himself allowed similar relief to the assessee from AY 2017-18 onwards. Hence, we find that ground of appeal is squarely covered in favour of assessee and against the Revenue. Thus, following the principal of consistency we affirm the order of Ld. CIT(A). In the result, this ground of appeal is dismissed. TDS u/s 194H - Addition 40(a)(ia) - non-deduction of tax at source on the discount given to dealers - HELD THAT:- We find that before CIT(A) the assessee filed detailed written submissions and relied on various case laws. The ld CIT(A) after considering the submissions of the assessee held that the issue is covered by the decision of his predecessor for AY 2009-10, 2010-11 2011-12 and following the same the assessee was allowed relief. We find that order of ld CIT(A) in earlier years has been affirmed by Tribunal and further appeal before High Court has already been dismissed. Hence, we do not find any infirmity in the order of ld CIT(A), which we affirm. In view of the aforesaid legal position, we do not find any merit in the ground raised by the revenue. Disallowance of corporate social responsibility claimed as business expenses - AO disallowed the claim of such deduction u/s 37(1) of the Act and added back to the total income of the assessee in the computation of total income - HELD THAT:- CSR is no longer charity or philanthropy instead it should be imbibed in the corporate culture that leads to responsible business. The assessee stated that the CSR contribution has helped in building brand image of the company and publicity among the agrarian community. The activities implemented in the rural areas are publicized on account of large scale so message reaches to the masses. To ensure that the assessee-company gets better publicity, representatives from its team participates in every event like designing the programme, discussion with sarpanch gram Sabha, Bhoomi Pooja, concurrent monitoring evaluation, inauguration event, etc., for the said project. To get wider acceptability, the assessee also installs inaugural stone, boards, banners, etc. wherever and whenever applicable and said project implemented by assessee helps to build a good rapport among the villagers and the agrarian masses. The assessee relied on the judgment of Hon ble jurisdictional High Court in assessees own case for assessment years 1996-97 to 1997-98 [ 2013 (5) TMI 759 - GUJARAT HIGH COURT ], wherein the Hon ble jurisdictional High Court relied on the judgment of Hon ble Supreme Court in the case of Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. CIT [ 1996 (10) TMI 2 - SUPREME COURT ] and allowed the contribution given to NGO as deduction. CIT(A) after considering the submissions of the assessee accepted the claim and held that Explanation-2 inserted to section 37 (1) is prospective in nature as the same has been brought in the Act with reference to section 135 of Companies Act. We find that similar disallowance was made in AY 2009-10 and on appeal before Tribunal the disallowance was deleted and on further appeal by revenue before High Court, the order of the Tribunal was upheld in [ 2019 (8) TMI 1288 - GUJARAT HIGH COURT ] Thus, respectfully following the order of High Court, we affirm the order of ld CIT(A) with additional observation. In the result, this ground of appeal is also dismissed.

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• 2022 (8) TMI 1020
  Revision u/s 263 - Deduction u/s 80P - as per CIT AO had wrongly accepted its section 80P(2)(a) deduction claim regarding interest income derived from deposits made in the co-operative banks - HELD THAT:- We have given our thoughtful consideration to the Revenue s foregoing arguments supporting the learned PCIT s revision directions and find no merit therein as this tribunal s recent co-ordinate bench s order in Rena Sahakari Sakhar Karkhana Ltd [ 2022 (1) TMI 419 - ITAT PUNE] CIT-DR could hardly pinpoint any distinction on facts and on law regarding the instant issue of 80P deduction claim raised on interest income derived from deposits made in co-operative banks. We accordingly reverse the learned PCIT s revision directions in issue - Assessee appeal allowed.

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• 2022 (8) TMI 1019
  Estimation of Income - Bogus purchases - claim of the assessee that it has earned gross profit of 5.07% - HELD THAT:- We find that this aspect was not raised and thus, was not considered by any of the lower authorities. Even in its appeal before the learned CIT(A), the assessee did not appear despite issuance of various notices. However, during the hearing before us, learned AR gave a personal undertaking that in case the matter is remanded to the learned CIT(A) for de novo adjudication, she will appear under any circumstances. Considering the undertaking given by the learned AR and also in view of the fact that the assessee did not appear before the learned CIT(A) and apart from filing one written submission, no other details were filed before the learned CIT(A), therefore, we deem it appropriate to remand this issue to the file of learned CIT(A) for de novo adjudication after consideration of all details as may be filed by the assessee. Further, the assessee is directed to appear before the learned CIT(A) on all the dates of hearing as may be fixed without any default and file all details/ documents in support of its claim. Thus, ground no.1 raised in assessee s appeal is allowed for statistical purpose.

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• 2022 (8) TMI 1018
  Proportionate deduction u/s 54 / 54F - Computation of capital gain - direct construction cost as stated to be paid by the assessee was held to be not admissible for want of documentary evidence and the pre-construction housing loan was held to be not admissible - HELD THAT:- The assessee has paid construction cost under a construction agreement. The perusal of ledger account of the said party as placed on record would reveal that majority of these payments are through banking channels which are evidenced by assessee s bank statements. Shri J. Bhaskaran responded to the notice issue by AO u/s 133(6) and file the requisite details. AO found that the said party was not maintaining books of accounts and no tax return was filed since the income was stated to be below taxable limit. However, the aforesaid fact, in our opinion, could not jeopardize assessee s claim since the assessee had paid the amount through banking channels under a construction agreement, a fact which stood confirmed by the contractor. In such a case, restricting the construction cost to the extent of Rs.49.95 Lacs could not be held to be justified. Accordingly, we direct Ld. AO to allow full construction cost of Rs.74.09 Lacs as paid to the contractor. So far as cost of Rs.40.88 Lacs stated to be incurred by the assessee is concerned, upon perusal of ledger as placed on record, it could be seen that the assessee has paid the construction cost of Rs.5.18 Lacs through banking channel whereas the remaining amount of Rs.35.67 Lacs has been paid in small trenches for various construction work which is evident from the narrations appended with each of the entry. In such a case, the denial of deduction of the same is not justified. The Ld. AO is directed to allow this cost. It could be seen that the assessee has not claimed any deduction on sale of property which is situated at Kolathur and in fact, the computations have resulted into capital loss for assessee on sale of this property. Therefore, the sale consideration of this property was not to be considered while computing proportionate deduction u/s 54 / 54F. We order so. The Ld. AO is directed to re-compute assessee s income. Assessee appeal partly allowed.

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• 2022 (8) TMI 1017
  Nature of expenditure - deduction of expenditure incurred towards advertisement - whether allowable as business expenditure or cash irretrievably lost? - HELD THAT:- Benefit derived from the impugned expenditure is not at all for the assessee and it goes directly to the AE only. It was also held that such transactions would be international transaction. Following the same, the ground raised by the assessee was dismissed. The assessee has taken an alternative plea that such expenditure should be allowed as business expenditure or irretrievable cash loss. It has been submitted by Ld. AR that even if the expenditure is not incurred by the assessee for its business activity, however, it was incurred in the course of business and the same being an irreparable loss would be allowable as business income. However, we decline to accept this argument in view of the fact that the dispute under consideration is determination of ALP of advertisement expenditure as paid by the assessee. The payment of the same is not under dispute by revenue. This transaction has been held by the bench to be an international transaction and therefore, the same has be benchmarked as per Transfer Pricing mechanism. TPO has determined the ALP of the same as Nil despite the fact that the assessee has incurred actual expenditure. The point in dispute is ALP of advertisement expenditure and nothing more. The said disallowance has not been made u/s 37(1). Therefore, this ground stand dismissed. Interest on advances granted by the assessee to its AE - We find that this issue has been decided by the bench for AY 2003-04 [ 2016 (5) TMI 1589 - ITAT CHENNAI] as held that non-charging of interest attracts Transfer pricing provisions and it is appropriate to charge interest @LIBOR+2% as held by Mumbai Tribunal in M/s Aurinpro Solutions Ltd. [ 2013 (11) TMI 806 - ITAT MUMBAI] . Respectfully following the same, Ld. AO is directed to compute the interest at LIBOR+2%. This ground stand partly allowed. Apportionment of Common Expenses for Sec.80-IC - Allocation of expenditure - HELD THAT:- Only design and development cost and assembly share of common facilities have been allocated on the basis of number of watches produced. The Ld. AO has apportioned the same on the basis of turnover. In our considered opinion, design and development cost and assembly share of common facilities are not proportional to the number of watches produced. The expenditure is largely salary expenditure of the two departments. It could not be said that the expenditure would be directly proportional to the number of watches produced. Rather, such expenditures would largely depend upon the decision of the management to decide as to how much expenditure was to be incurred to design / develop new products and the same may vary to a great extent in different periods. In such a case, the quantum of expenditure would have no relation with the number of watches and allocating the same on such basis would give absurd results as held by lower authorities. Therefore, the more appropriate method of allocation would be based on turnover as done by the assessee for other overhead expenses. Therefore, we concur with the stand of lower authorities, in this regard and find no reason to interfere in the same. This ground stand dismissed. All the ground stand disposed-off in terms of our above order.

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• 2022 (8) TMI 1016
  Deduction u/s 80P(2)(a)(i) - AO held that the assessee has violated the principle of mutuality since it was dealing with non-members - contended that majority of the interest income is earned out of investments made with Central Co-operative Banks and is in compliance with the requirement under the Karnataka Co-operative Societies Act and Rules - HELD THAT:- If the amounts are invested in compliance with the Karnataka Co-operative Societies Act, necessarily, the same is to be assessed as income from business, which entails the benefit of deduction u/s 80P(2)(a)(i) of the I.T.Act. Insofar as deduction u/s 80P(2)(d) of the I.T.Act is concerned, we make it clear that interest income received out of investments with co-operative societies is to be allowed as deduction. Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. Ors. [ 2021 (1) TMI 488 - SUPREME COURT] had settled various issues for claiming deduction u/s 80P(2)(a)(i). Thus the matter needs to be examined afresh by the A.O. de hors the observations of the CIT. The A.O. is directed to follow the dictum laid down by the Hon ble Apex Court in framing the fresh assessment. Thus, this issue is remitted to the files of the A.O. for fresh consideration in the light of our above observation. Interest income earned from other sources from deposits with banks are not entitled to deduction u/s 80P(2)(a)(i) - HELD THAT:- As the assessment year involved in the present appeal is A.Y. 2017-2018 and the judgment of the Hon ble Kerala High Court in the case of Chirakkal Service Cooperative Bank Ltd. v. CIT [ 2016 (4) TMI 826 - KERALA HIGH COURT] is directly on the issue. Being so, the judgment of the Hon ble Madras High Court in the case of Veerappampalayam Primary Agricultural Cooperative Credit Society Limited [ 2021 (4) TMI 1169 - MADRAS HIGH COURT] which is relating to assessment year 2018-2019, cannot be applied to the present case, and accordingly, the argument put forth by the learned DR is rejected. Unexplained cash deposit u/s 69A - HELD THAT:- As in the interest of justice and equity, we remit the matter to the files of the A.O. to give directions to the assessee to furnish PAN and name and address of the respective members who deposited the amount into the account of the assessee. Accordingly, we direct the A.O. to consider the issue afresh after affording a reasonable opportunity of being heard to the assessee.

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• 2022 (8) TMI 1015
  Disallowance u/s 14A - Disallowance of expenditure to extent of the exempt income - HELD THAT:- CIT(A) has rightly restricted the disallowance to the extent of the exempt income. Significantly, in the case of PCIT vs. M/s. ERA Infrastructure (India) Ltd. [ 2022 (7) TMI 1093 - DELHI HIGH COURT ] had the occasion to examine the law on applicability of Section 14A having regard to the newly inserted Explanation to Section 14A as codified by Finance Act, 2022. The Hon ble High Court held that the aforesaid Explanation cannot be presumed to be retrospective in operation. As a corollary, the law prevailing prior to the insertion of Explanation would continue to apply and shall not be guided by the Explanation being prospective. We therefore see no reason to interfere with the order of the CIT(A) which is in sync with extant law as expounded by judicial precedents. - Decided against revenue.

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• 2022 (8) TMI 1014
  Addition on unsecured loan as unexplained cash credit u/s 68 - HELD THAT:- CIT(A) deleted the addition in cases where the concerned parties had confirmed the transaction and the loan amount also matched. In other cases where there was a difference of the amount confirmed by the concerned parties as against the loan amount declared by the assessee, Ld. CIT(A) added the difference. In case where there was no reply or notice could not be issued for want of address etc., the Ld. CIT(A) confirmed the addition. After reconciliation of the entire figures, out of the total loan amount Ld. CIT(A) confirmed the addition of and deleted the addition of the remaining amount as the same being confirmed by the concerned parties in the independent inquiries conducted by the Ld. AO by way of issuing summons u/s 133(6) of the Act. It is pertinent to note here, in some cases Ld. A/R had furnished the PAN, address of the parties at a later stage in the rejoinder to the remand report which was rejected by the Ld. CIT(A). However, the assessee has not filed any appeal against the said order of the Ld. CIT(A). The Ld. D/R could not point out any defect or error in the order of the Ld. CIT(A) warranting our interference in this respect. Therefore, the order of the Ld. CIT(A) is upheld on this issue. Disallowance out of interest expenditure on loan amount - CIT(A) has deleted the proportionate interest up to the extent the addition on account of the loan amount has been deleted - HELD THAT:- CIT(A) has recomputed the interest on the addition confirmed at Rs. 3,22,73,728/- in respect of loan amount and accordingly restricted addition on account of interest to Rs. 5,69,693/-. There is no infirmity in the order of Ld. CIT(A) in this respect also. Ad hoc disallowance made out of the business loss claim - CIT-A deleted addition - HELD THAT:- CIT(A) in the impugned order has observed that the Ld. AO had made the aforesaid ad hoc disallowance only on estimation basis without giving any reasoning in this respect. The Ld. CIT(A) has further noted that the disallowance has been made just on mere presumption only that there was neither material nor reason nor rational for the Ld. AO to make the aforesaid disallowance. He further noted that even the accounts of the assessee have been audited as required u/s 44AB of the Act. He, therefore, deleted the disallowance so made by the Ld. AO. After hearing the Ld. representative of both the parties, we do not find any reason to interfere into the order of the Ld. CIT(A). Disallowance made u/s 14A of the Act of interest expenditure - CIT-A restricted addition - HELD THAT:- AO had made the disallowance of entire interest expenditure whereas the Ld. CIT(A) has restricted the disallowance as per the working given by the assessee as per Rule 8D of the Income Tax Rules, 1962 for computing the disallowance u/s 14A of the Act. In view of this, we do not find any infirmity in the order of the Ld. CIT(A) on this issue also.

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• 2022 (8) TMI 1013
  Revision u/s 263 - reassessment order as erroneous - period of limitation - whether credit entries available in the Bank account of the assessee against the name of the concerns mentioned in the reasons is to be added or not? - HELD THAT:- The assessee has explained that she does not have any credit entry against the names of these companies and, therefore, no addition can be made on the basis of her reply. No addition was made. If no addition was made in a reassessment order on the issue for which it was reopened, then any other addition could not be made. This has been propounded unanimously by three Hon ble High Courts, i.e. Hon ble Bombay, Delhi and Gujarat. The Hon ble High Courts were construing the expression and also implied in section 147 to mean that any other income could be added if addition is being made on the item for which assessment was reopened. Therefore, an error under section 263 could be pointed out in the reassessment order on the issue on which it was reopened. If ld. Commissioner was of the view that once the assessment order was reopened then ld. Assessing Officer was required, not only to examine the item for which it was reopened, but any item which exhibits escapement of income and since ld. Assessing Officer failed to examine the other item which in the opinion of ld. Commissioner as escaped income and, therefore, he termed the reassessment order as erroneous is patently contrary to the decision of the Hon ble three High Courts. Thus the reassessment order cannot be termed erroneous for not examination of other issues than the one it was reopened . As far as original assessment order is concerned, i.e. the order dated 28.12.2016 passed under section 153A/143(3), the action under section 263 is time barred in view of the Hon ble Supreme Court decision in the case of CIT vs.- Alagendra Finance Limited [ 2007 (7) TMI 304 - SUPREME COURT] We are of the view that the impugned order is not sustainable. It is quashed. Assessee appeal allowed.

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• 2022 (8) TMI 1012
  Accrual of income - method of accounting to recognize the revenue - Addition made for excess interest spread ( EIS ) income earned on assignment of receivables - accounting methodology of the assessee - HELD THAT:- The undisputed facts that emerge are that the assessee has transferred certain pool of outstanding debts owned by it by way of absolute sale to SPV by receiving lump-sum purchase consideration which is equal to the book value of the pool of debts transferred by the assessee. The SPV funds the deal by issuing pass-through certificates to the beneficiaries which get return of approx. 7%. Thus, the assessee gets immediate recovery of the principal outstanding. These debts would generate interest income in the range of approx. 14% over their respective tenure. As per the terms of the agreement, the assessee would be entitled for excess interest spread (EIS) as generated from the debts over their tenure which is in the range of 4 years to 16 years. The assessee would collect the debts on due date and deposit the receivables in a separate Collection and Payout Account . The surplus generated by the SPV (which would be in range of 7% approx.) in this account would be distributed as per unique mechanism which is known as Waterfall mechanism . The assessee is following consistent method of accounting to recognize the revenue in this manner. Following this consistent method, the income on these transactions has been offered in subsequent years also. The income thus offered by the assessee is on the reasoning that interest spread pertains to future years and its accrual and receipt is contingent upon certain conditions which cannot be estimated on the date of agreement. The said treatment of EIS is stated to be in line with the prudential norms prescribed by RBI and the principles of prudence - similar practice is followed by the industry. Notably, if income is utilized as per the agreed waterfall mechanism, there would be situations where the residual EIS paid to assessee could be nil or significantly lesser or even higher (if shortfalls in previous months are collected in a subsequent month at one go) than the amounts which are set out in the schedule, wherein scheduled amounts are based on ideal cash flows. Further, the agreement provides that the schedule of investor payouts forming part of the agreement may be revised from time to time in accordance with the Transaction Documents whether on account of pre-payments, part payments or otherwise. Payout schedule is indicative in nature and may undergo alterations as per the provisions of the Deed. Accordingly, the time at which the residual EIS as receivable by the assessee would become determinate only on the day when the Trust is aware of the amounts which are credited in the Collection and Payout Account and the quantum of monies which have to be utilized for meeting any statutory dues of the Trust or the expenses due and payable by the Trust including fees and interest payable to the persons making available the External Credit Enhancement and also the quantum of monies which are required for meeting the overdue Pass Through certificate (PTC) Yield in respect of any shortfalls in Investor payouts in previous months. All these amounts could only be determined on each payout date. In the present case, the receipt of EIS is uncertain and the same may or may not accrue to the assessee over the terms of the loan. The same has already been noted by us in preceding paras 4.8 4.9 of the order. The assessee, following a consistent method of accounting, has offered EIS to tax on proportionate basis as and when they have accrued over the tenure of loan and the same has been accepted by revenue. The said methodology is in accordance with the RBI norms as well as AS-9 which provide that in case the revenue could not be measured with reasonable certainty, a suitable provision thereof should be made. However, in the present case, we find that EIS may not have even accrued to the assessee in future years and thus, no such provision could be made in this year. Therefore, keeping in view the principle of prudence as well as rule of consistency, no fault could be found with the accounting methodology adopted by the assessee to recognize the revenue under securitization transactions. AO has arrived at estimated income under such arrangement by applying the present value factor on future estimated earnings, the receipt of which was uncertain. We concur with the submissions of Ld. AR that such a methodology has not been recognized under Income Tax Act and only the real income has to be assessed to tax. Thus we direct Ld. AO to accept the accounting methodology of the assessee and delete the impugned addition. The corresponding ground thus raised stand allowed. Deduction of education cess - HELD THAT:- This issue has now been settled by Finance Act, 2022 wherein amendment to Sec.40(a)(ii) has been brought retrospectively with effect from AY 2005-06 by way of insertion of Explanation-3 which read as Explanation 3-For the removal of doubts, it is hereby clarified that for the purposes of this sub-clause, the term tax shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax; Considering the same, we would hold that no such deduction is available to the assessee. This ground stand dismissed.

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• 2022 (8) TMI 1011
  Addition of income from unaccounted sales - additional income was declared by the assessee in the statement recorded u/s 132(4) - HELD THAT:- In view of the above finding of the in the case of Arti Gases v. Director of Income-tax (Investigation) [ 2000 (5) TMI 10 - GUJARAT HIGH COURT] we hold that the statement recorded subsequent to the search by the ADIT has got evidentiary value and can be relied upon in making the addition - Hence, the above contention raised by the AR is rejected as devoid of any merits. Excess stock found during the course of search - AO in the assessment order has stated that as per the recorded statement from Mr.Aravind u/s.132(4) that the excess stock belongs to N R Halagappa Sons and N R Halagappa Company. During the course of hearing the bench questioned whether any addition towards the excess stock is made in the hands of partnership firm N R Halagappa Company for which the DR could not provide any details - the contention of the ld DR is that the CIT(Appeals) have merely accepted the statement of assessee without verification of facts or records. Further it is the submission of the AR that the assessee was not provided with sufficient opportunity to confront the statement recorded from Mr.Arvind as the copy of the same was not provided. In view of the above discussion, we remit the issue back to the AO, for verification of the issue afresh after giving a reasonable opportunity of being heard to the assessee. Addition towards capital account balance in M/s. N R Halagappa Company - CIT(Appeals) has verified and given a clear finding of each of the line items pertaining to the movement of the balance during the year under consideration and has decided on the taxability. However the CIT(Appeals) has not verified whether the balance is correctly reflected in the assessee s books of accounts. Tribunal in the individual case for AY 2012-13 has remitted that issue back to the AO to verify the whether the investments are recorded in the books including the opening balance. Further in the present case, the AO has made the addition on the basis that the capital account of the assessee in the partnership firm is not reflecting in the proprietorship balance sheet. This, in our considered view, is not the correct basis as the balance sheet of the proprietorship would only reflect the transaction that are routed through the same and would not reflect the transactions if any done by the assessee directly from the HUF account. Therefore it is important that the consolidated balance sheet of the assessee HUF needs to be verified to examine if the transactions of partnership firm are correctly recorded in the assessee HUF account. We therefore remit this issue to AO to verify the consolidated statement of accounts of the assessee and decide the issue afresh in accordance with law. Needless to say that the assessee should be given an opportunity of being heard. - Appeal by the revenue is allowed for statistical purposes

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• Benami Property

• 2022 (8) TMI 1047
  Constitutional validity - Amendment to Prohibition of Benami Property Transactions Act, 1988 as amended by the Benami Transactions (Prohibition) Amendment Act, 2016 - retrospective or prospective effect - Attachment of property - Punishment of impresonment for offence - HELD THAT:- In the case at hand, the authority that initiates such confiscation, is granted extensive powers of discovery, inspection, compelling attendance, compelling production of documents. They are further empowered to take the assistance of police officers, custom officers, income tax officers and other relevant officers for furnishing information. It is also pertinent to note that any person who fails to furnish information, is subjected to a penalty of Rs.25,000/( Rupees TwentyFive Thousand) under Section 54(A). It is also necessary to note that a person who supplies false information before any authority, is subjected to rigorous imprisonment of upto 5 years under Section 54 of the 2016 Act. This Court is aware of the fact that the Right to Property is not a fundamental right, rather it is a constitutional right that can be abridged by law. However, this Court is not concerned with the constitutionality of such a measure, wherein such considerations have to be balanced. Rather, the focus is only on the characterization of retroactive confiscation, which in these facts and circumstances, are punitive. In view of the fact that this Court has already held that the criminal provisions under the 1988 Act were arbitrary and incapable of application, the law through the 2016 amendment could not retroactively apply for confiscation of those transactions entered into between 05.09.1988 to 25.10.2016 as the same would tantamount to punitive punishment, in the absence of any other form of punishment. It is in this unique circumstance that confiscation contemplated under the period between 05.09.1988 and 25.10.2016 would characterise itself as punitive, if such confiscation is allowed retroactively. Usually, when confiscation is enforced retroactively, the logical reason for accepting such an action would be that the continuation of such a property or instrument, would be dangerous for the community to be left free in circulation. When we come to the present enactment, history points to a different story wherein benami transactions were an accepted form of holding in our country. In fact, the Privy Council had, at one point of time, praised the sui generis evolution of the doctrine of trust in the Indian law. The response by the Government and the Law Commission to curb benami transactions was also not sufficient as it was conceded before this Court that Sections 3 and 5 of the 1988 Act in reality, dehors the legality, remained only on paper and were never implemented on ground. Any attempt by the legislature to impose such restrictions retroactively would no doubt be susceptible to prohibitions under Article 20(1) of the Constitution. Looked at from a different angle, continuation of only the civil provisions under Section 4, etc., would mean that the legislative intention was to ensure that the ostensible owner would continue to have full ownership over the property, without allowing the real owner to interfere with the rights of benamidar. If that be the case, then without effective any enforcement proceedings for a long span of time, the rights that have crystallized since 1988, would be in jeopardy. Such implied intrusion into the right to property cannot be permitted to operate retroactively, as that would be unduly harsh and arbitrary. We hold as under: a) Section 3(2) of the unamended 1988 Act is declared as unconstitutional for being manifestly arbitrary. Accordingly, Section 3(2) of the 2016 Act is also unconstitutional as it is violative of Article 20(1) of the Constitution. b) In rem forfeiture provision under Section 5 of the unamended Act of 1988, prior to the 2016 Amendment Act, was unconstitutional for being manifestly arbitrary. c) The 2016 Amendment Act was not merely procedural, rather, prescribed substantive provisions. d) In rem forfeiture provision under Section 5 of the 2016 Act, being punitive in nature, can only be applied prospectively and not retroactively. e) Concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act, viz., 25.10.2016. As a consequence of the above declaration, all such prosecutions or confiscation proceedings shall stand quashed. f) As this Court is not concerned with the constitutionality of such independent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds, the aforesaid questions are left open to be adjudicated in appropriate proceedings.

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• Customs

• 2022 (8) TMI 1010
  Smuggling - Gold Ornaments - prohibited item or restricted item - pendency of adjudication will stand in the way to release the gold articles to the petitioner - Section 110-A of the Customs Act, 1962 - HELD THAT:- Section 125 of the Customs Act, 1962, gives rights to the owner or from whom the goods have been seized to redeem such goods on payment of fine. Further, this Court consistently held that goods can be handed over on executing 50% of the Bank guarantee on the duty amount. Hence, this Court permits the petitioner to make an application for provisional release under Section 110-A, on such application, when received, shall be disposed of by the Adjudicating Authority, after hearing the petitioner within a period of two (2) weeks from the date of receipt of the application. This Court directs the petitioner to execute 50% of the Bank guarantee in lieu of customs duty and on execution of the Bank guarantee, the respondents are directed to hand over the gold articles seized from the petitioner, recorded in Mahazar, dated 07.11.2019 within two weeks from thereon. It is for the respondents to proceed with the adjudication proceedings to save the revenue to the Nation. The adjudication proceedings shall be completed within a period of three months from the date of receipt of a copy of this order. Petition allowed.

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• 2022 (8) TMI 1009
  Manipulation of exports - wrongful availment of export benefits - collection of money from the visiting tourists from CIS countries and deposited such amounts in to the accounts of various manufacturers showing the same to be advance payment for the fabrics / clothes purchased or imported by such tourists - statement of Shri Goldy and other exporters and local manufacturers, relied upon by Revenue - reports received from Customs Overseas Network and statement of the CHA, also relied upon by revenue - HELD THAT:- The appellants strongly contend that they are actual individual exporters; they have received payment for the export; they have received the foreign exchange as per guidelines issued by RBI; the customs officers have examined the cargo and have cleared for export; therefore, export benefits were rightly taken; DRI has no jurisdiction to issue the show cause notice to recover drawback or DEPB; Rule 16 and Rule 16A of the Drawback rules cannot be invoked and the impugned having confirmed the demands jointly and severely is bad in law and is liable to be set aside; as the goods held to be liable for confiscation are not export goods provisions of section 113 and 114 cannot be invoked. Reliability upon the statements of Shri Goldy and others - Retraction of statements or not - HELD THAT:- Though the department relies upon heavily on the statement of Shri Goldy, Shri Goldy has retracted his statement at the time of first opportunity when he was arrested and produced before the Court of Magistrate on 2ndJuly 2004, which is in immediate succession after recording of statement over four days in continuity - Revenue has not relied upon the statement of the suppliers and fabricators which were recorded in the course of investigation - the impugned order is bad for placing selective reliance on the evidence on record. The Department has not conclusively established that Shri Goldy was a freight forwarder and does the export benefits have accrued to him. As we found above no action whatsoever has been taken on the CHA or custom broker though his statement was recorded to the effect that Shri Goldy used to handover all the documents like shipping bills, invoices, etc. in respect of the export consignments of the fourteen exporters in question - the appellant herein are genuine traders and exporters as they have done the transaction of purchase and sale on their own account which is supported by their documents particularly their bank accounts. A freight forwarder or a C F agent is engaged in the work of receiving the goods, storing and thereafter clearing and forwarding as per the directions of the principal. A C F agent does not purchase or sell the goods on his own account. It appears that Shri Goldy simply works as an agent of the principal. The value for the purpose of exports, under the provisions of Customs Act 1962, is nothing but transaction value. If the Indian exporter can bargain and sell the goods at a higher price to the foreign buyer, the same cannot be held to be over valuation. It is the transaction value that constitutes the valuation for the purpose of exports and not certainly the intrinsic value of the goods in Indian markets. Rule 16 of the Drawback Rules is not invokable, as admittedly, the appellant exporters have received the payment for the goods exported and presented the BRC before the Authority and only thereafter, they have been granted export incentives. So far the invocation of Rule 16A of the Drawback Rules is concerned, for recovery of drawback erroneously granted, the same is also bad in the facts and circumstances, and further action under the said rule can be taken only by the proper officer , who initially assessed the shipping bills - There is no allegation of any mismatch of currency declaration form and the encashment certificate. Further the circular also permits deposit of foreign currency received by the Indian exporter in the bank. Admittedly, the foreign buyers/tourists declared their foreign currency at the time of arrival in India to the customs officer who issued currency declaration form as per law. The impugned order confirmed the recovery of drawback or DEPB jointly and severally from Shri Goldy and other Exporters. Such confirmation would undoubtedly indicate that neither the show cause notice nor the adjudication order is convinced as to who are the persons that committed the alleged irregularity or is not sure of which amount is payable by whom. The department alleges that Shri Goldy was the kingpin or mastermind and has managed the exports in the name of various exporters. In case the department was convinced about the same, they should have called upon him alone to show cause and confirm the demands on him - Alternatively, they could have confirmed the same on individual exporters. But that would have contradicted the department s stand that Shri Goldy was the kingpin - this method of confirming demand jointly and /or severally has not found favour with the Tribunal and Courts in a number of cases, and as such is not legally tenable and acceptable. Jurisdiction of DRI to issue Show Cause Notice under Rule 16/Rule 16A of Drawback Rules and Section 28 of the Customs Act,1962 - HELD THAT:- The impugned order is not maintainable on merits as no concrete tangible corroborative evidence is brought on record to sustain the allegations that Shri Goldy was a freight forwarder/kingpin exporting in the names of various firms for claiming undue export benefits; other exporters were dummy and that the goods were overvalued. The impugned order is liable to be set aside - Appeal allowed - decided in favor of appellant.

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• 2022 (8) TMI 1008
  Refund of amount deposited during investigation - amount deposited at the time of filing of the appeal or not - contention of the appellant that the amount deposited voluntarily during investigation should be treated as amount towards the pre-deposit was rejected for the reason that it was not an amount deposited at the time of filing of the appeal - HELD THAT:- The appellant had not deposited the amount towards the pre-deposit and in any view of the matter the Tribunal had even after setting aside the order appealed against remanded the matter for a fresh adjudication with a direction to the parties to maintain status quo. The appellant was bound by this order of status quo passed by the Tribunal and could not have asked for the refund of the amount deposited by the appellant voluntary during investigation, which amount had been confirmed and appropriated by the order impugned before the Tribunal in the earlier round of proceedings. Appeal dismissed.

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• 2022 (8) TMI 1007
  Levy of penalties upon the Appellants u/s 112(a) of the Customs Act, 1962 and under Section 114AA of the Customs Act, 1962 - alleged involvement of forged /fake VKGUY /DEPPB license and imports there under - opportunity of personal hearing not granted - requests for cross examination was also not considered by the Ld. Commissioner - violation of principles of natural justice - HELD THAT:- In the impugned matter Appellants request for adjournment of hearing was not considered by the Ld. Commissioner. Moreover Appellant received the hearing notice dated 11.03.2014 on 19.03.2014 fixing personal hearing on 18.03.2014 i.e. after the date of hearing. The Appellant vide letter dated 21.03.2014 immediately informed the Ld. Commissioner that they received hearing notice after the date of hearing. However without considering the Appellant s request Ld. Commissioner has decided the matter ex-parte. It is also observed that the Appellants have sought for cross examination but the same was also not considered by Ld. Commissioner. It is the basic principle of the Natural justice that no one can be condemned unheard. Natural Justice is an un codified law purely based on principle of substantial justice and judicial spirit. Principles of Natural Justice are the cardinal principles, which must be followed in every judicial and quasi judicial proceeding. Authorities should exercise their powers fairly reasonably impartially in a just manner. They should not decide a matter in backside of the party. There is clear violation of natural justice. Therefore, ex-parte order passed by the Adjudicating Authority will not sustain - the matter remanded to the Adjudicating Authority for passing a fresh order after granting sufficient personal hearing. Appeals are allowed by way of remand to the Adjudicating Authority.

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• 2022 (8) TMI 1006
  Maintainability of appeal - requirement of mandatory pre-deposit contemplated under Section 129E of the Customs Act, 1962, not complied with - HELD THAT:- It would be seen from a bare perusal of section 129E of the Customs Act that after 6.8.2014 neither the Tribunal nor the Commissioner (Appeals) have the power to waive the requirement of pre-deposit, unlike the situation which existed prior to the amendment made in section 129E on 06.08.204 when the Tribunal, if it was of the opinion that the deposit of duty and interest demanded or penalty levied would cause undue hardship, could dispense the said deposit on such conditions as it deemed fit to impose so as to safeguard the interest of the Revenue. The Supreme Court in Narayan Chandra Ghosh vs. UCO Bank and Others [ 2011 (3) TMI 1478 - SUPREME COURT] , examined the provisions contained in section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 relating to pre deposit in order to avail the remedy of appeal. The provisions are similar to the provisions of section 129E of the Customs Act - The Supreme Court emphasised that when a Statue confers a right to appeal, conditions can be imposed for exercising of such a right and unless the condition precedent for filing appeal is fulfilled, the appeal cannot be entertained. The Supreme Court, therefore, held that deposit under the second proviso to section 18(1) of the Act, being a condition precedent for preferring an appeal, the Appellate Tribunal erred in law in entertaining the appeal. A Division Bench of Delhi High Court in M/s Vish Wind Infrastructure LLP v/s Additional Director General (Adjudication), New Delhi [ 2019 (8) TMI 1809 - DELHI HIGH COURT] examined the provisions of section 35F of the Central Excise Act, 1944 which are pari materia to section 129E of the Customs Act and held that every appeal filed before the Tribunal after the amendment made in section 35F of the Excise Act and section 129E of the Customs Act on 06.08.2014 would be maintainable only if the mandatory pre-deposit was made. Thus, it is not possible to maintain the appeal without making the required pre-deposit - appeal dismissed.

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• Securities / SEBI

• 2022 (8) TMI 1005
  Offence under SEBI - Market manipulation of shares - Stay of the proceedings in criminal complaint during the pendency of the main petition - sole basis of filing of the complaint against the petitioner companies is that the accused No.17 has been shown to be one of the Directors of the petitioner companies and has been described to be the person in charge and responsible of the petitioner companies - HELD THAT:- This court directed for issuance of notice which was accepted by learned counsel appearing on behalf of the respondent and the matter was directed to be re-notified on 03.02.2020. However, in the meantime, it was directed that the trial court shall fix a date after the date is fixed in the present petition. On 29.11.2019, it was further noted that the respondent moved an application before the trial court seeking clarification of the impugned order and therefore, the trial court was directed to list the said application after the date was fixed in the present petition. On 03.02.2020, the said interim arrangement was extended and the matter was directed to be listed on 01.10.2020. On 08.12.2020, in absence of any appearance on behalf of the petitioner, the matter was directed to be listed on 25.03.2021. Further proceedings would show that the interim order so passed, was extended from time to time. However, there has not been any consideration on the instant application on its merit and therefore, on 03.08.2022, this court directed the parties to make their submissions on merits of the aforesaid application. The complaint in question has been filed in the year 2016 against various companies on the premise that there were irregularities in the trading and shares of the accused No.1 company. It has been alleged in the complaint that there were synchronisation of logging-in of traders, creation of artificial volumes, false market in the shares, circular trading, churning of the same stock and market manipulation. Large number of shares were made available to the Ketan Parekh Group, ostensibly under guise of fiduciary transactions and those shares were sold by Ketan Parekh entities in the market. The subject-matter of the investigation was from 09.08.2000 to 30.06.2001 and the trial court has prima facie found sufficient material to proceed against the petitioners, therefore, without expressing anything on the merits of the case, as the same would prejudice their rights to be determined at a later stage, this court does not find any reason to stay the further proceedings of the trial court. However, it is made clear that the further proceedings of the trial court would remain subject to the outcome of the instant petition.

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• Insolvency & Bankruptcy

• 2022 (8) TMI 1004
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - debt in the Appeal is in nature of operational debt within the ambit of Section 5(21) of IBC or not - existence of any pre-existing dispute or not. Whether the debt in the Appeal is in nature of operational debt within the definition of Section 5(21) of IBC? - HELD THAT:- The financial debt is an inclusive and non-exhaustive definition given under Section 5(8) of the IBC to mean a debt alongwith interest, if any, which is disbursed against the consideration for time value of money. Financial creditors have relationship with the entity as financial contract, like loan or security etc. Whereas, an operational debt as defined under section 5(21) of IBC signifies a claim in respect of the provisions of goods or services. The argument of Learned Counsel for the Appellant that insurance company has rejected the claims of Respondents treating this as Financial Arrangements and not procurement of goods and services - It is also noted from Learned Counsel for the Respondent that the said order of insurance company has already been challenged in the State Consumer Forum as such this has not reached the stage of finality. In any case, the outcome of insurance will not impact IBC Proceedings and at the best can only be one of the factors to be considered in final decision as claimed by Appellant. The Adjudicating Authority has correctly treated debt due as operational debt and therefore allowed to petition under Section 9 of IBC. Existence of any pre-existing dispute or not - HELD THAT:- As per section 9(5)(ii)(d) of the IBC, application under Section 8 must be rejected with notice of dispute has been received by the Operational Creditor, however, the existence of dispute and/or a suit of arbitration proceeding must be pre-existing i.e. before receipt of demand notice. It is therefore, important to understand as to whether there were pre-existing dispute prior to issue of demand notice or otherwise. The demand notice was issued on 24.06.2019 in Form 3. Whereas, the arbitration petition was filed by OC on 03.11.2020. CD also initiated arbitration proceeding on 07.12.2020. Thus, it is clear that both the arbitration petition filed by OC (R-1) and CD (Appellant) were later then the demand notice issued. From the series of events, it is clear that the arbitration petition as well as settlement memo were subsequent to issue of demand notice. In terms of legal provision of the IBC, pre-existing dispute can be considered only if it is pre dated then the date of demand notice which is not the case here. As such the Learned Adjudicating Authority was right, there are no pre-existing dispute and therefore, Section 9 application was maintainable. Appeal dismissed.

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• 2022 (8) TMI 1003
  Maintainability of application of CIRP (which was admitted) - application was barred by time or not - sufficient reasons, present or not, to hold that there was extension of limitation under Section 18 of the Limitation Act since the entries in the Balance-Sheets year 2012-13 to 2018-19 have not been looked into - HELD THAT:- The loan is acknowledged by the entry in the balance sheets and the opinion expressed by the Auditor cannot be read to mean that acknowledgement in balance sheet is detracted in any manner. When the acknowledgment is unequivocal and Auditor s opinion in any manner does not detract it from being an acknowledgment under Section 18 of the Limitation Act, the mere fact that the financial document contains a counter claim shall not in any manner take away the acknowledgment under Section 18 of the Limitation Act. The Adjudicating Authority has rightly held that the balance sheets contain the acknowledgment under Section 18 hence the Application under Section 7 was not barred by time - It is further to be noticed that the financial documents have been prepared in the normal course of business and submitted under the Companies Act. Appeal dismissed.

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• 2022 (8) TMI 1002
  Suspension of initiation of CIRP - Personal Guarantors - whether the benefit of Section 10A can also be claimed by a Personal Guarantor and an application under Section 95 shall be barred for a default which has arisen on or after 25.03.2020 till 24.03.2021? - HELD THAT:- When Section 10A was inserted in Chapter II of Part I no corresponding amendment was made in Chapter III of Part III of the Code. Had the legislature intended to prohibit filing of application under Section 95(1) by a creditor against the Personal Guarantor for any default committed on or after 25.03.2020, a provision akin to Section 10A could have very well be inserted in Chapter III Part III of the Code - The principles of statutory interpretations are well established. The basic principle of statutory interpretation is that when a word of statute is clear, plain and unambiguous the courts are bound to give effect to that meaning irrespective of consequences. On the basic principle of statutory interpretation, the provision of Section 10A is capable of only one meaning that is suspension of initiation of CIRP was only for a Corporate Debtor. Had the legislature intended suspension of initiation of CIRP against the Personal Guarantor also, similar amendment was also required to be made in Chapter III of Part III of the Code - Whether the suspension of insolvency resolution process has to be for Corporate Debtor and also for individuals including Personal Guarantor is the legislative policy which policy has to be looked into from the amendment brought in the Code by insertion of Section 10A. The statutory scheme does not contain any indication that CIRP shall also remain suspended for Personal Guarantor for any default between 25.03.2020 to 24.03.2021, therefore, submission of learned counsel for the Appellant cannot be accepted. Service of notice to the Appellant by the Adjudicating Authority - HELD THAT:- Application under Section 95(1) was filed by serving advance notice to the Appellant in Form-B and the Adjudicating Authority issued notice by order dated 03.02.2022 to the Personal Guarantor. Interim moratorium under Section 96 - HELD THAT:- The purpose of limited notice as has been laid down by this Tribunal in Ravi Ajit Kulkarni [ 2021 (9) TMI 60 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] is to give opportunity to the Personal Guarantor to participate in the proceedings under Section 95 to object the application filed under Section 95(1) including report of the Resolution Professional. Personal Guarantor is entitled to raise all his pleas for opposing admission of Section 95 application at the time the Adjudicating Authority passes order under Section 100. In the present case, stage of Section 100 has not yet arisen - The Appellant still have opportunity to file his reply opposing the Section 95 application as well as of filing objection to the report filed by the Resolution Professional, if not already filed. There are no ground to interfere with the order dated 03.02.2022 - The Appeal is dismissed.

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• 2022 (8) TMI 1001
  Power of the Bench to call for further information or evidence - directions upon Corporate Debtor to disclose the following documents - privity of contract - HELD THAT:- Rule 43 of the NCLT Rules, 2016 deals with powers of the Bench to call further information or evidence. There cannot be any quarrel regarding Bench having such powers. Rule 43 (1) and (2) gives ample powers to the Bench to call any information or evidence as it may consider necessary in its discretion. In the present case, the Appellant has filed an application seeking directions to the Corporate Debtor to disclose certain documents. The Adjudicating Authority after considering the application has given reasons especially that there is no privity of contract between the Appellant and the Corporate Debtor, hence, he is not entitled to call for documents. The Adjudicating Authority has exercised its discretion in accordance with law after giving due reasons which does not warrant any interference in exercise of our Appellate jurisdiction - Application disposed off.

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• 2022 (8) TMI 1000
  Liquidation of the Corporate Debtor - section 33 of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In view of the satisfaction of the conditions provided under Section 33 of the Code, the Corporate Debtor i.e. M/s Hike Leather Pvt. Ltd. is directed to be liquidated in the manner as laid down in Chapter III of the Code. The Corporate debtor is liquidated with immediate effect in the manner provided under Chapter III Part II of the IBC 2016 - Application admitted.

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• 2022 (8) TMI 999
  Seeking direction to the respondent to refund the EMD amount and to reimburse the amount given by the applicant as bank guarantee towards performance security - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It is noted that the resolution plan submitted by the resolution professional before this Adjudicating Authority under Section 30(6) of the Code, 2016 was not be accepted due to non-consideration of the claims of some home-buyers and the RP CoC were directed to consider the grievances of the Union Bank of India and other creditors, home-buyers, plot owners etc. The resolution applicant submitted the modified plan to the CoC, which was rejected by the CoC and further the CoC forfeited the EMD of the resolution applicant which is not as per the provisions of law - it is directed that the forfeited amount of the resolution applicant should be refunded to the resolution applicant within 14 days from the date of this order. Application disposed off.

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• 2022 (8) TMI 998
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- It is noted that there was a business relationship between the Operational Creditor and Corporate Debtor for which they have entered into barter agreements. Further, in Compliance with those agreements, the Operational Creditor has duly provided the services to the Corporate Debtor from time to time. Admittedly, the Corporate Debtor had paid the cash component to the Operational Creditor, as per those agreements but failed to transfer the part of the units (barter Component) to the value aggregating to Rs. 5,25,89,000/- as per Section 4 of the Code. The Demand Notice was sent on 30.12.2021. However, the Corporate Debtor neither disputed nor replied to the said Demand Notice. The Corporate Debtor admitted the debt to the extent of Rs. 5,25,89,000 due to the Operational Creditor in its affidavit in reply filed in response to Section 9 petition but expressed its inability to pay due to its financial constraints which arose because of demonetization, Covid-19, and other legal action taken by the Income Tax Department, Real Estate Regulatory Authority, etc. - there is a demand above the threshold limit and the Corporate Debtor has defaulted in paying that demand. As the date of default is 13.02.2020 and this application was filed on 10.03.2022 it is within the limitation. As per section 4 of the Code, this application meets the threshold limit. This application is complete and defect-free. Application admitted - moratorium declared.

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• 2022 (8) TMI 997
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - whether the present application is filed within limitation? - HELD THAT:- It can be seen from the records that the date of default mentioned in Form 1 Part IV is 15.09.2015 and this petition is re-filed vide Diary No. 01099 dated 30.09.2021. Pursuant to this query, it is explained by the learned counsel for the petitioner there is also subsequent default, when the cheque was bounced. But this fact is not clearly mentioned in Part IV - it may be noted that although in above compliance affidavit the last cheque provided by the respondent to the applicant got bounced/dishonoured on 18.09.2017 for an amount of Rs. 69892 has been mentioned but there is no cogent evidence provided which shows bouncing of any cheque, instead bouncing of ECS Instrument as stated in the said affidavit. As per the mentioned date of default i.e. 15.09.2015, the limitation period ends up in the month of September, 2018 but the present petition is re-filed on 30.09.2021 vide Diary No. 01099. Also the date of default as per the record available with information utility in respect of debt is 30.06.2016 and the date of last repayment is 19.08.2015 for an amount of Rs. 69,892.00/-. Even if the last date of default is taken as 30.06.2016, then also it is badly time barred. The above-said arbitration award for recovery of Rs. 23,66,868/- has been made on 25.02.2016 which again emphasise that even after passing the award no payment was made thus, the instant petition is beyond the limitation period. The present petition is time barred. Section 3 of Limitation Act, 1963 is imperative and casts a duty upon the Court to dismiss an application barred by time although limitation has not been set up as a defence - As held in Ashis Kumar Hazra V. Rubi Park Co-operative Housing Society Ltd. [ 1997 (5) TMI 452 - SUPREME COURT ] that under Section 3, it is the duty of the Court to ensure that unless proper explanation is given, the valuable right cannot be defeated. It is also held in Lachhman Singh V. Hazara Singh [ 2008 (5) TMI 747 - SUPREME COURT ] that limitation is a question of jurisdiction Section 3 puts embargo on the court to entertain a suit if it is found to be barred by limitation. The present petition is not filed within the prescribed period of Limitation, whereas, every petition/application should be filed within the prescribed period of three years and if not filed, it is liable to be dismissed in view of Section 3 of the Limitation Act - Petition dismissed.

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• 2022 (8) TMI 996
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Time limitation - HELD THAT:- The applicant, has placed on record the balance sheet of financial year ending 31.03.2017, 31.03.2018 and 31.03.2019 which reflects the entries of the loans made to the Corporate Debtor by the applicant. Further, it is well settled principle that the entries made in the Balance sheet amounts to acknowledgement of debt as per section 18 of Limitation Act, 1963. It is evident from the entry in the balance sheet itself that the Corporate Debtor has acknowledged debt. Since the Corporate Debtor has acknowledge the debt in the balance sheet is as on 31.03.2019, the limitation commences from 31.03.2019 and the present application has been filed on 14.02.2020, so the present petition is well within the limitation period. The Loan agreements executed between the Financial Creditor and the Corporate Debtor clearly substantiate the Financial Creditor s claim that the Corporate Debtor has defaulted on repayment which is duly admitted by Corporate Debtor - Petition admitted - moratorium declared.

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• 2022 (8) TMI 995
  Dissolution of Corporate Debtor - Section 54(1) of Insolvency and Bankruptcy Code, 2016 read with Rule 11 of National Company Law Tribunal Rules, 2016 and Regulations 45(3)(b) of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - HELD THAT:- It is noticed that since there is no possibility to continue the liquidation process of the corporate debtor in the absence of any assets/documents/records and personnel of the corporate debtor, it is just and equitable to allow the prayer of the Applicant. Furthermore, there are no pending litigations against the Corporate Debtor. Consequently, it is not only just and equitable, but also necessary as no sale proceeds are available to satisfy the creditor s dues(s). The present case falls within the parameters of Regulation 14 of Liquidation Regulation and is a fit case for Order of dissolution--the Corporate Debtor M/s. Digicontrol Northern Pvt. Ltd. stands Dissolved from the date of this Order. Since the Company stands Dissolved vide this Order and no proceedings are pending, the Registry is directed that the case file be consigned to records - application allowed.

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• Service Tax

• 2022 (8) TMI 994
  Classification of services - rendering of services of the nature of advice , consultancy or technical assistance while executing the works contract - Consulting Engineer service or not - HELD THAT:- Considering the various services rendered by the assessee like erection/installation/commissioning of goods at customers site and incidentally they may also be providing the services of drawing, design etc., it cannot be said that the services rendered by the assessee was as a consulting engineer. The contract can be said to be works contract . Hence, the assessee cannot be said to be rendering the services as a consulting engineer and therefore liable to pay the service tax. Once, the assessee at the relevant time cannot be said to be consulting engineer and/or rendering services as a consulting engineering the assessee is not liable to pay the service tax on the works contract or the contract rendering services as consulting engineer for the period under consideration namely July, 1997 to December, 2000. No error has been committed by the learned Tribunal in setting aside the order passed by the Commissioner and restoring the Order in Original passed by the Deputy Commissioner dropping the show cause notice and demand of service tax and penalty considering the nature of services rendered by the assessee. All the appeals filed by the Revenue fail and the same deserve to be dismissed - Decided against Revenue.

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• 2022 (8) TMI 993
  Validity of show cause notice - availability of a statutory remedy - Challenge to SCN on the ground of lack of Jurisdiction - invocation of extended period of limitation - HELD THAT:- The learned Writ Court was fully justified in examining such of those facts which were required to decide as to whether the authority lacked jurisdiction in issuing the show-cause notice. Therefore, there is no error in the finding of the learned Writ Court that the writ petition was maintainable. In any event, the said issue has now become academic as the writ petition which was filed in the year 2011 was allowed by order dated 10.08.2011 against which the present appeal was filed in the year 2011 and the appeal is heard now and at this stage even assuming we were to hold that the writ petition was not maintainable, it will be too harsh on the assessee to be relegated back to the authority to respond to the show-cause notice. Therefore, the first issue is decided in favour of the respondent writ petitioner. Invocation of extended period of limitation - Section 73(1) of the Finance Act,1994 - HELD THAT:- On a careful reading of the show-cause notice, it is evidently clear that there is absolutely no whisper of any allegation of wilful mis-statement or suppression of facts or fraud or collusion as committed by the respondent assessee with an intention to evade payment of service tax. In the absence of such factual finding, the extended period could not have been invoked - the respondent was registered with the service tax department in the year 2004; during 2006 the Director General of Central Excise and Intelligence conducted search and seizure in the premises of the respondent and seized various records. It is thereafter in August 2006, the Officer from Dhanbad alleged that conversion charges for conversion of coal into coke attracted service tax under the category Business Auxiliary Service . The respondent immediately sent their reply informing the Officer that the conversion of coal into coke amounts to manufacture, thus exempt from service tax in view of the proviso to Section 65(19) of the Finance Act. It appears that none of the proceedings were taken to the logical end i.e. by issuance of show-cause notice, adjudication and passing of final orders. It is only in the year 2010, the impugned show-cause notice was issued invoking the extended period of limitation, with an iota of any allegation of mis-statement or fraud or collusion committed by a respondent with the intention to evade payment of service tax - the learned Single Bench was fully justified in holding that the show-cause notice impugned before it was barred by limitation. Appeal dismissed - decided against Revenue.

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• 2022 (8) TMI 992
  Valuation - services of erection of transmission lines - single contract or multiple contracts - inclusion of the value of towers/parts supplied by the appellant under the first contract, in the value of the second contract for determining the service tax liability - it is alleged that the appellant had artificially split the two contracts to evade the payment of service tax - benefit of notifications dated 20.07.2010 and 27.02.2010 - extended period of limitation - HELD THAT:- A division bench of the Tribunal in KEC INTERNATIONAL LTD VERSUS COMMISSIONER OF SERVICE TAX MUMBAI VII [ 2019 (9) TMI 1531 - CESTAT MUMBAI] dealt with contracts with electricity distribution authorities for supply, and/or installation of transmission towers between 01.10.2004 and 31.03.2009. In paragraph 7, the division bench rejected the contention of the department that the benefit of this notification would not be available to the appellant - The division bench, thereafter, examined the notification dated 20.07.2010 particularly the expression, in relation to and after placing reliance upon the decision of the Tribunal in M/S KEDAR CONSTRUCTIONS VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLHAPUR [ 2014 (11) TMI 336 - CESTAT MUMBAI] conclude that since the expression relating to is very wide in its amplitude and scope, all taxable services rendered in relation to transmission/distribution of electricity would be eligible of the benefit of exemption under notification dated 20.07.2010 for the period upto 27.02.2010. The decision of the Tribunal in Kedar Construction also considered the notification dated 27.02.2010 for the period 27.02.2010 onwards and held that since the exemption is available if the taxable services are rendered for transmission of electricity, the expression for would cover a very wide gamut of activities and, therefore, the activities undertaken by the appellant would be eligible to the benefit of a notification. The appellant is, therefore, clearly entitled to the benefit of both the notifications dated 20.07.2010 and 27.02.2010 - Appeal allowed - decided in favor of appellant.

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• 2022 (8) TMI 991
  Rebate of Service Tax paid - export of goods filed on 21.07.2015 - Rejection of claim on the ground of limitation for the period 2014-15 (w.e.f. August, 2014) since filed on 22.07.2015 - applicability of para 2.4 of Chapter 9 of Central Excise Manual - HELD THAT:- In para 2.4 of Chapter 9 of Central Excise Manual, it is mentioned that In case any document is not available for which the Central Excise or Customs Department is solely accountable, the claim may be received so that the claimant is not hit by limitation period. The instant case falls in this category. Accordingly, it is observed that the initial date of filing of the rebate claim i.e. 22.07.2015 is the relevant date as per Section 11B of the Central Excise Act, 1944. Hence, the rebate claims are not barred by limitation. It is observed that technical deviations or procedural lapses are to be condoned, if there is sufficient evidence regarding the export of the duty paid goods - the refund claim is within the prescribed time limit and the same requires to be disposed of in accordance with law. The matter is remanded to the adjudicating authority to consider and dispose the refund claim in accordance with law - Appeal allowed by way of remand.

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• 2022 (8) TMI 990
  Refund of Service Tax paid - export of goods made under Bills of Export - Time limitation - validity of refund which is sanctioned for the full year i.e. from 09.04.2014 to 08.03.2015, which is beyond the coverage period of the last month of export i.e. August 2014 - N/N. 41/2012-ST dated 29.06.2012 - HELD THAT:- On bare perusal of the Notification and the amendment thereof makes it abundantly clear that any service which is being received by an exporter of goods and are used exclusively for the export of goods and the Service Tax thereof has been paid, the refunds can be claimed provided that the services are rendered at a place which is neither the factory, nor any other place or premises of production or manufacture. This perusal makes it abundantly clear that the question of the service being rendered pre or post export has no significance. It has also been observed that there is no dispute as to the fact that the goods were exported by the Appellant assessee and the spot in respect of which licence fee has been paid. Paradeep Port Trust has been allotted only for export purposes. Once it is not in dispute that the services are specified for refund purposes and since Service Tax was actually paid on specified service pertaining to export activity, in terms of particular scheme of refund under Notification No.41/2012-ST as amended with clarifications, the exporter is eligible for refund - the order passed by the Ld.Commissioner(Appeals) cannot be sustained as substantive benefit should not be denied to an assessee if the conditions are fulfilled. The impugned order is set aside and the order passed by the Ld.Adjudicating authority stands restored - Appeal allowed.

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• 2022 (8) TMI 989
  Levy of service tax - Compensation/Short term capital gains - whether payments received by the appellants from 11 different companies/firms are liable to service tax or not? - extended period of limitation - Demand of interest and penalty - section 9AA(1) of the Central Excise Act, 1944. For BGB Spintex Pvt Ltd and CFM Infratex Ltd - Department is of the view that the amount received by the appellants was an agreement for refraining from an act or for tolerating an act or situation and was, therefore, liable to service tax - HELD THAT:- In the present case the appellants had acquired a right to purchase the said agricultural piece of land and this right was a benefit arising out of an immovable property and was, therefore, an immovable property itself. The instant case is nothing but transfer of the title of immovable property in any other manner ( not by way of sale or gift). Such a transaction is excluded from the definition of service and, hence, not liable to service tax - the view of adjudicating authority that capital gains can be earned only against change in ownership, not otherwise, cannot be agreed upon. It is now established law that any amount received on account of surrender of tenancy rights is also liable to capital gains tax as per the Income Tax Act, 1961. By the surrender of the agreement rights in the property by the appellants it cannot be said that the appellants agreed to refrain from an act or agreed to tolerate any act of the eventual buyer or tolerated any act or situation. For Shivshankar Logitex Pvt Ltd - HELD THAT:- In this case of purchase of agricultural land by the appellants at the price of Rs 15,00,000/- earnest money was paid to the owner. In this case too another company by the name Shivshankar Logitex Pvt Ltd wanted to purchase the said land and after mutual discussion the appellants released their agreement rights to the property for Rs 36,50,000/-. In this case also, we hold that since the rights or benefits of the appellants arose out of an immovable property the same was outside the scope of service and, therefore, outside the scope of service tax - Further, in this case too, by the surrender of the agreement right in the property by the appellant it cannot be said that the appellant agreed to refrain from an act or agreed to tolerate any act of another person or tolerated any act or situation. For M/s Shanti Enterprise - HELD THAT:- In this case the appellants entered into an agreement with another buyer for purchase of non-agricultural land @ Rs.1,51,00,000/- and an advance payment was also made. Subsequently another company, M/s Shanti Enterprise wanted to purchase the said land for developing it and, accordingly, the appellants surrendered their agreement rights at a mutually agreed price of Rs 2,08,00,000/- - the transaction did not relate to any service and, therefore, no service tax was leviable on the same - Further, in this case too, by the surrender of the agreement right in the property by the appellant it cannot be said that the appellant agreed to refrain from an act or agreed to tolerate any act of the eventual buyer or tolerated any situation. For Excelsior Services Pvt Ltd - HELD THAT:- The compensation cannot be considered as the appellants agreeing to the obligation to refrain from an act or to tolerate an act or a situation or to do an act. M/s Autocare Services - HELD THAT:- Autocare Services owned a property in Vadodara which they developed and started construction of commercial office space. The appellants entered into 14 separate agreements for purchase of 14 office premises in the said building and advance amounts were also paid. Subsequently, it was mutually agreed between the appellants and M/s Autocare Services to cancel the sale agreements and relinquish the appellants rights on payment of consideration/profit of Rs 3,38, 24,939/- - Since this amount was also received in connection with surrender of rights or benefits arising out of immovable property the same is outside the scope of service and, hence, not liable to service tax. Vijay Kumar Dalmia and STB Exports Pvt Ltd - HELD THAT:- In this case the appellants had purchased 204.75 satak of land from one Vijay Kumar Dalmia. Subsequently, out of this area of land 82 satak land was sold by the appellants to M/s STB Exports Pvt Ltd. In the whole transaction of sale/purchase of immovable property the appellants earned profit of Rs 64,31,000/-. This is a clear case of outright sale and purchase of immovable and is outside the scope of service and hence, not liable to service tax. M/s Thermax Ltd - HELD THAT:- Since M/s Thermax had not released payments to M/s Ensol Power Pvt Ltd the appellants made payment to M/s Ensol Power Pvt Ltd and, in turn, booked the amount paid on M/s Thermax account. Hence, the appellants issued a debit note on Thermax for Rs 2,00,000/-. Thus, it is seen that this Rs 2,00,000/- is nothing but the reimbursement by M/s Thermax for the amount paid by the appellants on their behalf to M/s Ensol Power Pvt Ltd. - This cannot be considered as a service provided by the appellants as this was nothing but reimbursement. No service of any sort had been rendered by the appellants to M/s Thermax Ltd. Nilu Construction Pvt Ltd - HELD THAT:- The surrender of tenancy rights is liable to capital gains tax as per the Income Tax Act, 1961 - Further, it also cannot be said that the appellants had agreed to an obligation to refrain from an act or tolerated an act or a situation or did an act. M/s Siddhartha Land and Building Pvt Ltd - HELD THAT:- The surrender of tenancy rights on receipt of some compensation is subject to capital gains tax and is not covered under clause (e) of section 66E of the Finance Act 1994 - Further, as per the decision of the Hon ble Allahabad High Court in the case of Kanhiyalal and Anr [ 1964 (8) TMI 96 - ALLAHABAD HIGH COURT] the tenancy rights are also benefits arising out of the immovable property and outside the definition of service and, therefore, cannot be subjected to Service Tax. M/s Madanlal Brijlal Pvt Ltd - HELD THAT:- The appellants were in occupation, as tenant, of a portion of the building owned by M/s Madanlal Brijlal Pvt Ltd. The owner wanted to construct a building at the said premises and entered into a rehabilitation agreement with the appellants to vacate the premises on the condition that the appellants would be provided a larger area in the new building. However, subsequently the appellants surrendered their tenancy rights on payment of Rs 2.40 crores as compensation. The surrender of tenancy rights on receipt of some compensation is subject to capital gains tax and is not covered under clause (e) of Section 66E of the Finance Act 1994 - as per the decision of the Hon ble Allahabad High Court in the case of Kanhiyalal and Anr [ 1964 (8) TMI 96 - ALLAHABAD HIGH COURT] the tenancy rights are also benefits arising out of the immovable property and outside the definition of service and, therefore, cannot be subjected to Service Tax. Jasmine Commercials Pvt Ltd - HELD THAT:- This is nothing but receipt of compensation on account of the other party not being able to fulfil its obligations under a contract. These damages cannot be considered as agreeing to the obligation to refrain from an act or to tolerate an act or a situation or to do an act as per clause (e) of section 66E of the Finance Act, 1994 - the appellants were not required to pay service tax on any of the amounts received by them. Extended period of limitation - HELD THAT:- This is not a case where service tax returns were not filed at all. The case of the department is that the amounts recovered from the 11 companies, were not reflected in the said returns. It is also noted that the whole case is based on the balance sheets of the appellants. The appellants had declared all the transactions in their records and had even paid capital gains tax on the profit/compensation received. Hence, it cannot be said that the appellants had resorted to wilful mis-statement or suppression of facts or had contravened of any of the provisions of service tax law with intent to evade payment of service tax. Courts have consistently held that the extended time limit can be invoked only if there is a positive act on the part of an assessee to conceal anything from the department. There must be a deliberate attempt to suppress information for invoking the extended period. The appeals are allowed, on merits as well as on limitation.

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• Central Excise

• 2022 (8) TMI 988
  Remission of duty - leakage of the tank where molasses were stored - remission rejected on the ground that the application was not filed within the prescribed period of 24 hours as prescribed in Trade Notice No.29/2003 - manufacture of molasses - losses within the prescribed limit or not - HELD THAT:- Section 37B of the Act confers the power upon the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act to issue directions for uniformity in the classification of excisable goods or with respect of levy of excess duties. It is on record that the petitioner was served with a showcause notice under Section 11A of the Act claiming the payment of duty and interest under Section 11AB of the Act to which a Defense Reply was submitted. It was incumbent upon the Central Excise Authorities to have considered the documents submitted by the petitioner alongwith his defense reply including the fact that the sugar mill of the petitioner was under the control of the State Authorities and of the Central Excise Authorities. There is no denial of the fact that the remission claimed by the petitioner was within the prescribed limit of 2% for remission of duty. It is well settled that without there being a foundation to invoke a larger period of limitation as provided in the proviso to Section 11A of the Act, no orders can be passed thereupon. Even otherwise in the present case, the fact with regard to the accident was well within the knowledge of State Authorities and there was no reason for the Central Excise Authorities to have denied the benefit of remission of duty as claimed by the petitioner under Rule 21. That being the case coupled with the fact that there was no specific allegation in the show-cause notice that the assessee had not paid the duty, the orders impugned being order dated 14.10.2011 (Annexure 1), the appellate order as well as the order-in-original are clearly not sustainable and are set aside. It is well settled that central excise duty is payable on manufacture; although the word goods has not been defined under the Act, it is well settled by the Hon ble Supreme Court that for the article to be considered as goods , the same must be something which can ordinarily come to the market to be bought and sold. Once the goods are not marketable, they are not liable to duty. In the present case there is no material to allege or establish that the brown sugar was marketable and once there is no foundation to hold that brown sugar, on which the remission was claimed, was marketable goods, no question of payment of duty arises. Even otherwise, no allegation was levelled in the show-cause notice with regard to clandestine removal, which was required to be established while raising a demand under Section 11A of the Act. The show-cause notice was served to the petitioner therein calling upon the petitioner to show-cause as to why the application for remission may not be rejected mainly on the ground that no intimation was given to the Range Officer within 24 hours as prescribed in the Trade Notice - the said issue is covered by the judgment of the Tribunal in the case of Ramala Sahkari Chini Mills Ltd. [ 2007 (2) TMI 59 - CESTAT, NEW DELHI ], which issue has attained finality. Even otherwise, the claim of the petitioner was well within the prescribed limit of being less than 2%. Thus, there being no material to allege against the petitioner that there was any evasion of duty, the impugned orders being order dated 28.11.2013 (Annexure - 6), the appellate order dated 07.07.2011 (Annexure - 5) as well as the order-in-original dated 30.12.2009 (Annexure - 4) are not sustainable and are set aside. Petition allowed.

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• 2022 (8) TMI 987
  Refund of unutilised accumulated CENVAT credit - denial on the ground of limitation - principles of judicial discipline - September 2004 to June 2005 - October 2006 to September 2007 - HELD THAT:- This Court in Karanja Terminal Logistic Pvt. Ltd. V/s. Principal Commissioner of Income Tax Ors. [ 2022 (2) TMI 442 - BOMBAY HIGH COURT] following the judgment of the Apex Court in Union of India and Ors. V/s. Kamlakshi Finance Corporation Ltd. [ 1991 (9) TMI 72 - SUPREME COURT] has held that it is of utmost importance that in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of CESTAT and the Commissioner (Appeals) is binding on respondent no.3. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority was not acceptable to the department in itself would be an objectionable phrase and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. The Apex Court has held that if this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. As there is no stay granted to the orders passed by CESTAT in the only appeal filed by petitioner and no appeal has been filed challenging the order dated 5th January 2016 of the Tribunal granting refund of Rs.1,29,60,000/- for September 2004 to June 2005 and no appeal having been filed against the 10 refund orders passed by the Commissioner (Appeals), respondent no.3 is obliged and bound to follow unreservedly the refund orders passed by CESTAT as well as the Commissioner (Appeals). Respondents are directed to pay interest to petitioner on refund amount for the applicable period in accordance with law. The interest will be payable after the expiry of three months from the date of the original refund claim - Petition disposed off.

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• 2022 (8) TMI 986
  Recovery of excise duty leviable on cotton yarn manufactured and removed captively for the manufacture of entire grey cotton fabrics - benefit of duty exemption under Notification No.22/96-CE, dated 23.07.1996 - Rule 49A of the erstwhile Central Excise Rules, 1944 - HELD THAT:- It is seen that this is the second round of litigation. Earlier the petitioner suffered an order in original No.14 of 2002 dated 28.03.2002. Thereafter, the petitioner challenged the same before the CESTAT - the petitioner again participated in adjudicating the proceedings before the Commissioner. In the meanwhile, the jurisdiction Assistant Commissioner finalized the provisional assessment, passed the assessment order dated 24.06.2011. Following the same, he had passed three refund orders. Admittedly, all the four orders never challenged by the department by way of revision. Now, the assessment finalized. The Deputy Commissioner in his letter of the year 2001 cleared the doubt of the department and the difficulty. Admittedly, the petitioner is a composite mill, wherein, yarn is manufactured consumed captively in manufacture of both grey and process fabrics. The process fabrics are mostly dutiable and further there is exemption from paying duty on the yarn. In view of the same, in the yarn manufacture, the portion of the same is used for export. As regards grey fabric, it is exempted for clearance, hence, duty to the yarn used for this process to be paid. This calculations can be precisely made only at the time of clearance either as grey fabric or process fabric. In the impugned order, there is no discussion about considering the report of the Deputy Commissioner of the year 2001, which is followed and orders passed by the jurisdictional Assistant Commissioner, while passing the assessment order which ought to be considered before finalizing the order in original. The matter is remitted back to the Commissioner to consider afresh the petitioner s plea from the stage of issuance of show cause notices - petition allowed by way of remand.

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• 2022 (8) TMI 985
  Interest on refund - relevant date from which the interest on refund will get triggered from the date of deposit or after the expiry of three months from the date when the refund application was filed? - rate at which interest should be paid - section 11BB of the Central Excise Act, 1944 - notification dated 12.09.2003 issued by the Government of India through the Ministry of Finance (Department of Revenue) - threshold limit of amount which was deposited in the course of investigation - HELD THAT:- The principal amount, therefore, which is involved in the present proceedings is Rs 25,00,000/-. Issue notice - List the matter on 11.11.2022.

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• 2022 (8) TMI 984
  Process amounting to manufacture - wrongful availment of MODVAT/CENVAT Credit on CRM and Handling Services used for manufacturing CRMB and subsequently utilization of the same for payment of Central Excise duty - HELD THAT:- The Hon ble Karnataka High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE BANGALORE-V VERSUS M/S. VISHAL PRECISION STEEL TUBES AND STRIPS PVT. LTD. [ 2017 (3) TMI 1287 - KARNATAKA HIGH COURT] has held that when the Cenvat credit availed on the inputs stand utilized for payment of duty on the final product, there would be no requirement of reversal of the said credit even if the activity undertaken by the assessee does not amount to manufacture. It is an undisputed position that the final product is treated as dutiable and duty is paid by the assessee. When once duty is paid by the assessee treating the activity as manufacturing activity by the Department, Cenvat credit is available and there is no question of denial of Cenvat credit. The impugned order is not sustainable and is liable to be set aside - Appeal allowed - decided in favor of appellant.

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• 2022 (8) TMI 983
  Area Based Exemption - whether the gold and silver unit which was purchased by the respondent/assessee was availing the area based exemption or not? - HELD THAT:- The tribunal in CCE ST, DEHRADUN VERSUS M/S. PARAJ EXIM [ 2018 (1) TMI 1689 - CESTAT DELHI] , observed that the whole issue is whether the gold unit which was purchased by the respondent was availing the area based exemption or not and remanded the matter to the adjudicating authority for this limited purpose. It is clear from paragraph 4 of the final order that the tribunal was aware that the respondent had purchased only the silver and gold unit from OSMI on 15 October 2015 and it is evident from paragraph 3 that this tribunal was aware that this unit was established by OSMI in October 2015 and due intimation was given to the Department. The submission of the learned Authorized Representative is agreed upon that the tribunal had an incorrect impression that the entire unit of OSMI was transferred to the respondent and accordingly passed the final order. The final order passed by this tribunal attained finality and the matter was remanded for the limited purpose of verification of the fact as to whether the gold unit was availing the benefit of area based exemption notification or not. Appeal dismissed - decided against Revenue.

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• 2022 (8) TMI 982
  Reversal of CENVAT Credit - empty drums and barrels - reversal of credit in terms of Rule 6 of Cenvat Credit Rules, 2004 - HELD THAT:- The issue is settled by the decision of tribunal in the case of CADILA HEALTHCARE LTD. [ 2022 (6) TMI 1177 - CESTAT AHMEDABAD] , where it was held that In the present case, the packaging material since not arising out of any manufacturing process the same will not fall either under Sub-clause (d) or sub-clause (h) of Rule 2 of Cenvat Credit Rules, 2004. As regard explanation (2), it is only for the purpose of value of the non-excisable goods to calculate the payable amount under Rule 6(3). Since the goods does not fall under the explanation (1), explanation (2) will obviously not be applicable therefore, the charges made in the Show Cause Notice are not tenable. The appeal is allowed.

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• 2022 (8) TMI 981
  SSI Exemption - clubbing of clearances - value of clearance of M/s. Impex Transformers, M/s. Index Marketing, M/s. Jay Power Protection Pvt. Ltd., M/s. Pruthivi Controls and M/s. Parth Electronics are includable with the value clearance of M/s. XPSPL or not - calculation of exemption limit under Notification No.8/2002-CE dated 1.3.2002 (erstwhile) and notification no.8/2003 dated 1.3.2003 for the period from 1.4.2002 to 16.5.2005 - batteries were stored in the factory premises of M/s. Xsis Power System Pvt. Ltd. and were cleared from the said factory along with UPS/Inverter/Constant Voltage Transformer or not - inclusion of value of batteries in the value of UPS/Inverter/Constant Voltage Transformer for determining the transaction value of the UPS/Inverter/Constant Voltage Transformer under Section 4 of the Central Excise Act, 1944. Whether the value of clearance of M/s. Impex Transformers, M/s. Index Marketing, M/s. Jay Power Protection Pvt. Ltd., M/s. Pruthivi Controls and M/s. Parth Electronics are includable with the value clearance of M/s. XPSPL for calculating the exemption limit under Notification No.8/2002-CE dated 1.3.2002 (erstwhile) and notification no.8/2003 dated 1.3.2003 for the period from 1.4.2002 to 16.5.2005? - HELD THAT:- It can be seen that out of four units and the main unit M/s. XPSPL were situated in the Ramju Ice Factory Compound but each and every company/firm had a separate and independent premises with entry door. Merely because all the four units were located in one campus, this cannot be the reason for holding that all are working in one premises accordingly, all the five manufacturers had separate factories and manufacturing units. The goods manufactured by the five manufacturers were also separate, the transactions of purchase and sale among these five manufacturers were purely on a principal to principal and commercial basis. All the five manufacturers had purchased required raw material, inputs, etc. on their own. These five manufacturers had their own equipments and infrastructures as well as separate workers and employees also - The allegation of the department that Shri Zahir I Laliwala was looking after the affairs of all the units is contrary to the fact that Shri Zahir I Laliwala was not looking after any activity during the relevant period. The most important test involving clubbing of clearance is the financial flow back and this test has to be satisfied to hold that all the company/firm are clubbable - it is found that all the five manufacturers are totally different and none of them had any financial dependence of any nature or whatsoever on the other (or with M/s.Xsis). The learned Commissioner could not adduce evidence either by showing any financial records or in the books of account that there is any financial flow back among these five companies/firms. Only because the proprietors/directors of five manufacturing firms belongs to one family or that they were related to one another, the test of mutuality of interest has not been satisfied. Even in worst scenario than the charges made in the present case by the revenue, the various forums have held that clearances of different units cannot be clubbed and consequently, the exemption to SSI Unit cannot be denied - the value of all four units namely M/s. Impact Transformers, M/s. Index Marketing, M/s. Jay Power Protection Pvt. Ltd. and M/s. Pruthvi Controls cannot be clubbed with the value of M/s. XPSPL and consequently, each company/ firm having its clearance value within the exemption limit provided under notification are eligible for SSI exemption Notification No.8/2002-CE and 8/2003-CE. Whether the batteries were stored in the factory premises of M/s. Xsis Power System Pvt. Ltd. and were cleared from the said factory along with UPS/Inverter/Constant Voltage Transformer? - HELD THAT:- There are force in the submission of the appellant that the batteries which were stored in the factory at the time of panchnama was batteries for Offline UPS which is inbuilt in the UPS, batteries supplied separately is only in respect of online UPS which were received and stored at the godown located at a few kilometres away from the factory at Bagh-E-Firdosh Shopping Centre. This is evident from the invoices of supplier of batteries which were addressed to the godown outside the factory of M/s. XPSPL. The adjudicating authority has heavily relied upon the seizure of 3768 batteries which were lying in the factory on 16.5.2005 to construe that the appellants were received the batteries in the factory and clearing the same along with UPS. In this regard, it is the submission of the appellant that out of 3768 batteries, 3743 number of batteries were meant for offline UPS as the size of the batteries itself establishes that batteries of 7AH and 9AH power were meant for installing an offline UPS for which there was no dispute whereas, other 25 batteries of higher ampere were kept for testing only because it is on record and accepted by the appellant also that few batteries were kept in the factory for testing of online UPS manufactured therein - even during cross examination of the appellant s production manager, he has confirmed the above position. With this fact, it is found that the reason for holding that the batteries for online UPS were stored and cleared alongwith UPS by the learned Commissioner is absolutely contrary to the fact hence, the contention is not acceptable. As regard the batteries supplied with offline UPS there is no dispute as the appellants were including the value of such batteries in the offline UPS. On the appreciation of the above fact supported with various evidences, it is found that the batteries were directly supplied from the godown by the appellant company M/s. XPSPL. For this reason the value of batteries was not includible in the assessable value of UPS system. Whether the value of batteries can be added in the value of UPS/Inverter/Constant Voltage Transformer for determining the transaction value of the UPS/Inverter/Constant Voltage Transformer under Section 4 of the Central Excise Act, 1944? - HELD THAT:- The batteries were cleared from outside without bringing the same in the factory, the value of the batteries is not includible in the assessable value of UPS/Inverter therefore, the legal issue in this regard need not be dealt with, and the same is left open. The clubbing of value of four units with M/s. XPSPL and inclusion of value of batteries in the value of UPS, we are of the view that the entire demand is not sustainable. The learned Commissioner has imposed personal penalty on various persons under Rule 26 which are consequential to the confirmation of demand against M/s. XPSPL. Since the entire demand is not sustained, the consequential penalties on the persons shall also not sustain. Appeal allowed.

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• 2022 (8) TMI 980
  CENVAT Credit - duty paying documents - credit on services has been denied as the appellant failed to produce original invoices or original bills of entry - photocopies of documents produced - admissible evidences or not - invocation of Rule 9 of the Cenvat Credit Rule - HELD THAT:- Rule 9 requires the appellant to maintain records of receipt and use of goods. The Rule also requires the appellant to produce the original invoice/ bill of entry. The appellant has failed to produce the bill of entry and invoices. The failure to produce original invoice or bill of entry is a procedural lapse if the appellant is able to establish that the goods are actual received and used in the factory for the purpose of manufacture of finished goods - the demand on this count is set aside and matter is remanded to original adjudicating authority to decide afresh after examining the records produced by the appellant to establish that the goods were actually received and used in the factory for the manufacture of finished goods. CENVAT Credit - furniture procured form the quality control laboratory in the factory premises - Circular No. 943/04/2011-CX dated 29.04.2011 - HELD THAT:- The quality control is an integral part of the manufacture of goods and the furniture used in quality control lab is just like any other furniture used in factory premises and credit on same cannot be denied. The CBEC Circular cited by the appellant also supports this view - the credit under this head is allowed and demand under this head is set aside. CENVAT Credit - GTA Services - appellant availed the GTA Services for transport of goods from factory premises to the premises of buyers - HELD THAT:- The learned counsel showed some invoices, however, from the same it was not apparent if the sale value includes the cost of transportation and if sale are FOR destination. To verify this claim of the appellant that the sales made by them are FOR destination and the GTA credit pertains to the outward transportation of their sales, the matter is remanded to the original adjudicating authority. Service tax credit - outdoor catering service availed by the appellant - HELD THAT:- T he said service is clearly an admissible service and therefore, credit on same has to be allowed - reliance placed in the case of M/S HINDUSTAN COCACOLA BEVERAGES PVT. LTD. VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, BBSR [ 2019 (9) TMI 747 - CESTAT KOLKATA ], where it was held that The appellant is entitled to avail Cenvat credit on outdoor catering. CENVAT Credit - rent-a-cab service availed by the appellant for movement of their employees from their residences to the factory premises and for movement of the sales and purchase teams for their official work - denial of credit on the ground of exclusion clause (B) of Rule 2(l) of Cenvat Credit Rules - HELD THAT:- Reliance placed in the case of M/S. MARVEL VINYLS LTD. VERSUS C.C.E. INDORE [ 2016 (11) TMI 1126 - CESTAT NEW DELHI ] where it was held that the appellant would be entitled to the Cenvat Credit on service tax paid on the said services - credit allowed. Service tax credit - maintenance of cars which were hired by the appellant for the purpose of transportation of their employees - credit sought to be denied relying on exclusion clause (BA) of Rule 2(l) of Cenvat Credit Rules - HELD THAT:- The decision of Tribunal in the case of M/S. MARVEL VINYLS LTD. VERSUS C.C.E. INDORE [2016 (11) TMI 1126 - CESTAT NEW DELHI] is equally applicable to the instant case where it was held that the appellant would be entitled to the Cenvat Credit on service tax paid on the said services, and therefore, credit under this head cannot be denied - The demand on this count is also set aside and appeal on this count is allowed. CENVAT Credit - Hotel Accommodation Services - HELD THAT:- No specific reason has been given in the impugned order for denial of this credit - the accommodation for visiting employees as well as consultants is a necessary requirement for the purpose of manufacture and sale of goods. In these circumstances, the credit of the hotel accommodation services used for purpose of official movement of consultants, technicians and employees is admissible as input service. The demand on this count is also set aside. The matter is remanded to original adjudicating authority - appeal allowed in part and part matter on remand.

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• CST, VAT & Sales Tax

• 2022 (8) TMI 979
  Validity of assessment order - Reversal of ITC - Cash refund of Input Tax Credit - Section 19(2)(v) of TNVAT Act - HELD THAT:- The Scheme provided for a cash refund of input tax upon condition that the petitioner had not availed the benefit of reversal as provided for under Section 19(2)(v) of the Act. In the absence of a claim or credit, the question of reversal does not arise. It was for this purpose and in light of the distinction made that the Division Bench had set aside the order of the learned single Judge that had been passed on the anvil of Section 19(2)(v), remanding the matter to the file of the learned single Judge for decision in regard to the distinction made by the petitioner - Since the decision on the aspect of applicability of Section 19(2)(v) impacts the case of manufacturers as well, of which the petitioner is, admittedly, one, the petitioner does not wish to make a foray into the argument taken by it in W.A.No.1654 of 2019 [ 2018 (3) TMI 1272 - MADRAS HIGH COURT ]. It merely wishes to obtain the benefit of the decision of the Division Bench in W.A.No.1260 of 2017 [ 2022 (4) TMI 1204 - MADRAS HIGH COURT ]. There are no divergent views on the narration as captured in the preceding paragraphs and in light of the same, this Writ Petition is liable to be allowed.

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