TMI Tax Updates - e-Newsletter
September 18, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. GST Registration for E-commerce sellers

   By: Sparsh wadhwa

2. From 1st November 2023, 30 Days’ time for IRN – Issues and Pointers

   By: Vivek Jalan

3. APPEALS AND WRITS UNDER TAX LAWS

   By: Dr. Sanjiv Agarwal

4. RETENTION OF GOODS AFTER PAYMENT OF REDEMPTION FINE AND PENALTY UNDER CUSTOMS ACT, 1962

   By: DR.MARIAPPAN GOVINDARAJAN

5. Failure to declare amount in return alone does not imply wilful suppression

   By: Bimal jain

Notifications

Central Excise

1. 31/2023 - dated 15-9-2023 - CE

Reduce the Special Additional Excise Duty on export of Diesel - Notification No. 04/2022-Central Excise, dated the 30th June, 2022 as amended

2. 30/2023 - dated 15-9-2023 - CE

Increase the Special Additional Excise Duty on production of Petroleum Crude and reduce the Special Additional Excise Duty on export of ATF - Notif No. 18/2022-Central Excise, dated the 19th July, 2022 as amended

Customs

3. 56/2023 - dated 15-9-2023 - Cus

Exemption to specified defense equipment and their parts imported in India by the Ministry of Defence, Government of India or the defence forces - Seeks to amend Notification No. 19/2019-Customs, dated the 6th July, 2019

4. 67/2023 - dated 15-9-2023 - Cus (NT)

Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver

Circulars / Instructions / Orders

GST - States

1. TRADE CIRCULAR No. 10/2023 - dated 11-9-2023

Clarification on refund related issues.

2. TRADE CIRCULAR No. 11/2023 - dated 11-9-2023

Clarification on issue pertaining to e-invoice.

3. TRADE CIRCULAR No. 12/2023 - dated 11-9-2023

Clarification regarding taxability of services provided by an office of an organisation in one State to the office of that organisation in another State, both being distinct persons.

Highlights / Catch Notes

GST

• Educational Institutions Exempt from GST on Student and Staff Transportation Charges as Per Service Agreement.

  Case-Laws - AAR : Levy of GST - educational institution - collection of transportation charges from parents will be taxed or exempted under GST, since only school students are only picked up and dropped, and school staff which will be covered in the agreement with school - Benefit of exemption available - AAR
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• Tapioca Flour from Dried Roots Classified Under HSN 2303.10, Subject to 5% GST, No Tax Exemption Available.

  Case-Laws - AAR : Classification of goods - Tapioca flour obtained by crushing the dried roots, and remnants of tapioca roots/tubers - The product is classifiable under HSN 2303.10 “Residues of Starch manufacture and similar residues” liable to tax (GST) @ 5% - Benefit of exemption not available - AAR
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• GST Applies to Software Sub-Licensing and Market Support Fees; Value Determined by Section 15, Rule 28.

  Case-Laws - AAR : Levy of GST - valuation of supply - sub-licensing of the software by the applicant to end-users in India - Market Support fees received by the applicant from Central Hub - The applicant is liable to GST - Value shall be determined u/s 15 and Rule 28 - AAR
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Income Tax

• Court Orders Action Against Officers for Failing to Return Seized Cash u/s 132A; Highlights Accountability Issues.

  Case-Laws - HC : Return of cash seized by department u/s 132A - Failure to obey the directions of the ITAT and PCIT - This is a fit and proper case in which action should be initiated against all the officers concerned who were all in charge of this case at the appropriate and relevant point of time and particularly after 25th September 2014 and in any case after 31st December 2019 and most certainly after the Petition was filed and because of their inaction, Petitioner was made to suffer both financially and mentally. - HC
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• High Court Quashes Assessment Order: Revenue Failed to Record Reasons for Reopening Under Income Tax Act Section 147.

  Case-Laws - HC : Reopening of assessment u/s 147 - reasons to believe - It is settled law that the reasons for reopening an assessment can be tested and examined only on the basis of the reasons recorded at the time of issuing the notice under Section 148 of the Act. The Revenue has not even placed on record any document to suggest that the reasons recorded have been furnished to the Petitioner. On this ground alone the assessment order impugned herein deserves to be quashed. - HC
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• Section 270A Penalty Not Imposed: Bona Fide Omission of Taxable Interest on Income Tax Refund Deemed Valid Explanation.

  Case-Laws - AT : Levy of penalty u/s 270A - Failure to offer the interest on income tax refund subject to tax - the explanation of the assessee for not offering the interest on income tax refund while filing its return of income is bona fide, and thus, the non-declaration of interest on income tax refund cannot be said to be under-reporting of income by the assessee within the meaning of section 270A of the Act. - AT
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• Conditions for Being an "Assessee in Default" u/s 194A: TDS on Interest and Recipient's Tax Payment.

  Case-Laws - AT : Assessee in default - TDS u/s 194A - interest paid/credited to its customers - Interest other than interest on securities - In order to treat a person as assessee in default, firstly, there should be an obligation to deduct tax at source and despite such obligation, the person fails to deduct tax at source or pay after such deduction and further the payee has also not paid tax directly. - AT
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• AO to Re-examine Capital Gain Computation: Deduction of Land Cost and Related Expenses Under Scrutiny.

  Case-Laws - AT : Capital gain computation - Deduction of cost of land with expenses for exploitation on land and others - the amount was shown as advance in books of account and not capitalized because the registration was pending - Assessee is having complete documents and information from which it can easily file documentary evidences to AO to prove cost without any difficulty. - Matter restored back to AO - AT
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• Transfer Pricing Dispute Over Technical Services Fee Sent Back for Re-evaluation; Assessee Claims It's a Reimbursement.

  Case-Laws - AT : TP Adjustment - Addition as ‘Fees for Technical Services’ ignoring the assessee’s contention that it was purely reimbursement received for Construction and Management Expenses - Matter restored back for fresh adjudication - AT
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• Tax Dispute Over Bagasse Pricing: Assessing Officer's Error in Profit Calculation u/s 80-IA(8) Raises Concerns.

  Case-Laws - AT : Profit of eligible unit by on account Baggase Purchase u/s 80-IA(8) r.w.s. 80-IA (10) - Assessee’s manufacturing unit has sold “bagaase” to assessee’s power unit at Rs. 1600/- per metric ton. - Assessee has sold “bagasse” at “Market Rate” to its eligible unit. Therefore, AO has erred in recalculating the profit of eligible unit i.e. power unit, as per section 80IA(8). - AT
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Customs

• Court Rules Error in MEIS Application Shouldn't Deny Petitioners Benefits; Access Granted Despite Mistake.

  Case-Laws - HC : Benefit of Merchandise Exports of India Scheme (MEIS) - The only ground on which the petitioners could not claim the benefit of the MEIS was an inadvertent mistake in clicking “NO” instead of “YES”. Such an inadvertent mistake cannot disentitle the petitioners to claim the benefit of the MEIS or Merchandise Exports of India Scheme. - HC
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• Refusal of Cross-Examination u/s 108 Violates Natural Justice, Renders Proceedings Invalid.

  Case-Laws - HC : Principles of natural justice (audi alterem partem) - whether the adjudicating authority was right in refusing an opportunity of cross-examination of natural persons whose statements recorded u/s 108 - Not having been allowed to cross-examine such witness of the prosecution, in the adjudication proceedings, the entire proceedings stood vitiated. The appellate authority had incorrectly held that the appellant was not entitled to cross-examine the prosecution witnesses. - HC
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• Anti-Dumping Duties Not Applicable During Interim Period Between Provisional Notification and Final Imposition.

  Case-Laws - AT : Levy of Anti-Dumping Duty - time gap between provisional notification and final notification imposing ADD - anti-dumping duty during the interregnum between the expiry of a provisional duty notification and the imposition of a final anti-dumping duty not to be levied. - AT
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• EPCG Scheme: No Malicious Intent Found as Authorities Acknowledge Uncontrollable Circumstances Affecting Export Obligation Period.

  Case-Laws - AT : EPCG Scheme - Failure to fulfill the conditions - export obligation period expired - extension of the period for fulfillment of export obligation - The compelling circumstances beyond their control pointed out by the respondents, have been admitted by the authorities. Therefore, no blame or aspersions can be cast on the respondents that they had malicious intent to defraud the revenue. This argument of the revenue is rejected summarily. - AT
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• Foil Balloons from China Classified Under Customs Heading 9505 for Party Decoration Use.

  Case-Laws - AAR : Classification of Foil Balloons intended to be imported from China - The subject goods i.e "Foil Balloons" are made of Nylon/HDPE not of Latex/Rubber and imported for the purpose of party decoration or entertainment, merit classification under the heading 9505 - AAR
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Indian Laws

• Maharashtra Courts Struggle with Delays; Lawyers Urged to Minimize Objections and Ensure Fairness in Trials for Efficiency.

  Case-Laws - SC : There is a huge pendency of suits in the Trial Courts in the State of Maharashtra. If the members of the Bar do not cooperate with the Trial Courts, it will be very difficult for our Courts to deal with the huge arrears. While a trial is being conducted, the members of the Bar are expected to act as officers of the Court. They are expected to conduct themselves in a reasonable and fair manner. The members of the Bar must remember that fairness is a hallmark of great advocacy. If the advocates start objecting to every question asked in the cross-examination, the trial cannot go on smoothly. The trial gets delayed. - SC
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• Cheque Dishonor: Accused Fails to Prove Defense, Complainant Not Required to Prove Debt Existence.

  Case-Laws - HC : Dishonour of Cheque - existence of legally recoverable debt or liability - The accused has failed to establish his defence even on preponderance of probability, therefore, there was no occasion to shift onus of proof on the complainant to establish existence of legally recoverable debt or liability. - HC
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• High Court Addresses Jurisdictional Challenges in Cheque Dishonor Cases u/ss 202 and 204 of Cr.P.C.

  Case-Laws - HC : Dishonour of Cheque - territorial jurisdiction - When the learned Magistrate on scrutiny of record prima facie came to a decision that process ought to have been issued even against a person who resides outside the jurisdiction of the court of the learned Magistrate and passed an order under Section 204 of the Cr.P.C, it is obvious that the learned Magistrate also took into account the provision under Section 202 of the Cr.P.C. - HC
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Service Tax

• Court Invalidates Demands Based on Unauthenticated Electronic Data u/s 65B of Indian Evidence Act & Section 36B.

  Case-Laws - AT : Invesitgation - admissibility of computer printouts as evidences or not - Electronic records being more susceptible to tempering, alteration, transposition, excision etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. The provisions of Section 65B of Indian Evidence Act and Section 36B of Central Excise Act, 1944 of the Act are pari-materia. It is evident from the panchanama, and the appeals records that the investigating officer had failed to follow the safeguard as mandated u/s 36B of the Act. - demand based on such unauthenticated data is not sustainable - AT
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• Buyers of coal are liable for service tax on GTA services under reverse charge mechanism per Rule 2(1)(d) 21(v).

  Case-Laws - AT : Liability of Service Tax on GTA service - Reverse Charge - Appellant being agent / intermediatory - SECL was the consignor and buyers of the coal were consignees and referring to large number of instances where the incidence of freight was actually borne by the consignees and which has not been disputed by the Revenue, it is the buyers of the coal who are liable to make the payment of service tax on freight amount paid to the transporter for transportation of coal in terms of Rule 2(1)(d) 21(v) of Service Tax Rules, 1994. - AT
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Central Excise

• Extended Limitation Period Not Applicable: Appellant Reversed CENVAT Credit Pre-Show Cause Notice Without Evidence of Intent to Evade Duty.

  Case-Laws - AT : Reversal of CENVAT Credit - extended period of limitation - In the present case the appellant has reversed the proportionate credit before the SCN. There is no evidence put forward by the department to establish that there was suppression of facts with intent to evade payment of duty. - AT
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• Duty Demand on Nepal Exports Unjustified: Documents Show Duty Paid by Manufacturers at Clearance, No Additional Duty Imposed.

  Case-Laws - AT : Demand of duty on goods cleared / exported to Nepal - These documents clearly establish the duty paid nature of the traded goods which were exported to Nepal. Thus, the department cannot again demand duty from the Appellant for the traded goods exported, as duty has already been paid by the concerned manufacturers at the time of clearance of those goods - AT
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VAT

• Tribunal's Decision on HIMANI BOROPLUS Classification Challenged for Procedural Errors in VAT and Sales Tax Case.

  Case-Laws - HC : Classification of services - HIMANI BOROPLUS ANTISEPTIC CREAM - Medicament or not - The Tribunal did not direct remand, for ascertaining the question of fact regarding ingredients of the product. Instead, without itself ascertaining on the fact, it went on to dismiss the appeal of revenue. - There was no satisfaction rendered by opposite party (assessee) on the second test. It must be said that it was for opposite party to prove the product fell under the entry as the Tribunal erred in saying the burden was on petitioner (Revenue) to prove the negative. - HC
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Case Laws:

• GST

• 2023 (9) TMI 767
  Blocking of Input Tax Credit - one year period prescribed under Rule 86A(3) of the CGST Rules has expired - HELD THAT:- Considering the fact that the petitioner proposes to file an appeal before the Appellate Authority, liberty is given to the petitioner to deposit 10% of the amount confirmed vide order dated 08.08.2023 through electronic cash register. The petitioner shall also file an appeal against the aforesaid order within a period time prescribed under Section 107 of the TNGST Act, 2017. The credit amount of Rs. 37,71,590/- that has been blocked shall be unblocked subject to the petitioner depositing 10% of the amount confirmed vide order dated 08.08.2023. It is made clear that if the petitioner fails to file an appeal within the statutory period prescribed under Section 107 of the TNGST Act, 2017, the respondent is at liberty to block the aforesaid credit amount that may be lying unutilized in the electronic credit ledger of the petitioner. Petition closed.

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• 2023 (9) TMI 766
  Violation of principles of natural justice - impugned order preceded a SCN but has concluded the proceedings by holding that the petitioner had not participated in the personal hearing - HELD THAT:- The decision of the Hon ble Supreme Court in M/s.Dharampal Satyapal Limited Vs. Deputy Commissioner of Central Excise, Gauhati and others, [ 2015 (5) TMI 500 - SUPREME COURT] stating that there cannot be any straight jacket formula as far as the violation of principles of natural justice is concerned, cannot be applied to the facts of the case. The decision of the Hon ble Supreme Court prima facie cannot be applied to the facts of this case. To take such an extreme view as was contended by the learned Government Advocate for the respondent by applying the ratio therein in the context of GST law would amount to dilution of the safeguards under the statute. The legislature has itself provided for safeguards under the statute at each stage of the proceeding. Therefore, such safeguards cannot be diluted. The impugned order is quashed and the case is remitted back to the respondent to pass a fresh order on merits and in accordance with law within a period of six weeks from the date of receipt of a copy of this order - Petition allowed by way of remand.

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• 2023 (9) TMI 765
  Exemption from GST - educational institution - collection of transportation charges from parents will be taxed or exempted under GST, since only school students are only picked up and dropped, and school staff which will be covered in the agreement with school - percentage of GST to be charged from parents and school - HELD THAT:- It is seen from the submissions made by the Applicant that they propose to provide the service of picking up and dropping of school children and staff of higher secondary school in bus and/or by van and not of the general public; that the service will be provided under agreement with schools; that the bus and van permits will be in the name of respective schools; that the applicant will be receiving the payments for the services directly from the parents, as per advice and agreement with school; and that for picking up and dropping of the teachers and staff, the respective school will pay. The Applicant did not submit any copy of the agreement entered with the schools as the whole activity is only proposed to be undertaken. The Applicant propose to provide the service of picking up and dropping of school children and staff of higher secondary school in bus and/or by van by entering into an agreement with the schools. Further the bus and van permits will be in the name of respective schools. Thus, the Applicant s proposed activity of providing transport services to the education institutions by way of transportation of students and staff, will become eligible for exemption vide Sl.No. 66(b) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, if the services provided by the Applicant is to an educational institution as defined in Para No. 2(y) of the said notification and necessary permit has been obtained as mandated under the Tamilnadu Motor Vehicles (Regulation and Control of School Buses) Special Rules 2012.

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• 2023 (9) TMI 764
  Classification of goods - Tapioca flour obtained by crushing the dried roots, and remnants of tapioca roots/tubers - entry No. 78 and Tariff item 1106 of Part A of Exempted goods, and tariff item 1106 in SI. No. 59 of Part C in Schedule I of the said Act - such trader/ dealer is required to be registered or not - HELD THAT:- The tariff heading 1106 includes Flour, meal and powder of the dried leguminous vegetables of heading 0713 and of sago or of roots or tubers of heading 0714. Therefore, it is clear that this HSN is related to flour directly prepared by grinding dried leguminous vegetables, tubers without involving any other processing. The impugned product is prepared by drying and grinding the wet residue which is nothing but the fibrous substances retained in the sieve, while extracting/filtering wet milk from grinded tapioca roots. Hence, it is understood that, segregating fibre/residue is an integral part of the starch manufacturing process. Though, the applicant and other dealers in similar trade line described it as tapioca flour, the commodity dealt with by the applicant more clearly fits into the specific description Residues of starch manufacturing and similar residues, (HSN 2303.10) - as per the dealers contention also this product is not fit for human consumption and it is actually used as animal feed and in manufacturing of adhesives. But, the goods classified under tariff head 1106 are meant for human consumption. The product dealt with by the applicant is classifiable under the tariff head 2303.10, Residues of starch manufacturing and similar residues, taxable @ 5%. Requirement of registration - HELD THAT:- In terms of Section 22 of the CGST Act, read with relevant provisions of SGST Act, the applicant is liable to be registered, if his aggregate turnover in a financial year exceeds the prescribed turnover under GST Law.

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• 2023 (9) TMI 763
  Levy of GST - valuation of supply - sub-licensing of the software by the applicant to end-users in India - Market Support fees received by the applicant from Central Hub - taxable value for the operating fees paid to Central Hub by the applicant pursuant to the said arrangement shall be determined as per Rule 28 of the Tax Valuation Rules prescribed in CGST Rules 2017. Whether GST is applicable on sub-licensing of the software by the applicant to end-users in India? If yes, then what shall be the value of supply? - HELD THAT:- In pursuant to the said arrangement, Central Hub has appointed the Applicant as a nonexclusive distributor of software products by granting a non-exclusive right to sublicense the software products. Further, they stated that they provide implementation services relating to sub-licensing of software to the End-users, upon specific request. It also promotes and markets the software products to the End-users; Also they provide all the services in its own name and for its own account within the territory and act as an authorized distributor of Central Hub while sub-licensing the software products. Whether the said activity would be supply of goods or services? - HELD THAT:- It can be seen that a software is an intellectual property having value. GST law does not recognize or make distinction between tangible and intangible property. Under GST law, the definition of goods makes it clear that all property whether tangible or intangible capable of being moved would fall within the definition of goods. Goods has following attributes: (a) utility (b) capable of being bought and sold (c) capable of being sold, transferred, delivered, stored and possessed. If a software whether customised or non-customised satisfies the attributes mentioned above, the same could be treated as Goods . It is very essential for an article to be termed as Goods , it is its marketability. It is important to note that when a person purchases a software programme especially canned software implanted in some tangible medium, he does not become owner of such software programme, but only a license holder, i.e., he cannot use of its own will. Thus, the software supplied by the Applicant is pre-developed and predesigned software and made available through the use of encryption keys and hence it satisfies all condition of the definition goods . Further, it is observed that goods which are supplied by the applicant cannot be used without the aid of the computer and has to be loaded on a computer and then after activation would become usable and hence the goods supplied qualifies to be Computer Software and more specifically cover under Application Software - Supply of software license qualifies to be Supply of Goods on the grounds that as per the explanatory notes to the scheme of classification of services the SAC 997331 excludes the services of limited end-user licence as part of packaged software. Hence, the supply made by the Applicant is covered under Supply of goods and GST shall be applicable on the same in terms of Section 9 of CGST Act, 2017. In the instant case the applicant and end user are not related persons, since the applicant has not furnished any sample tax invoices for the actual transaction between them and the end user, the taxable value will be the actual transaction value which the applicant has charged the end user for sub-licensing the software. Whether GST is applicable on the Market Support fees received by the applicant from Central Hub? - HELD THAT:- It is clear that the Market Support fees is nothing but a compensation provided by the Central Hub to the Local Operating Entity, whenever the guaranteed profit margin is not earned by the Local Operating Entity, and therefore, it is nothing but an additional consideration received by the Applicant from the Central Hub for an agreed obligation as per the Operating Agreement. In this connection, the Applicant has claimed that, compensation received is not liable to GST, as clarified in Circular No. 178/2022-GST dated 03.08.2022 - consideration in relation to supply of goods and services includes payment received from any person other the recipient also for the inducement of, the supply of goods or services or both. Therefore, the amount received from the Central Hub in the form of Market support fees by the Local Operating Entity is an additional consideration charged towards the supply in this case which will form part of the value of supply as per the provisions of section 15 of the GST Act. Whether the taxable value for the operating fees paid to Central Hub by the applicant pursuant to the said arrangement shall be determined as per Rule 28 of the Tax Valuation Rules prescribed in CGST Rules 2017? - HELD THAT:- In the instant case the Central Hub being the supplier is located outside India, the recipient being the Applicant is located in India and the key factor to be decided is the place of supply - the conditions as envisaged in Section 2(11) of the IGST Act are satisfied, the distribution rights granted by the Central Hub to the Applicant shall qualify as import of services in the hands of the Applicant. If the supplier of service is located in a non-taxable territory, the recipient of services located in the taxable territory is liable to pay GST under reverse charge as per Notification No. 13/2017-CT(Rate) and 10/2017-CT(Rate) dated 28.06.2017. Coming to the Valuation part, the Applicant and the Central Hub qualifies to be related persons in terms of Explanation to Section 15(5) of CGST Act, 2017. Hence, value cannot be determined as per Section 15(1) of the CGST Act and consequently Section 15(4) of the CGST Act read with Chapter IV of CGST Rules, 2017 i.e. Rule 27 to Rule 35 of the CGST Rules will be applicable. In case where the open market value is available, then valuation of the supply shall not be governed by clause (b) or (c) of Rule 28 of CGST Rules. Further, in case, where the recipient of service is eligible to claim the full ITC, the value shall be determined as per the second proviso to Rule 28 of CGST Rules.

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• 2023 (9) TMI 762
  Profiteering - Respondent had not passed on the benefit of ITC to him by way of a commensurate reduction in the price of the flat purchased by him - contravention of section 171 of CGST Act - HELD THAT:- It is clear from the plain reading of Section 171 (1) mentioned that it deals with two situations, one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP s Report that there has been no reduction in the rate of tax in the post GST period. Hence, the only issue to be examined is as to whether there was any additional benefit of ITC with the introduction of GST. The Commission observes that, the ITC, as a percentage of the turnover, that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 9.95%, whereas, during the post-GST period (July-2017 to October, 2019), it was 9.27%. Hence, the Respondent has availed lesser ITC to the extent of 0.68% [9.95% (-) 9.27%] of the turnover as compared to the pre-GST period. This confirms that in the post-GST period, the Respondent has not been benefited from additional ITC as percentage of the turnover that was available to the Respondent during post-GST is lower than during the pre-GST. It is observed that the provision of the RERA Act, 2016 makes it mandatory for a real estate developer/promoter to maintain separate bank accounts for each of his projects registered separately under the RERA Act, 2016. In view of this, Secretary of Real Estate Regulatory Authority, Karnataka vide letter dated 12.10.2020 and subsequent reminder dated 29.01.2021 and 24.02.2021 was requested to intimate whether the Respondent has maintained separate accounts for Nikko Homes-I, Nikko Homes-II and Leela Residences projects. In reply, vide the letter dated 04.03.2021 Karnataka RERA has informed that M/s. Bhartiya Urban Pvt. Ltd. has maintained separate Bank accounts for above projects. The above information was sought from the Karnataka RERA only to confirm whether the Respondent has kept separate accounts for each project or not. The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017. Accordingly, the proceedings initiated against the Respondent under Rule 133 (4) of the CGST Rules, 2017 are hereby dropped.

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• Income Tax

• 2023 (9) TMI 761
  Deduction u/s 80P - assessee, a co-operative society - Whether entitled to claim deduction of the whole of its profits and gains of business attributable to the business of banking or providing credit facilities to its members who are all co-operative societies? - Whether the appellant is a co-operative bank within the meaning of sub-section (4) of Section 80P? - HELD THAT:- Sub-clause (1) of clause (a) of sub-section (2) of Section 80P recognises two kinds of co-operative societies, namely, (i) those carrying on the business of banking and; (ii) those providing credit facilities to its members. Clause (a) of sub-section (2) gives exemption of whole of the amount of profits and gains of business attributable to any one or more of such activities which are mentioned in sub-section (2). Sub-section (4) of Section 80P inserted by the Finance Act, 2006 is in the nature of a proviso and such a deduction under the said Section shall not be admissible to a cooperative bank. Thus, co-operative banks are now specifically excluded from the ambit of Section 80P of the Act. A co-operative society which is not a state co-operative bank within the meaning of NABARD Act, 1981 would not be a co-operative bank within the meaning of Section 56 of the BR Act, 1949. In the instant case, as already noted in A.P. Varghese case [ 2007 (12) TMI 545 - KERALA HIGH COURT] the Kerala State Co-operative Bank being declared as a state co-operative bank by the Kerala State Government in terms of NABARD Act, 1981 and the appellant society not being so declared, would imply that the appellant society is not a state co-operative bank. In fact, in Citizen Co-operative Society Ltd [ 2017 (8) TMI 536 - SUPREME COURT] this Court held that the appellant therein was having both members as well as nominal members who were depositing and availing loan facilities from the appellant therein and therefore, appellant therein was not entitled to the benefit of Section 80P of the Act as it was functioning as a cooperative bank. But, the appellant herein is not a co-operative bank and neither has it been so declared under the provisions of NABARD Act, 1981 or the State Act. On the other hand, under the provisions of State Act, 1969, the Kerala State Co-operative Bank has been so declared by the Government of Kerala as a co-operative bank. Also under the provisions of the State Act, 1984, agricultural and rural development bank means the Kerala Cooperative Central Land Mortgage Bank Limited, registered under Section 10 of the Travancore-Cochin Co-operative Societies Act, 1951, which shall be known as Kerala State Co-operative Agricultural and Rural Development Bank Limited i.e. the appellant herein. Thus, from a conjoint reading of all the relevant statutory as alluded to hereinabove, it is quite clear that the appellant is not a co-operative bank within the meaning of sub-section (4) of Section 80P of the Act. The appellant is a co-operative credit society under Section 80P(2)(a)(i) of the Act whose primary object is to provide financial accommodation to its members who are all other co-operative societies and not members of the public. Therefore, when the definition of co-operative bank in Section 56 of BR Act, 1949 is viewed in terms of Sections 2(u) of the NABARD Act, 1981, it is clear that only a state co-operative bank would be within the scope and meaning of a banking company under Section 2(c) of the BR Act, 1949 on obtaining licence under Section 22 of the said Act. Conclusion - In the instant case, although the appellant society is an apex cooperative society within the meaning of the State Act, 1984, it is not a co-operative bank within the meaning of Section 5(b) read with Section 56 of the BR Act, 1949. In the result, the appeals filed by the appellant are allowed and the order(s) of the Kerala High Court and other authorities to the contrary are set aside. Consequently, we hold that the appellant is entitled to the benefit of deduction under Section 80P of the Act. The questions for consideration are answered accordingly.

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• 2023 (9) TMI 760
  Return of cash seized by department u/s 132A - inaction of the Revenue in not even obeying and complying with the orders and directions passed by ITAT as well as PCIT - seeking direction to the Revenue to return the amount as seized together with interest for pre-assessment period as well as post-assessment period until the date of payment - seized gold were handed over but the cash was not returned - HELD THAT:- As there has been an inordinate delay. Notwithstanding the order of the ITAT which attained finality on 25th September 2014, the Revenue did not consider it fit to return the cash of Rs. 2,60,000/- that was seized on or about 9th July 1996. Even after the PCIT passed the order on 31st December 2019 under Section 132B of the Act, the Revenue did not consider it fit to process and refund the amount. Even after the Petition was filed and served and the lawyer appeared for the Revenue, still the Revenue did not consider it fit to return the money. Therefore, in our case this is nothing but a clear case of high handedness on the part of the officers of the Revenue. This is a fit and proper case in which action should be initiated against all the officers concerned who were all in charge of this case at the appropriate and relevant point of time and particularly after 25th September 2014 and in any case after 31st December 2019 and most certainly after the Petition was filed and because of their inaction, Petitioner was made to suffer both financially and mentally. Admittedly, the amount of Rs. 2,60,000/- was to be refunded to Petitioner when the order dated 25th September 2014 passed by the ITAT attained finality. A copy of this judgment be forwarded to the Prime Minister s office and to Hon ble Minister for Finance for perusal and further appropriate action against erring officials on whose lethargic and adamant attitude the Department has to suffer financially. According to the computation of income tendered by Mr. Sharma, interest amount payable was Rs. 5,50,983/-. The Interest as on 24th September 2014 payable was Rs. 4,10,583/-. Any amount that is payable to Petitioner in excess of Rs. 4,10,583/- towards interest may be recovered from the erring officials together with interest thereon at 12% p.a. by the Government of India. Petitioner, therefore, will be entitled to interest at 12% p.a. for the post-assessment period, i.e., from 25th September 2014 until payment/realization.

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• 2023 (9) TMI 759
  Validity of order passed u/s 144C(5) - Reference to dispute resolution panel - petitioner s case that the directions passed by DRP was in gross violation of the provisions of the Act in as much as the DRP can hear and pass directions only in pending assessment proceedings and when AO has passed an assessment order albeit illegally, without waiting for the mandatory period of 30 days specified in sub-section 2 of Section 144C DRP has no role to play and should not have passed the directions - HELD THAT:- DRP could give directions only in pending assessment proceedings. Once assessment order is passed, rightly or wrongly, the assessment proceedings come to an end. Therefore, the DRP would have no power to pass any directions contemplated under subsection 5 of Section 144C of the Act. In the circumstances, we hereby quash and set aside the directions issued by DRP and the consequent assessment order.

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• 2023 (9) TMI 758
  Reopening of assessment u/s 147 - reasons to believe - no information furnished by the Petitioner including relating to his immovable property - HELD THAT:- From the facts in the present case, it is evident that the AO had within his possession all the primary facts and it was for him to make necessary enquiry and draw proper inferences. Thus, the AO did not do and it is even admitted by the Respondents that the AO failed to appreciate the information provided by the Petitioner by oversight . Thus, it cannot be said that the income chargeable to tax for the AY under consideration has escaped assessment by reason of the omission or failure on the part of the Petitioner to disclose fully and truly all material facts. The AO had all the material before him when he made the original assessment. Whether assessment cannot be reopened on a mere change of opinion and more particularly, in the absence of any fresh tangible material ? - The first assessment order is based upon the information and details provided by the Petitioner including material relating to his immovable property and the deductions under Section 54(F) of the Act have been computed on the basis of the material provided by the Petitioner. Thus, the AO had in his possession all the primary facts and it was for him to make necessary inquiries and draw proper inference as to whether deductions as claimed under Section 54(F) of the Act were to be allowed or otherwise while working the computations. Thus, it can be safely held that the reopening of the assessment order is clearly on the basis of a change of opinion and that too without surfacing of any tangible new information. As noted earlier, a perusal of the communications reveal that there was nothing more to disclose and a person cannot be said to have omitted or failed to disclose information which clearly has been placed before the AO at the time of issuance of the first assessment order. It is settled law that the reasons for reopening an assessment can be tested and examined only on the basis of the reasons recorded at the time of issuing the notice under Section 148 of the Act. The Revenue has not even placed on record any document to suggest that the reasons recorded have been furnished to the Petitioner. On this ground alone the assessment order impugned herein deserves to be quashed. Petitioner had fully and truly disclosed all material facts necessary for the purpose of assessment. The AO issued the first assessment order after carefully scrutinizing the material furnished by the Petitioner. The Respondents have failed to furnish any reasons for reopening as mandated by law. There is not even a whisper in the entire communication trail as to what was not disclosed. In our view, thus, this is not a case where assessment should be permitted to be reopened on the reasonable belief that income has escaped assessment on account of failure of the assessee to disclose truly and fully or material information necessary for computation of income. Decided in favour of assessee.

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• 2023 (9) TMI 757
  Notice issued u/s 271D - violation of Section 269SS - specific case of the petitioner is that the notice is vague and that already a regular Assessment order has been passed wherein, proposals were made for imposing penalty u/s 270A, 271A, 271B and 271AAC - HELD THAT:- Show cause proceeding cannot be scuttled by filing a writ petition, as it is not without jurisdiction. It is open for the petitioner to reply to the Show Cause Notice and defend himself. P rima facie, it appears that the petitioner has violated provisions of Section 269SS of the Income Tax Act, 1961 and is therefore required to answer to the proposal contained the impugned Show Cause Notice dated 09.08.2023. Therefore, this writ petition is liable to be dismissed. The petitioner shall file such reply within one week from the date of receipt of a copy of this order. The respondent shall therefore dispose the impugned Show Cause Notice dated 09.08.2023 on merits and in accordance with law without getting influenced by any of the observations contained herein in this order within reasonable period.

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• 2023 (9) TMI 756
  Validity of assessment u/s 144B - LTCG on sale of inherited shares which were held in petitioner s father s name - petitioner had merely uploaded an affidavit of his mother which is not sufficient and petitioner ought to have uploaded a proper reply/representations to the draft Assessment order cum Show Cause Notice in absence of the proper response from the petitioner - HELD THAT:- Mere filing of the affidavit does not prove that shares (which were sold by the assessee) were transferred by his mother in favour of her son A.v.Kishore (assessee). In this support no documentary evidence has been furnished by the assessee. Petitioner has failed to give a proper response to the Show Cause Notice cum Draft Assessment order dated 22.04.2021. In absence of a proper reply, the respondent could not be blamed. Whether the respondents are entitled to make additions to re-compute the taxable income of the petitioner to demand the differential tax of cannot be decided under Article 226 of the Constitution of India. The proper remedy for the petitioner is only to file a Statutory Appeal before the Appellate Commissioner under Section 246 of the Income Tax Act, 1961. The petitioner has instead filed this writ petition within the time period prescribed for filing a Statutory Appeal. Considering the above, Court is inclined to dispose this writ petition by giving liberty to the petitioner to file a Statutory Appeal before the Appellate Commissioner within a period of 30 days from the date of receipt of a copy of this order. Petitioner is also given liberty to file appropriate application before the respondents for stay of recovery proceedings in accordance with Section 220(6) of the Income Tax Act or in the alternative ask for waiver in accordance with the relevant circular of the Board. The petitioner shall file the Appeal before the Appellate Authority and the application before the concerned Authority either for waiver/or for stay as the case may be, within a period of four weeks from the date of receipt of a copy of this order. Pending disposal of such application, the respondent/Income Tax Department, recovery proceedings shall be kept in abeyance.

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• 2023 (9) TMI 755
  Levy of penalty u/s 270A - assessee not offering the interest on income tax refund while filing its return of income - HELD THAT:- As return filed by the assessee was selected for limited scrutiny only for the purpose of examination of foreign assets vide notice dated 09/08/2018, issued u/s 143(2) of the Act and no notice was issued regarding interest of income tax refund received by the assessee. Therefore, it is not a case, wherein pursuant to scrutiny assessment proceedings the assessee decided to offer the income tax. Thus, no merits in the findings of the AO that the assessee chose to disclose the interest only after the case was selected for limited scrutiny - unless the refund is received, the interest element of the refund cannot be determined. It is also pertinent to note that the suo moto declaration of interest on income tax refund, as offered by the assessee during the assessment proceedings, has been accepted vide order passed u/s 143(3) of the Act without modification of the revised computation in this regard. Therefore, we are of the view that the explanation of the assessee for not offering the interest on income tax refund while filing its return of income is bona fide, and thus, the non-declaration of interest on income tax refund cannot be said to be under-reporting of income by the assessee within the meaning of section 270A of the Act. Accordingly, we direct the AO to delete the penalty levied u/s 270A in the present case. As a result, ground raised in assessee s appeal is allowed.

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• 2023 (9) TMI 754
  Addition u/s 56(2)(viia) - difference of the total fair market value and the total purchase consideration - AO while making the above addition, was of the opinion that shares which have been routed at Rs. 10 per share was in violation of provisions of section 56(2)(viia) - HELD THAT:- Assessee did not furnish any reliable and robust basis of valuation of such equity as per the Rules before the A.O. In the absence of any valuation as per Rule submitted by the Assessee, the A.O. carried out valuation on NAV method. It is the duty of the assessee to furnish reliable valuation determining such share premium from a qualified valuer. Assessee had not entered into a distress transaction also though the same is not recognized in the extent scheme of Section 56(2) r.w.r. 11UA. Thus, the A.O. was well within his rights to question the valuation reports as they were not in line with the method of valuation adopted basis the assets valuation owned by the concerned entity, as detailed above. C As assessee had not furnished any valuation as per Rules either before the AO or before the Ld. CIT(A) or before us, we find no error or infirmity in the order of the CIT(A) sustaining the addition made by the AO - Decided against assessee. Unexplained investment - A.O. concluded that the assessee was not doing any actual purchase or sale and are mere name lender - HELD THAT:- Sundry debtors created from fictitious sale made during the AY 2014-15 has no worth and only book entry, and the fact that the assessee has not carried any business during the current year, which is corroborated by the AO from the Profit and Loss account. Apart from the same, the assessee had purchased huge investments through book entry from its opening sundry debtors without any actually receipts payment transaction routed through bank. Thus, we find no error in the orders of the authorities in making the above addition - Decided against assessee. Expansion of scope of limited scrutiny - CIT(A) to confirm the assessment made by the A.O. by rejecting the scope of limited scrutiny having being expanded by the A.O. without prior permission is in violation of the provisions u/s 119 of the Act and the assessment is illegal and bad in law - HELD THAT:- Considering the fact that the AO has put the reasons for picking of the case for scrutiny and had sought all the replies pertaining only to the issue as per criteria for scrutiny selection, we find no merit in the ground No.6 of the assessee

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• 2023 (9) TMI 753
  Addition u/s 68 - unsecured loan - HELD THAT:- Once the assessee has discharged the onus cast upon her with regard to identity of the creditors, their creditworthiness and genuineness of transactions, we are of the considered opinion that there would not be any case for the Department to treat the credits as unexplained under section 68 of the Act. Moreover, since the Department has accepted the deletion of addition of Rs.. 45 lakhs loan on similar facts and circumstances, we are of the considered opinion that the Department has no case to find fault in the appellate order towards deleting the addition on account of unsecured loan received by the assessee to the extent of Rs.. 2.40 crores along with interest on the above unsecured loans. Accordingly, the grounds raised by the Revenue are dismissed. Unsecured loan from minors - assessee has submitted that both the minors have received gifts in the previous assessment year and the amounts were lying in the bank accounts of the minors unused. Thus, the minors offered loans to the assessee out of their savings - HELD THAT:- It is an admitted fact that the minors have been receiving gifts in earlier years. In fact, there was no debit entry in their SB account. To offer a loan, credit balances in their accounts are required. Out of their bank balance, the minors have offered loans to the assessee. When they have sufficient credit in their accounts, creditworthiness cannot be questioned. More so, both the minors have furnished their income tax returns, which were duly agreed by the Department. Thus, we are of the opinion that the ld. CIT(A) was not correct to held that the minors have no independent source of funds to advance the loans. Accordingly, we reverse the orders of authorities below and delete the addition as well as interest relating thereon - Thus, the ground raised by the assessee is allowed. Addition on account of factory maintenance expenditure - HELD THAT:- Once the assessee has furnished detailed confirmation of payment on accounts of factory maintenance expenses, to prove the identity of Shri S. Srinivasalu, copy of Aadhar, PAN, ITR, etc. were brought on record, we are of the considered opinion that the assessee has discharged the primary onus cast upon her and thus, the above addition made by the Assessing Officer is liable to be deleted. Accordingly, The addition made on account of disallowance of factory maintenance expenses stands deleted and the ground raised by the assessee is allowed. Addition towards payment of electricity charges - HELD THAT:- As assessee claims to have made payment to the TNEB and the element of personal usage cannot be ruled out in the absence of production of electricity bills, we sustain the addition to the extent of Rs.. 2,00,000/- out of addition confirmed by the ld. CIT(A) to the extent of Rs.. 5.00 lakhs and the balance addition of Rs.. 3,00,000/- stands sustained. Addition being depreciation and vehicle maintenance expenses - HELD THAT:- In this case, 10% of the expenditure on maintenance of car was disallowed towards personal use, thereby, the ld. CIT(A) has observed that the Assessing Officer was justified in disallowing 10% of the depreciation on car. Since the assessee has not given the correct depreciation on car claimed, the Assessing Officer has taken 10% of the total depreciation claimed under the 15% block and disallowed the depreciation. Accordingly, the ld. CIT(A) confirmed the disallowance of Rs.. 2,27,817/- under depreciation and total disallowance under car maintenance expenses. We find no infirmity in the above findings of the ld. CIT(A) and thus, the ground raise by the assessee is dismissed. Addition on account of insufficient drawings over and above the addition made by the AO - HELD THAT:- Considering the turnover of the assessee at about Rs.. 37 crores and also drawing of Rs.. 12,00,000/- as salary from Metro Power Transmission (P) Ltd. during the previous year 2013-14, the drawings towards personal expenses shown by the assessee appears to be very low and accordingly, the Assessing Officer enhanced an additional amount of Rs.. 2.00 lakhs. CIT(A) has also observed that the addition of another 2 lakhs thereto the personal expenses appears to be reasonable and fair in totality of the facts and circumstances of the case. Thus, we find no reason to interfere with the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the assessee is dismissed. Partly confirming the computation of income from house property - HELD THAT:- assessee claimed that the property was vacant for the whole year and not let out for any period during the year, the ld. CIT(A) opined that the assessee may not be entitled to any relief and has to pay tax on the notional rent. Accordingly, the ld. CIT(A) confirmed the findings of the Assessing Officer that the notional rent has to be assessed as property income. However, since the Assessing Officer has assessed the entire gross rental of Rs.. 5.40,000/- as income without giving statutory deduction at 30% of the annual value, the ld. CIT(A) has confirmed the addition to the extent of Rs.. 3,78,000/- after granting statutory deduction of Rs.. 1,62,000/- being 30% of Rs.. 5,40,000/-. Before us, the ld. Counsel for the assessee could not controvert the above findings of the ld. CIT(A) and accordingly, the addition confirmed by the ld. CIT(A) stands sustained. Appeal filed by the assessee is partly allowed and the appeal of the Revenue is dismissed.

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• 2023 (9) TMI 752
  Penalty u/s. 271(1)(c) - deduction u/s 35 of the Act in respect of donation given to M/s. Herbicure Health Care Bio Herbal Research Foundation - HELD THAT:- At the time when deduction was claimed by the assessee, the registration certificate granted to HHBRF u/s 35(1)(ii) of the Act was still in place during the impugned assessment year. Secondly, the return was filed by the assessee in response to notice under Section 147/148 of the Act on 04.04.2017 whereas the reasons recorded for reopening of assessment under Section 147 of the Act were provided to the assessee on 19.04.2017. Therefore, it cannot be presumed that the reasons for reopening of assessment were known to the assessee at the time when return was filed by the assessee in response to notice under Section 147 of the Act withdrawing the claim of deduction under Section 35(1)(ii) of the Act. We observe that the ITAT Ahmedabad in the case of S. G. Vat Care Pvt. Ltd. [ 2019 (1) TMI 1694 - ITAT AHMEDABAD] has held that assessee is eligible for deduction under Section 35 of the Act in respect of donation given to M/s. Herbicure Health Care Bio Herbal Research Foundation since the donations were given by the assessee and at that point of time, the donee was identified as an eligible institute and fell within the statutory eligibility criteria. The ITAT further observed that the certificate for receiving donation was cancelled only on 05.09.2016 in respect of HHBFR and therefore, the claim of deduction could not be disallowed in the hands of the assessee for A.Y. 2014-15, when the registration for receiving donation was still in existence. In the case of CIT vs. Punjab Tyres [ 1986 (7) TMI 77 - MADHYA PRADESH HIGH COURT] held that when an amount is surrendered to purchase peace, or for other similar reason, such surrender cannot amount to admission, constituting evidence of concealment in penalty proceedings. The High Court held that unless there is any evidence showing that assessee had consciously concealed particulars of his income, any admission made by him surrendering the said particular amount as his income would not by itself justify imposition of penalty. Accordingly, we are hereby directing deletion of levy of penalty u/s 271(1)(c) - Decided in favour of assessee.

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• 2023 (9) TMI 751
  Addition on account of interest income - Income from other sources u/s 56 - difference of interest income as reflected in Form No. 26AS and the amount of interest income as declared in the books of account - HELD THAT:- We are in agreement with the assessee that the Assessing Officer did not take into consideration the other ledger account maintained by the assessee reflecting interest income - Accordingly, in view of the arguments made before us and the Rectification Applications filed by the assessee, alongwith supporting documents viz. ledger account produced before us for our perusal, we are hereby directing that the addition made by the AO may be deleted. No cogent reason has been furnished by the Assessing Officer for rejecting the rectification application filed by the assessee. Appeal of the assessee is allowed.

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• 2023 (9) TMI 750
  Addition u/s 69C - unexplained source of income incurred towards purchase of the land - as submitted assessee had not paid a single penny in cash and the entire share of the transaction was routed through the bank accounts and the entire share of on money was admitted to be paid by the co-owners - HELD THAT:- As search action against Mr. Baldevbhai Patel was not based for reopening of assessee s case and assessee as well as co-owners i.e. Shri Baldevbhai Patel and Saileshbhai Patel had admitted that the share of three purchasers was 60:20:20 respectively was there as Shri Baldevbhai Patel and Sailseshbhai Patel and Shri Manish Ramanbhai Patel i.e. assessee. The additional amount paid in cash on money was admittedly paid by the other two-owners and not by the assessee as per the reply filed by the assessee during the assessment proceedings. In fact, the assessee s portion of share only 20% i.e. of 1,77,000/- and CIT(A) has categorically observed that both co-owners has challenged the ratio of land holdings amongst co-owners who challenged addition of on money on the ground that money received earned on sale of land were utilized by said co-owners for making money payment of land. This explanation was not taken into consideration by the Assessing Officer as well as by the ld. CIT(A) and thus in fact charging/making 20% addition was not justified and therefore the appeal of the assessee is allowed.

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• 2023 (9) TMI 749
  Exemption u/s 11 - Rejection of application for registration u/s. 12AA - Rejecting the application of the assessee the CIT(E) observed that the grants / funds received from the Government of Haryana is income of the assessee - assessee vehemently stated that the impugned grants are nothing but capital receipts and, therefore, were directly credited to the reserves and surplus in the balance sheet - HELD THAT:- Section 12AA pertains to the registration of the trust and not to assess what a trust has actually done. That is to say the Commissioner is bound to consider whether the objects of the trust are charitable in nature and whether the activities which the trust proposed to carry on are genuine in the sense that they are in line with the objects of the trust. For the above preposition we drawn support from the decision of the Hon ble Supreme Court in the case of Anand Social And Educational Trust [ 2020 (2) TMI 1293 - SUPREME COURT ] Incidentally we find that on the same set of facts the PCIT has granted registration to the assessee for A.Y.2022-23 to 2026-27 as per the order. Decided in favour of assessee.

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• 2023 (9) TMI 748
  Ad-hoc disallowance of power and fuel expenses - As per AO documents submitted by the assessee could not satisfactorily lead to co-relation between production and increasing power and fuel expenses - HELD THAT:- It is found that the assessee accepted the proposed addition made by the A.O. during the assessment proceedings and consequent to which addition made by the A.O. and now he cannot find fault with the Authorities in making addition. It was not demonstrated before us that the Assessee s Representative had agreed the said addition before the A.O. by mistake of fact or law or it was agreed before the A.O. without the authority from the assessee himself. Being so, agreed addition cannot be challenged before us. Therefore, we find no merit in the Ground Disallowance of Warranty expenses - DR submitted sales has decreased in comparison to the preceding years but the total warranty expenses have increased more than 250% and the provision for warranty expenses around 300% similarly in the Assessment Year 2005-06 as well, though the sales remained almost static, but the warranty expenses increased more than 200% - HELD THAT:- The provision of warranty has been made in very arbitrary manner as the assessee is not following consistent method of making provision for warranty. We are aware of the judgment of Rotork Controls [ 2009 (5) TMI 16 - SUPREME COURT] wherein it is held that if the warranty is based on the past experience i.e. historic trends, the estimate can be said to be reliable. When the assessee makes provision for warranty following scientific method and the same is not arbitrarily made, the reliable estimation made by the assessee to be allowed as deduction. In the present case, the assessee made provisions for warranty in arbitrary manner which is not supported by any scientific method which cannot be allowed as deduction, accordingly, we find no error in the order of the Lower Authorities. Thus, we confirm the addition made by the authorities and dismissing the Ground of the assessee.

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• 2023 (9) TMI 747
  Addition u/s. 56(2)(vii) - transaction of purchase of immovable property - consideration exceeded the stamp duty value of the immovable property - difference of opinion arising between the Members - Third Member appointed for taking decision on the point of difference between the Members constituting Division Bench - HELD THAT:- Third Member has agreed with the view take by Hon ble Accountant Member and held that the impugned addition u/s. 56(2)(vii) of the Act, is liable to be deleted. Section 56(2)(vii)(b)(ii) of the Act, being a deeming provision, it is not legally permissible to expand the scope of the said section by stating that there is round tripping of money. Ideally, AO ought to have examined the applicability of section 69 of the Act, provided there was material on record to suggest there was some payment not recorded in the books of account of the assessee (unaccounted money). However, the AO has candidly admitted in the Assessment Order that there is no material on record to suggest unaccounted money/on money was paid prior to taking possession of the impugned property. There is only an assumption and no material / evidence for making the addition. Therefore, concur with the views AM and accordingly hold that the impugned addition under section 56(2)(vii) of the Act, is liable to be deleted. Hence, answer to the above question framed in the negative and in favour of the assessee. Thus the matter may be placed before the regular Bench for an appropriate order, in accordance with law. Decided in favour of assessee.

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• 2023 (9) TMI 746
  Revision u/s 263 - Nature of receipt - compensation received by the assessee as per the consent decree of the Hon ble Bombay High Court - taxability of receipt of damages which was claimed as capital receipt not chargeable to tax, whereas the ld. PCIT has held it to be in the nature of income - HELD THAT:- As noted above, Section 6 of the Transfer of Property Act clearly provides that a mere right to sue cannot be transferred , even if it is to be treated as property u/s. 5 of the Transfer Property Act. Transfer of property means the act by which a person conveys a property to another and to transfer property is to perform such act. The mere right to sue may or may not be property but certainly it cannot be transferred as per law. In the case of the assessee MOU was not capable of specific performance under the Specific Relief Act and was confirmed by the Hon ble Bombay High Court vide consent decree dated 10/07/2017 and it was decreed that the only right available to the assessee was the right to sue for damages and the compensation was paid under the decree towards the said right to sue. As considering judgments of various High Courts including the two judgments of the Hon ble Jurisdictional High Court in favour of the assessee, the impugned order of the ld. PCIT cancelling the assessment order solely relying on the judgment of M/s. Vijay Flexible Containers [ 1989 (9) TMI 16 - BOMBAY HIGH COURT] which is not applicable on the facts of the assessee s case cannot be sustained and is hereby set aside and the order of the Assessing Officer accepting the claim is upheld. Also once the ld. AO has examined this issue threadbare relying upon the various judgments of the High Court which was cited before him accepting the claim, then ld. PCIT cannot set aside the assessment order within the scope of u/s. 263 is not adjudicated as we have already held on merits that the judgment of the ld. PCIT is incorrect in law. Accordingly, the appeal of the assessee is allowed.

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• 2023 (9) TMI 745
  Assessee in default - Period of limitation to pass order - TDS u/s 194A - Interest other than interest on securities - Non deduction of TDS where form 15H has been furnished - order passed u/s. 201(1)/201(1A) treating the assessee in default for non-deduction of tax at source - HELD THAT:- The time limit under the substituted provision is seven years from the end of the financial year in which the payment is made or credit for the income is allowed. The order u/s 201(1)/(1A) came to be passed in this case on 27.3.2019, which is within a period of seven years from the end of the financial year in which the interest income was paid/credited to the customers accounts. Such an order is clearly within the limitation period. Thus, the ground of limitation raised by the assessee does not stand. The same is, ergo, dismissed. Liability of the assessee to deduct tax at source - The net effect of the Explanation to section 191, section 194A read with section 197A and 201 is that there will be no obligation to deduct tax at source on furnishing the necessary declaration by customers where either the interest income does not exceed the basic exemption limit or the depositor is more than the prescribed age and he furnishes the declaration that tax on his total income including interest from the bank will be Nil. In order to treat a person as assessee in default, firstly, there should be an obligation to deduct tax at source and despite such obligation, the person fails to deduct tax at source or pay after such deduction and further the payee has also not paid tax directly. The question whether the assessee is in default in terms of section 201(1) needs to be determined in the light of Explanation to section 191. Howbeit, the cases covered u/s 197A(1A) [i.e. the eligible person furnishing declaration in form No. 15G that his tax liability on total income, including the interest, will be Nil] but not hit by section 197A(1B) [i.e. interest income other than interest on securities as referred to in section 194A does not exceed the basic exemption limit], will at the outset be excluded from consideration as not entailing any obligation to deduct tax at source. Similarly, the cases covered u/s 194A(1C) [i.e. persons exceeding the specified age furnishing form No. 15H to the effect that tax on their total income including such interest will be Nil] will also be excluded. Interest u/s 201(1A) is payable by the assessee - Even w.r.t. the cases where it is not in default in terms of Explanation to section 191 - from the date when the tax was deductible up to the date of filing of return by the payee including the interest income in his total income. However, the cases in which there is no obligation to deduct tax at source will not be considered for interest u/s 201(1A) of the Act. In the ultimate conclusion, we set aside the impugned order and send the matter back to the AO for passing a fresh order u/s 201(1)/(1A) in the light of above directions. In case it is found that the recipients included such amount of interest in their total income, then the assessee should not be treated in default in terms of section 201(1).

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• 2023 (9) TMI 744
  Exemption u/s 11 - application for registration u/s. 12AB was rejected - mandation to obtain necessary approval as per section 11(1)(c) for the international projects/activities not adhered - HELD THAT:- We note that the assessee has been granted provisional registration and the assessee filed application in Form 10AB for regular registration which has been rejected by the CIT(E) stating that the assessee has not followed the provisions of section 11(1)(c) and not complied with the requirements of the provisions of the Act as well as failed to prove the genuineness of the activities of the trust. We have gone through the documents placed containing the photographs and summary of the activities of the trust within India as well as outside India as narrated. For the activities outside India, it is mandatory to obtain necessary approval as per section 11(1)(c) of the Act which has not been complied by the assessee. Permission from the Board is mandatory as per section 11(1)(c) for the above international projects/activities. It is also not clear whether the MAVIM (2017-2018) project is national or international project. There is contradiction in the trust deed since the Preamble states that the income shall be applied for the stated objects of the Trust in India, whereas the object clause at sl. No. 4 allows work in India and other countries. We also note from the order of the CIT(E) that the assessee has not submitted documents to prove the genuineness of the charitable activities undertaken by it. We confirm the order of the ld. CIT(E). Decided against assessee.

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• 2023 (9) TMI 743
  Capital gain computation - Deduction of cost of land with expenses for exploitation on land and others - as stated that the assessee has shown the amount as advance in books of account and not capitalized because the registration was pending - Whether legal rights in the property can be extinguished by an agreement to sell as per Section 2(47) of the Income-tax Act which defines the word transfer in relation to capital asset? - HELD THAT:- When the assessee is a statutory body incorporated under Companies Act and maintaining statutory books of account, why it is not proving the expenses on exploitation and others incurred by it or the cost incurred by it being shown as advance in accounts? We fail to understand the approach of assessee. The matter does not stop here. Interestingly, we find that the assessee had claimed before AO that it had declared the receipt of Rs. 29,20,000/- in AY 2010-11 and the AO has accepted this version of assessee too but the authenticity of this claim is also doubtful. We find that both of the lower authorities have made a concurrent finding that the assessee has not filed any evidence to prove the cost of Rs. 99,20,000/-. We are also aware that if the land is sold for Rs. 1,28,50,000/- the department cannot tax entire sum of Rs. 1,28,50,000/- as income of assessee; the department has to allow deduction of actual cost incurred by assessee since the impugned land actually belonged to RLM once upon a time and the assessee purchased from RLM and therefore certainly incurred cost whatever amount may be. Therefore, it is necessary to ascertain the correct cost incurred by assessee and give deduction to assessee. At the same time, we also note that it s assessee onus to prove conclusively the amount of cost incurred. We also find that all three original owners, namely RLM from whom the land was purchased, have already expired and their death certificates are filed in the Paper-Book. We feel that the legal heirs/relatives of RLM have not co-operated the department in earlier proceeding and it would be unreasonable to expect any assistance from them at this stage for the transactions done by deceased RLM. As mentioned earlier, we note that the assessee is a company and maintaining books of accounts in terms of statutory provisions of Companies Act as well as Income-tax Act. Assessee is having complete documents and information from which it can easily file documentary evidences to AO to prove cost without any difficulty. Therefore, it is most appropriate in the situation to remand this case back to the file of AO who will decide the issue afresh. Needless to mention that the AO would give adequate opportunities to assessee and the assessee shall avail those opportunities; in the event of any failure by assessee without just cause, the AO shall be free to take a decision as the situation warrants. We direct the assessee to submit all documentary evidences including production of audited balance-sheets of past years, books of accounts and accounting entries therein, as may be required by AO, to prove its claims. The assessee shall make clear submissions with documentary evidences so that there remains no ambiguity on the factual aspects and the litigation does not multiply again. The AO shall also take a decision afresh without being influenced by his earlier order. Appeal of assessee is allowed for statistical purpose

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• 2023 (9) TMI 742
  Validity of the assessment order on the ground that no notice u/sec. 143(2) was issued by the AO - HELD THAT:- The contention of the assessee is contrary to the material on record in mere perusal of the assessment order, it would be clear that the AO had issued notices u/sec. 143(2) and 142(1) and the assessee had also responded and participated in the assessment proceedings. Therefore, the contention of the assessee is devoid of any merit and is hereby dismissed. Assessment should not have been made in the individual hands of the assessee, but in AOP status - The assessee had not brought any material to show that the transaction of purchase of property was done in AoP status. On the other hand, the material on record clearly indicates that the properties were purchased jointly along with two other persons, namely Shri Ashok Selarka and Shri Vikesh Agrawal with a definite share in the property, which clearly indicates that there was no intention on the part of the assessee and other two parties to purchase the property in the capacity of an AoP. Thus, the findings of the ld. CIT(A) are very well reasoned and this ground of appeal has no merits. Accordingly, dismissed. Addition solely on the basis of the statement given by the vendors of the property from whom the assessee has purchased the land jointly with other two parties - During the course of assessment proceedings, the assessee had denied having paid on money consideration over and above the consideration mentioned in the sale deed. During the course of appellate proceedings before the ld. CIT(A), the ld. CIT(A) had directed the AO to afford an opportunity to cross examine the vendors. AO in the remand proceedings offered the assessee an opportunity to cross examine the vendors, but the assessee could not disprove the statements made by the vendors and also could not deny the existence of agreement for on money consideration over and above the consideration mentioned in sale deed. There was a conclusive evidence to show that the assessee had paid on money consideration cash at the time of purchase of agricultural land and the assessee could not offer any explanation as to the source of on money consideration paid. AO was justified in making the addition in the hands of the assessee. Therefore, this ground of appeal raised by the assessee is dismissed.

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• 2023 (9) TMI 741
  TP adjustment - Adjustment on account of Advertisement, Marketing and Promotion ( AMP ) expenses - HELD THAT:- As relying on in assessee s own case for A.Y.2009-10 [ 2021 (2) TMI 1358 - ITAT MUMBAI] there exists a fine but very important distinction between products promoted and nurtured by an assessee and the brand owned and supported by its AE. In the modern world both exist and play different and specified roles. Therefore, until and unless some -thing positive is brought on record about sharing/incurring AMP expenditure under the head by an assessee on behalf of its AE, it cannot be held that it should have recovered some amount from the AE as the expenditure by it indirectly helped in augmenting the brand value owned by its overseas AE. In the case under consideration, the assessee was incurring expenditure for its products whereas the AE was looking after the ground at global level. If the AMP expenditure incurred by them benefited indirectly in the local/ international market it would not mean that it was an IT. The basic purpose of introducing the various provisions of chapter X, as stated earlier, was to prevent tax evasion in the transactions undertaken between an Indian entity and its overseas AE. In our opinion, a perceived/notional indirect benefit to the AE, due to incurring of certain expenditure by an assessee in India, is not covered by the TP provisions. It is a fact that the payment under the head AMP expenditure was made to third parties and that those parties were located in India. Thus we hold that the decisions made by the TPO / AO towards transfer pricing adjustment on account of AMP expenditure be deleted. Accordingly, these grounds raised by the assessee are allowed. Disallowance of payment of royalty on technology paid - HELD THAT:- Payment of royalty towards trademark for the year under consideration is based on the same agreement, which is considered by the co-ordinate bench for the assessment year 2009-10 [ 2021 (2) TMI 1358 - ITAT MUMBAI] Therefore we are of the view that the issue is covered by the above decision for the year under consideration also. Accordingly, we delete the TP adjustment made by the TPO towards payment of royalty on technology paid to Cadbury Adams USA LLC, and Cadbury Enterprises Pte Ltd. These grounds are allowed in favour of the assessee. Disallowance of regional service fees paid - assessee has entered into service agreement with Cadbury Enterprises Pte Ltd for availing certain services such as business strategy, financial planning and accounting supply chain, co-ordination and planning human resources legally and marketing, etc - One of the grounds on which the TP adjustment is contested by the assessee is that the TPO has computed the ALP based on an adhoc estimation of salary and the number of man hours - AR submitted that the TPO has not followed the CUP method but has arrived at the ALP on some estimation - HELD THAT:- We notice that the TPO while arriving at the ALP has used the estimated salary and also used earlier years man hours to determine the current year man hours spent. In the above decision, the coordinate bench has considered the issue of determination of ALP by the TPO and has held that the TP adjustment is not tenable by relying on the decision in the case of Kodak India Pvt. Ltd [ 2013 (11) TMI 667 - ITAT MUMBAI] - Thus we delete the TP adjustment. Disallowance of Global Service Fee paid - assessee has entered into service agreement for availing services from its AE Cadbury Holding Ltd (CHL) where the services rendered are in the nature of business and commercial strategy and support, executive development, programme development and delivery, internal management, etc. - HELD THAT:- We have already held in the earlier part of this order that the determination of ALP without applying any methods as prescribed under section 92C(1) by the TPO is not tenable. We notice that the TPO has computed the TP adjustment towards global services rendered by Cadbury Holdings Limited also in the same way by applying adhoc estimation of salary cost and man hours. Therefore our decision with respect regional service fee paid to Cadbury Enterprises Pte Ltd., is equally applicable to the current issue under consideration also. Therefore considering the decisions of the coordinate bench in assessee s own case for AY 2009-10 and in the case of Kodak India Private Ltd., [ 2013 (11) TMI 667 - ITAT MUMBAI] we hold that the TP adjustment towards global services rendered by Cadbury Holdings Limited be deleted. Disallowance u/s 14A - assessee computed a suo motu disallowance - assessee submitted before the Assessing Officer that the investments are made out of surplus funds available with the assessee and that the assessee did not borrow any funds in order to make investments - HELD THAT:- It is now a settled position that when the own funds are available, no disallowance is warranted under section 14A read with rule 8D. For the year under consideration, the reserves and surplus of the company as on 31/03/2011 is at Rs. 89, 988.09 lakhs and the investments made stands at Rs. 12, 881.07 lakhs, therefore, we see merit in the contention of the Ld.AR that no disallowance is warranted u/s 14A - Thus no disallowance towards interest is warranted under section 14A r.w.r.8D of the Act. With regard to the contention that the suo motu disallowance we notice that the Assessing Officer in the OGE passed for AY 2009-10 has deleted the disallowance made under section 14A and therefore we see merit in the submission of the ld AR that the suo moto disallowance based on the salary of employees in treasury department is being accepted by the revenue. We therefore remit the issue of verification of direct / indirect expense disallowance to the file of Ld. AO for re-adjudication in the light of suo-moto disallowance offered by the assessee. Treatment of forex loss on cancellation of contracts as speculative - assessee submitted that the loss on cancellation of forward contract is arising out of the normal course of business activity and not out of intention to earn more profits and accordingly the same should be allowed as business expenditure - HELD THAT:- As relying on assessee s own case has considered a similar issue for A.Y. 2009-10 [ 2021 (2) TMI 1358 - ITAT MUMBAI] we hold that the loss arising from cancellation of forward contracts is arising in the normal course of business and accordingly, should be allowed as a deduction. The disallowance made in this regard is deleted. Deduction u/s 80IC - Allocation of expenditure at Baddi Unit-I II - disallowance is arising out of the allocation of finance cost and the Operating Establishment expenses (O E) which the assessee allocated based on the revenue ratio as compared to the total revenue of the assessee - HELD THAT:- We notice that the coordinate bench in assessee s own case for AY 2009-10 accepted the claim towards finance cost and remitted the issue back to the Assessing Officer only with respect to the verification of allocation of O E expenses. We further notice that in the OGE the AO has allowed the O E expenses as claimed in the return of income for the purpose of deduction u/s 80IC thereby accepting the method of allocation followed by the assessee for allocating O E expenses. As noticed that there is no change in the method of allocation followed by the assessee for AY 2011-12 also - thus we delete the disallowance made by the AO and hold that the assessee be allowed the deduction u/s 80IC as claimed in the return of income. Addition on account of Annual Information Report - aggregate income was appearing in AIR information which had not been reconciled by the assessee with respect to books of account - HELD THAT:- As decided in case Reliance Apex Networks Ltd [ 2015 (5) TMI 990 - ITAT MUMBAI] and also on Zee Media Corporation Ltd. [ 2018 (4) TMI 932 - ITAT MUMBAI] the addition cannot be made solely based on the information in the AIR. Thus keeping in view the amount involved, vis- -vis the total turnover, we see no reason to sustain the addition, we delete the addition made in this regard. Non grant of MAT - AR submitted that the MAT credit is carried forward from A.Y. 2010-11 and the credit was modified due to additions made in the assessment order for A.Y. 2010-11 - HELD THAT:- We are of the view that this issue needs to be factually examined for the purpose of allowing the credit towards carried for MAT credit from AY 2010-11. Therefore, we remit the issue back to the Assessing Officer to examine the status of the assessment order passed for AY. 2010-11 and accordingly give credit for the carried forward MAT for the year under consideration. Levy of interest u/s 234A - HELD THAT:- We notice that the AO has recorded in the assessment order that the assessee has filed the return of income on 30/11/2011. Therefore, as per the provisions of section 234A, no interest is leviable in assessee s case. Accordingly, the interest levied is deleted. Levy of Interest u/s 234C - As submitted by AO has levied interest u/s 234C on the assessed income whereas the provisions of section 234C talks about levy of interest on income returned - HELD THAT:- We accordingly remit the issue back to the Assessing Officer with a direction to examine the records and re-compute the interest under section 234C as per the provisions of the said section.

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• 2023 (9) TMI 740
  TDS u/s 194A - interest payment to NBFCs - non deduction of TDS - Disallowance of payment of interest u/s 40(a)(ia) - HELD THAT:- CIT(A) after considering the submissions and additional evidence filed by the assessee and findings of the AO has dismissed the appeal filed by the assessee. In the absence of any contradictory material being available on record, we are of the considered view that the impugned order passed by the learned CIT(A) requires no interference and, therefore, is upheld. Accordingly, grounds raised by the assessee in this appeal are dismissed.

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• 2023 (9) TMI 739
  Revision u/s 263 - assessment order as erroneous on account of issue of disallowance of expenses u/s 14A as not having been examined by the AO - AO power to go beyond the scope of limited scrutiny - contention of assessee that his case had been selected for limited scrutiny for the purpose of scrutinizing the expenses debited to the Profit and Loss account for earning exempt income and the issue had been thoroughly examined by the AO and noting that no exempt income had been earned by the assessee, he had made no further disallowance of expenses - HELD THAT:- It is not disputed that the assessee had not earned any exempt income during the year. It is also not in dispute that the jurisdictional High Court has laid down that where no exempt income is earned by the assessee there is no case for making any disallowance under Section 14A of the Act. In the light of these facts, undoubtedly, the view taken by the Assessing Officer in making no disallowance under Section 14A therefore, clearly in accordance with law as interpreted by the Hon ble jurisdictional High Court. The finding of the ld. PCIT that the Assessing Officer was bound by CBDT Circulars including those contrary to the decision of the Hon ble jurisdictional High Court we cannot agree with the same. As rightly pointed out by the learned Counsel for the assessee, the circulars issued by the CBDT are binding on their officers only to the extent that they are not in contradiction to the judicial interpretation of provisions of law. Thus we hold that the view taken by the Assessing Officer in making no disallowance under Section 14A of the Act being in consonance with law as interpreted by the Courts; there is no error in the order of the Assessing Officer. Claim of depreciation on goodwill - It is an admitted fact that the assessee s case was selected for limited scrutiny and the reason was examining the disallowance of expenses pertaining to the earning of exempt income in terms of provisions of Section 14A of the Act. The Revenue does not dispute this fact before us. In the light of these facts, we fail to understand how the Assessing Officer could have travelled beyond the scope of assessment and how the assessment order could have been held to be erroneous for not having travelled beyond the scope of assessment which was directed to the Assessing Officer. The Assessing Officer had acted in accordance with the scope which was delineated to him. The assessment order cannot be held erroneous for the Assessing Officer having not crossed the boundary for scrutiny which was set out before him. Assessing Officer in the present case, by not expanding the scope of assessment, had acted contradictory to the CBDT Circular is an incorrect understanding of the said circular. Even otherwise, we have noted that the ld. PCIT had invoked clause (a) of Explanation (2) to Section 263 in the said case, that the Assessing Officer had not conducted proper inquiry relating to the issue of claim of depreciation on goodwill, and not clause (c) of Explanation (2) as contended by the learned DR before us. The Revenue cannot improve upon the case made out by the authorities below in any case. Therefore, for this reason also, we dismiss this contention of the learned DR. Assessee appeal allowed.

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• 2023 (9) TMI 738
  Penalty levied u/s. 271(1)(c) - addition on account of Deemed Dividend u/s 2(22)(e) - CIT(A) deleted penalty levy - HELD THAT:- The fact that the very basis for imposition of penalty, does not survive, there can be no question of any imposition of penalty thereon. When the quantum addition does not survive, the penalty levied u/s 271(1)(c) on the corresponding quantum addition also cannot survive. We take support from judicial precedent in the case of K.C. Builders [ 2004 (1) TMI 7 - SUPREME COURT] in which as held that where the additions made in the Assessment Order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment, and therefore, in such a case, no such penalty can survive and the same is liable to be cancelled. Appeal filed by Revenue against the impugned order whereby the penalty is deleted on merits, do not stand any more

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• 2023 (9) TMI 737
  TP Adjustment - addition of 15% Mark-up on reimbursement of expenses received by the assessee/Foreign Company for expenses relating to registration of Patents and Trademark for the Indian Subsidiary - HELD THAT:- According to us, the Adhoc mark-up directed by Ld. DRP cannot be accepted since the Ld. DRP did not follow any method prescribed u/s 92C for determining the ALP of International Transaction between two Associated Enterprises u/s 92B of the Act. And it is trite that the ALP has to be determined as per section 92C of the Act. And further for any comparability analysis, the Ld. DRP ought to have followed the mandate u/r 10B(1)(a) of the Rules, i.e. one of the method prescribed u/s 92C of the Act needs to be used while determining the ALP as held in the case of Kodak India Pvt. Ltd 2013 (11) TMI 667 - ITAT MUMBAI] . Therefore, the action of Ld. DRP directing mark-up of 15% without adhering to the methods prescribed u/s 92C of the Act, cannot be countenanced since it would breach the Rule of law and makes the order arbitrary. Therefore, this ground of appeal of the assessee is allowed and the addition made by AO pursuant to such a direction of Ld. DRP is directed to be deleted. Addition as Fees for Technical Services ignoring the assessee s contention that it was purely reimbursement received for Construction and Management Expenses - Documents submitted before us, we note that other than the expenses of Euro 5,900/- raised by cross border consultancy which has given the nature of expenses as being advance towards statutory expenses to be incurred for incorporation of subsidiary company of assessee dated 21.06.2013 a perusal of the other invoices, it is not discernable as to whether the expenses pertains to the subsidiary company or not. And without as certaining the nature of the expenses, it is not possible to determine whether the claim of assessee that it is only reimbursement is possible. Since the Ld. AR pleaded that provided an opportunity is given to the assessee, it would be able to bring in evidence to show that the expenses have been made for the purpose of setting up of the business of the subsidiary company. Therefore, we set aside this issue back to the file of the AO for deciding this issue afresh after giving an opportunity to the assessee. This issue is allowed for statistical purposes.

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• 2023 (9) TMI 736
  TP Adjustment - interest on outstanding receivables - assessee submitted interest on outstanding receivables cannot be treated as a separate international transaction - HELD THAT:- This issue is no longer res-integra by virtue of the decision of Instrumentation Corporation Ltd. [ 2016 (7) TMI 760 - ITAT KOLKATA ] Therefore this argument by the Ld.AR stands rejected at the outset. Rate that needs to be applied for computing interest in the hands of assessee - As decided in Cotton Naturals (India) Pvt. Ltd. [ 2015 (3) TMI 1031 - DELHI HIGH COURT ] it is the currency in which the loan is to be repaid that determines the rate of interest and hence the prime lending rate cannot be considered. The Ld.AR before us has not provided the details of the outstanding debtors and the delay in respect of the same. As the agreement / invoice grants for 30 days credit period which is observed by the DRP, we direct the Ld.AO/TPO to compute interest on such outstanding receivables that exceeded 30 days credit period, by applying LIBOR rate + 200 basis points. In the event, the receivables get subsumed while computing the net margin of assessee, the same shall stand excluded - We therefore remand this issue to the Ld.AO to compute the disallowance if any in accordance with law. Disallowance of deduction claimed u/s. 80G - donations made in pursuance of the CSR policy - HELD THAT:- As decided in assessee s own case for A.Y. 2016-17 [ 2022 (11) TMI 1320 - ITAT BANGALORE ] , wherein, this Tribunal followed the decision of First American (India) Pvt. Ltd. [ 2020 (5) TMI 187 - ITAT BANGALORE ] authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act. Under such circumstances, we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. Assessee is directed to file all requisite details in order to substantiate its claim before Ld.AO. Ld.AO is then directed to grant deduction to the extent of eligibility. Disallowance of provision for gratuity u/s. 40A(7) - assessee claimed leave encashment and gratuity that was disallowed in earlier years and claimed in the year under consideration on payment basis this year - AO disallowed the claim as the same was not verifiable with respect to Form 3CDB - HELD THAT:- Assessee has not provided satisfactory explanation with reference to documentary evidence to substantiate its claim of gratuity having paid during the year under consideration. It is also an admitted position that the contributions made by assessee was towards unapproved gratuity fund and therefore the disclosure of the actual payment of gratuity to the employees would not be reported in coln. 26 of form 3CED. The deduction in respect of gratuity is to be allowed either in the year in which the gratuity is actually paid on retirement / termination or in the year in which the contributions are made to a gratuity fund which may be approved or unapproved. In support, we take strength from the decision of Hon ble Supreme Court in case of Shree Sajjan Mills Ltd. [ 1985 (10) TMI 2 - SUPREME COURT ] and the decision of Commonwealth Trust Pvt. Ltd. [ 2004 (4) TMI 51 - KERALA HIGH COURT ] We therefore remand this issue to the Ld.AO for necessary verification in respect of the disallowance made by the assessee towards the gratuity in any of the previous year and subsequent payment to the extent it is paid should be allowed.

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• 2023 (9) TMI 735
  Profit of eligible unit by on account Baggase Purchase u/s 80-IA(8) r.w.s. 80-IA (10) - Assessee s manufacturing unit has sold bagaase to assessee s power unit at Rs. 1600/- per metric ton. - - price charged by Khandsari manufacturing unit of Baggase to Power Unit is as per the Market rate prevailing in the relevant area and quality of Baggase - HELD THAT:- It is an admitted position that assessee s manufacturing unit has sold bagasse to its power unit at Rs. 1600/- per metric ton. As observed that bagasse has been sold by the assessee to Independent Third Parties at Rs. 1400/- per metric ton. In the assessment order and in the ld.CIT(A) s order, both these authorities have not given any reason, why the rate at which assessee has sold bagasse to independent parties shall not be considered as market rate for the purpose of section 80IA(8). We are of the opinion that when assessee has sold bagasse to third parties at Rs. 1400/- per metric ton, the said rate of Rs. 1400/- per metric ton is market rate qua assessee. Because, the same bagasse is sold to third party by the assessee and to its own unit. Therefore, the quality of the bagasse sold to third party by the assessee and to its own unit is same. Thus most appropriate market rate is the rate at which assessee itself has sold bagasse to third parties. As observed that assessee has sold bagasse at Market Rate to its eligible unit. Therefore, AO has erred in recalculating the profit of eligible unit i.e. power unit, as per section 80IA(8). Therefore, the Assessing Officer is directed to delete the addition made on account of difference in the rate of bagasse - Assessee appeal allowed.

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• Customs

• 2023 (9) TMI 734
  Merchandise Exports of India Scheme (MEIS) - It is the case of the petitioner that the default setting in respect of the claim for benefit of an export promotion scheme in N (NO) and therefore it requires unchecking the the bos reading NO to tick/mark the box reading YES for claiming the export benefits - HELD THAT:- The only ground on which the petitioners could not claim the benefit of the MEIS was an inadvertent mistake in clicking NO instead of YES . Such an inadvertent mistake cannot disentitle the petitioners to claim the benefit of the MEIS or Merchandise Exports of India Scheme. The petition is therefore allowed and the decisions denying such benefits are quashed and set aside and respondents are further directed to accept the applications made for the grant of MEIS Scrips manually for the 68 Shipping Bills which were the subject matter of the impugned orders/ decisions dated 25.09.2018, 21.05.2019, 25.2.2020, 27.10.2020 and 26.11.2020 and accordingly grant the benefits of the MEIS to the petitioners within a period of eight weeks from the date of receipt of this order.

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• 2023 (9) TMI 733
  Principles of natural justice (audi alterem partem) - whether the adjudicating authority was right in refusing an opportunity of cross-examination of natural persons whose statements recorded under Section 108 of the Customs Act, 1962 had been referred to and relied upon in the adjudication order, or not? - HELD THAT:- In UNION OF INDIA AND ANOTHER VERSUS TULSIRAM PATEL AND OTHERS [ 1985 (7) TMI 371 - SUPREME COURT] the Supreme Court has considered several appeals by special leave and petitions under Article 32 of the Constitution raising substantial question of law as to the interpretation of Articles 309, 310 and 311 of the Constitution. The proceedings involved government servants who had been either dismissed or removed from service without holding any enquiry, they being not informed of the charges against them nor given any opportunity of being heard in respect of such charges. LAKSHMAN EXPORTS LIMITED VERSUS COLLECTOR OF CENTRAL EXCISE [ 2002 (4) TMI 66 - SC ORDER] has also recognized that, an assessee should be allowed to cross examine the representatives of the prosecution to establish that the goods in question had been accounted for in their books of accounts and appropriate amount of Central Excise had been paid, in proceedings under the Central Excise Act, 1944. The contours of natural justice in the context of seizure of a vehicle by the Customs Department under the provisions of the Customs Act, 1962 had come up on consideration in TAPAN KUMAR BISWAS VERSUS UNION OF INDIA (UOI) AND ORS [ 1995 (7) TMI 429 - CALCUTTA HIGH COURT] . In the facts of that case, the writ petitioner had neither filed show-cause nor took any steps to inspect the documents. In such context, request for cross-examination had been turned down. It had observed that, Section 124 of the Customs Act, 1962 itself provides for the extent of application of the principles of natural justice. In the facts of that case, it had held that, the writ petitioner was not entitled to cross-examine any witness. Principles of natural justice have two primary facets, namely, no one should be the judge of his cause and hear the other side. The issues that have been raised in the three appeals pivot around the audi alterem partem rule of the principles of natural justice - Principles of natural justice have been recognized to be a part of Article 14 of the Constitution of India. It has also been recognized that, Article 14 is not the sole repository of the principles of natural justice. Principles of natural justice stand attracted in every adjudicatory proceeding, be it judicial, quasi judicial or administrative, unless specifically excluded by statute. An administrative action or a quasi judicial decision has to conform with the principles of natural justice when such action or decision affects the rights or results in consequences for a party. Audi alteram partem which is a dimension of the principles of natural justice has the requirement of allowing cross-examination of the witnesses who give evidence against the delinquent. It has been recognized by judicial pronouncements that, administrative and quasi judicial orders must also adhere to the principles of natural justice. Courts have held that adherence to the principles of natural justice in the decision making process of administrative and quasi judicial authorities/bodies prevents injustice. Courts have carved out an exception to the adherence to the principles of natural justice. In FEA 25 of 2009 the appellant had suffered order in original and appellate authority s order where, at both stages, the prayer for cross-examination of prosecution witnesses had been negated. On the parity of the reasoning of FEA 2 of 2009 and FEA 3 of 2009, since, the authorities had introduced evidence of natural persons in the adjudication proceedings, the appellant was entitled to cross-examine such natural person. Not having been allowed to cross-examine such witness of the prosecution, in the adjudication proceedings, the entire proceedings stood vitiated. The appellate authority had incorrectly held that the appellant was not entitled to cross-examine the prosecution witnesses. The authorities are at liberty to commence the adjudication proceedings from the stage of evidence of the prosecution. All prosecution witnesses have to be allowed to be cross-examined by the appellants - appeal disposed off.

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• 2023 (9) TMI 732
  Confiscation of immovable properties procured from the sale proceeds of smuggled goods - section 121 of Customs Act, 1962 - HELD THAT:- Without going into the issue of intent of sale therein, it is found that the appellant was not placed on notice of proposal to confiscate his property. Indeed, both the lower authorities have failed to determine ownership of the property in question and have merely concerned themselves with its alleged characteristic as sale proceeds of smuggled goods for dealing with it in the context of finding on gold having been smuggled. This is a dangerous trend for such action could be used whimsically to deprive any legal owner of property an act of expropriation under cover of law. The essential condition of the owner having to be placed on notice before depriving title to the goods has rendered the confiscation illicit. For that reason the impugned order is set aside - appeal allowed.

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• 2023 (9) TMI 731
  Levy of Anti-Dumping Duty - imports made during the period between the expiry of the provisional Anti-dumping duty and the imposition of the final Anti-Dumping duty - N/N. 105/2006 dated 6.10.2006 - HELD THAT:- The Final Notification No.78/2007-Cus. dated 29.06.2007 as reproduced above stated that the Anti-dumping duty imposed under this Notification shall be levied with effect from the date of imposition of the provisional Anti-dumping duty and shall be paid in Indian currency, therefore, based on these two Notifications, the Commissioner (A) was right in imposing and demanding Antidumping duty from the appellant during the intervening period of provisional Anti-dumping Notification and final Anti-dumping Notification. The Hon ble Supreme Court vide its order dated 23.09.2015 in the case of Commissioner of Customs, Bangalore vs. G.M. Exports [ 2015 (9) TMI 1162 - SUPREME COURT] after elaborating Section 9A(6) of the Customs Tariff Act, the Customs Tariff (Identification, Assessment and Clearance of Anti- Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 held that anti-dumping duty during the interregnum between the expiry of a provisional duty notification and the imposition of a final anti-dumping duty not to be levied. The impugned order is set aside and the appeal is allowed.

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• 2023 (9) TMI 730
  Classification of imported goods - 473.590 MTS(Gross Wt.) and 1988/679(Gross wt.) for white spirit which is a petro oil/hydrocarbon solvent - to be classified under CTH 27101990 and therefore same being freely importable? - HELD THAT:- The appellant has seriously challenged the report of CRCL, and not only has it backed up its proposition of goods being as per its classification with various technical literature, only which are a part of paper book, but has done so on the basis of various material mentioned in the findings of the CRCL to indicate that impugned products are devoid of getting fitted into the requirement of statutory notes, under Tariff Heading 271012. Reliance upon the decision of the coordinate Bench of Calcutta High Court in their own matter i.e M/S KUNJAL SYNERGIES PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS (PORT) , KOLKATA (VICE-VERSA) [ 2023 (6) TMI 1014 - CESTAT KOLKATA] . The coordinate Bench while dealing with similar imports of item which were claimed to be Low White Spirit has thoroughly analysed various parameters, the statutory notes as well as findings of the CRCL on various parameters, and more particularly Chapter Note 4 of Chapter 27, which indicates that to be included in Sub Heading 271012, as low white oil in the matter, atleast 90% or more by volume should distil at 210 according to ISO. In the instant case also, we find that as per the reports available 95% of volume is recovered at approximately 184 , and final boiling point is maximum was 202.4 in one case and 196.2 in another case which was not as per the requirement approved of by the Apex Court of 90% distilled taking place at 210 degree Celsius as per statutory note and as per the decision of M/S KRISHNA TECHNOCHEM PVT. LTD., SHRI BINDHYACHAL SINGH VERSUS COMMR. OF CENTRAL EXICSE, HALDIA [ 2019 (9) TMI 1523 - CESTAT KOLKATA] . There are no merits in the impugned order - appeal allowed.

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• 2023 (9) TMI 729
  EPCG Scheme - respondent was obligated to export the marbles mined using the said imported capital goods to the tune of eight times the duty foregone - seeking recovery of the duty foregone, once the export obligation period expired with interest and penalty - HELD THAT:- It is not in dispute that the respondents could not undertake any mining activity because of the aforesaid restrictions imposed by the Hon ble Apex Court issued on 21.09.2005. To attach motives on part of the appellant under such circumstances is certainly not called for. It cannot be anybody s case that the respondents continued to import the capital goods with intentions of defrauding the revenue and depriving the department of its rightful claim. In any case the department has not been able to adduce any evidence in support of this proposition of theirs of mis-representation and deliberate suppression of facts. The fact that the respondents could not discharge their export obligation and hence failed to meet the export commitments leading to nonissue of the EODC is understandably beyond the control of the respondent. The compelling circumstances beyond their control pointed out by the respondents, have been admitted by the authorities. Therefore, no blame or aspersions can be cast on the respondents that they had malicious intent to defraud the revenue. This argument of the revenue is rejected summarily. There are no infirmity in the orders of the learned Commissioner (Appeals) - appeal filed by Revenue dismissed.

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• 2023 (9) TMI 728
  Confiscation - Smuggling - foreign marked Gold Bars - evaluation of evidence tendered by the appellants towards discharge of their obligation and onus cast upon them under Section 123 of the Customs Act, 1962 - difference of opinion. HELD THAT:- In view of the the difference in the view points of two members, constituting the Bench who heard the matter, the Registrar is directed to refer the matter to the President for his kind consideration and referring the matter to a third member for the resolution of the conflict and the difference of opinion. The points of difference are as under: (a) Whether the appellants have discharged their burden under Section 123 of the Customs Act, 1962 in the facts and circumstances of the case, consequently, the goods are not liable for confiscation, as held by Member (Judicial); or (b) Whether the appellant have failed to discharge their burden under Section 123 of Customs Act, 1962 and hence, the goods are liable for confiscation in the facts and circumstances of the case as held by Member (Technical).

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• 2023 (9) TMI 727
  Classification of goods intended to be imported from China - Foil Balloons - classifiable under heading CTH 9505 9090 under the heading other or under CTH 95030090? - HELD THAT:- Foil Balloons are used for party decoration and for entertainment purposes. These balloons ordinarily have shiny reflective surfaces and are often printed with colour pictures and patterns for gifts and parties. Foil Balloons are used for decoration for various events such as birthday, marriage, new-year eve celebration and many other joyous programmes and they are available in various shapes such as alphabets, numbers, heart, star etc. The said foil balloons are not used as toys but are only used for decoration and entertainment purposes. Foil Balloons are very fragile and non-durable goods which are not purchased in the market for the purpose of play by children and they are used like festoons also as explained in the application and also shown in the pictures attached thereto. They are decorated on the wall on various joyous occasions. The rejoinder of the applicant agreed upon that the contention of the Department ( Jurisdictional Commissioner of Customs ) that Foil Balloons are identified as toys in the common parlance is clearly misconceived and without any evidence; said Analytics Report of NCTC, Mumbai docs not take into account the common parlance test as indicated above as well as the HSN explanatory notes to the heading 9505 - if the subject goods i.e. Foil Balloons are classified under the heading 9503 as per the paragraph (D)(vii) of the Explanatory Notes thereto, it would be similar to completely disregarding the fact Foil Balloons are purchased in the market for the purpose of decoration or entertainment. The subject goods i.e Foil Balloons are made of Nylon/HDPE not of Latex/Rubber and imported for the purpose of party decoration or entertainment, merit classification under the heading 9505 and specifically under subheading 9505 9090 of the First Scheduler the Customs Tariff Act, 1975.

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• Insolvency & Bankruptcy

• 2023 (9) TMI 726
  Acceptance of claim - whether claim can be accepted without getting it condoned by the Adjudicating Authority/Tribunal, as mandated under Regulation 12 of the Insolvency Bankruptcy Board of India (Insolvency Resolution Process for Corporate Debtor) Regulations, 2016 - HELD THAT:- In the instant case on hand, the Corporate Debtor had already settled the dues of two Operational Creditors (i) SS Metal Amsa Agencies and Services to their satisfaction and made a draft already in favour of M/s. Mayura s Industrial Services. In the judgement dated 03.06.2022 of the Hon ble Supreme Court in Vallal RCK V M/s. Siva Industries and Holdings [ 2022 (6) TMI 173 - SUPREME COURT] , the Hon ble Supreme Court has observed that Tribunals should not interfere with the Commercial wisdom of the Committee of Creditors, agreeing to the settlement Plan submitted by the Corporate Debtor, once it got the approval of Committee of Creditors , with more than 90% voting in its favour. This Tribunal bearing in mind of a primordial fact that the Operational Creditor had admitted that entire sum of Rs. 1,86,389/- was received by the Petitioner and added further the averments made in the Petition by the Resolution Professional as withdrawal was approved by the CoC meeting that took place on 06.06.2022 (third meeting), the IA 676(CHE)/2022 filed by the Resolution Professional in the main IBA/374/2020 on the file of the Adjudicating Authority/NCLT, Division Bench II, (filed under section 12A of the Code) was rightly allowed by the Adjudicating Authority/NCLT, Division Bench II, Chennai. Appeal dismissed.

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• PMLA

• 2023 (9) TMI 725
  Money Laundering - predicate offence or not - no crime proceeds were generated in favour of the venture company - allegation against this petitioner is that he helped Mantena Srinivas Raju, but, the case against said Mantena Srinivas Raju in ECIR was also quashed by this Court - HELD THAT:- It cannot be disputed that the person who is not charged under the predicate offence cannot be investigated into under the Prevention of Money-Laundering Act, 2002. Any person dealing with the proceeds of crime in any manner whatsoever comes within the purview of the offence punishable under Section 3 of the Prevention of Money-Laundering Act, 2002. The Honourable Supreme Court while cancelling the bail of this petitioner has not referred to Vijay Madanlal Choudhary s case [ 2022 (7) TMI 1316 - SUPREME COURT ] - It was concluded by the 3-Judge Bench of the Honourable Supreme Court in Vijay Madanlal Chudhary s case, that if a person is finally discharged or acquitted of a scheduled offence or the criminal case, is quashed by the court of competent jurisdiction, there can be no offence of money laundering against him or anyone claiming such property being the property linked to stated scheduled offence through him. As already discussed, the petitioner is being investigated for taking benefits from Mantena Srinivas. The said person was acquitted of the predicate offence and the proceedings against him in the present ECIR were also quashed on the ground that there were no criminal proceeds. In the said circumstances when there are no criminal proceeds , following the law as laid down by the Honourable Supreme Court in Vijay Madanlal Choudary s case this Court deems it appropriate to quash the proceedings against the petitioner. Petition allowed.

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• Service Tax

• 2023 (9) TMI 723
  Levy of Service Tax - appellant was rendering advertisement agency services by placing advertisement boards in the buses of leading consumer brands - period from January 2002 to June 2006 - HELD THAT:- The Board vide Ministry of Finance F. No. 345/4/97-TRU, dated 16-8-1999 had clarified that no service tax is chargeable on the advertisement booked for yellow pages. The reasoning given therein is also applicable to this case. It was clarified that if persons undertake any activity relating to making or preparation of an advertisement, such as designing, visualizing, conceptualizing etc., only then will they be liable to pay service tax on the charges made thereon under advertisement agency service. A similar matter was also examined by the Tribunal in COMMISSIONER OF CENTRAL EXCISE, KOLKATA-V VERSUS THE INCODA [ 2004 (6) TMI 7 - CESTAT, KOLKATA ]. It was held hiring of space will not bring the appellant under the definition of advertising agency . Since the issue has been decided on merits in favour of the appellant the question of interest, penalties or invoking the extended period does not arise. Appeal allowed.

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• 2023 (9) TMI 722
  Under-valuation - demand based on excel computer printouts - admissibility of computer printouts as evidences or not - Section 36B of the Central Excise Act as made applicable for service tax law by virtue of Section 83 of the Finance Act, 1994 has not been followed - admissibility of statements - HELD THAT:- Apart from recording the statements of persons in the present matter no independent investigation has been carried out by the department. We observed that Department has not brought out any independent facts or evidence as who is the service receivers, whether the cash receipts shown in the xls. Files pertaining to the service component only or otherwise and no corroborative evidence produced in support of details mentioned in the said xls. files. In the present matter allegation of the revenue are that appellants collected the huge amount of cash in respect of provisions of services involved. However not a single rupee of unaccounted cash was found during the search conducted by revenue in the business premises of the appellants. In the present matter appellants disputed the finding of the Ld. Commissioner on the ground that Ld. Commissioner has relied upon the statements of persons but these statements are not admissible as evidence because the mandatory procedure laid down under Section 9D of the Central Excise Act as made applicable in relation to service tax by virtue of Section 83 of the Finance Act 1994 is not complied. In the present matter it is admitted facts that Statements recorded during investigation in the present matter, whose makers are not examination-in-chief before the adjudicating authority, would have to be eschewed from evidence, and it will not be permissible for Ld. Adjudicating Authority to rely on the said evidences. Therefore, none of the said statements were admissible evidence in the present case. Section 36B(2) provides the conditions in respect of computer printouts. In the present matter the computer was not shown to have been used regularly to store or process information for the purposes of any activities regularly carried on by the appellants. It was also not shown that information of the kind contained in the computer printout was regularly supplied by the appellant to the computer in the ordinary course of activities - Electronic records being more susceptible to tempering, alteration, transposition, excision etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. The provisions of Section 65B of Indian Evidence Act and Section 36B of Central Excise Act, 1944 of the Act are pari-materia. It is evident from the panchanama, and the appeals records that the investigating officer had failed to follow the safeguard as mandated under Section 36B of the Act. In the present matter the investigating officers failed to comply with the conditions of Section 36B of the Act in respect to relying upon this computer printout. In view of the above the service tax demand based on such unauthenticated data is not sustainable and hence are set aside. The impugned order set aside - appeal allowed.

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• 2023 (9) TMI 721
  Classification of services - Technical Testing and Analysis Services or not - appellant was engaged by their customers for the purpose of testing and analyzing the quality and fitness of the welded areas on the joints of the products fabricated before such manufactured / fabricated items are sold or taken for further use in manufacture / fabrication activity - HELD THAT:- The main activities carried out by the appellant is PWHT and stress relieving treatments. Though he has used the word testing, it is now argued by the Ld. counsel that the activity under taken by the appellant is not technical testing and is only part of manufacturing activity. The word testing is used by him in an unprofessional sense. The work orders do not show that the appellant has been entrusted with the job of technical testing. Instead, the job description says localised PWHT of piping product - activity under taken by the appellant as per the above work order does not indicate any activity of technical testing. It is in the nature of heat treatment, stress relief treatment, etc. For an activity to fall under technical testing, some process so as to test the quality, strength, toughness, etc., has to be done. From the literature available in website, it cannot be concluded that the activity under taken by the appellant falls within the definition of technical testing and analysis services . Further, in the present case, it is not seen that the appellant has issued any certificate with regard to the testing done. From the statement given by Shri C. Manikanteswaran, it is inferred that while doing the heat treatment, the temperature at which the material is subjected to heating is recorded. It is prepared in a chart form and given the customer. Thus, the temperature chart provided by the appellant is considered to be the test report by the Department - there are no material throwing light with regard to a certificate issued by the appellant as to the technical nature/ quality of a product - the issue therefore requires re-consideration. This is a fit case for remand to the adjudicating authority who is directed to consider all issues afresh - appeal allowed by way of remand.

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• 2023 (9) TMI 720
  Levy of service tax - Tour Operator service - organising tours for foreign tourists to India - reverse charge mechanism - period July 2012 to March 2014 - Extended period of limitation - HELD THAT:- There is no dispute that the appellant is provided tour operator services and has been paying service tax on the services and has been filing ST-3 returns. To provide these services, the appellant hires taxis. Thus, the services of the taxi operators are the input services to the appellant - From the invoices produced, it is evident that the taxi operators were paying service tax on their services considering themselves liable to pay service tax and the appellant has been taking CENVAT credit of such service tax. To charge service tax again on reverse charge basis from the appellant (the service recipient) would result in double taxation on the same service. Even otherwise, the notification refers to persons not in the same line of business and NOT persons engaged in the same business and the two are distinct. Similar line of business has a much wider connotation and therefore, it includes their tour operator services as well. Since the appellant is in the similar line of business, it was not covered S. No. 7 (a) of the notification. Extended period of limitation - HELD THAT:- There are no grounds to invoke the extended period of limitation under the proviso to section 78(1). There is no fraud or collusion or wilful mis-statement or suppression of facts or violation of the Act or Rules with an intent to evade payment of service tax. Revenue Neutrality - HELD THAT:- If the appellant had paid service tax under reverse charge mechanism, it would have been entitled to CENVAT credit on it immediately because it is its input service. Thus, the entire exercise is revenue neutral and in such a situation, the appellant cannot be alleged to have had an intent to evade payment of service tax. The demand in the impugned order needs to be set aside. Consequently, the interest and penalties also need to be set aside - Appeal allowed.

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• 2023 (9) TMI 719
  Refund of Service Tax - export of service - appellant performed like a commission agent and the appellant s job was to seek or procure sales orders for products manufactured by steel mills outside India for customers in India - rejection of claim of refund stating that services were not used outside India - HELD THAT:- The Larger Bench through Interim Order No. 26/2023 dated 09.06.2023 [ 2023 (8) TMI 107 - CESTAT MUMBAI] in very clear terms has held that in the present proceedings, the activity of the appellant is export of service. The impugned order set aside - appeal allowed.

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• 2023 (9) TMI 718
  Liability of Service Tax on GTA service - Reverse Charge - transportation charges paid by the appellant on behalf of the buyers of coal to the Goods Transport Agency - Intermediary services - benefit of N/N. 32/2004-ST dated 03.12.2004 as amended - HELD THAT:- The Tribunal had directed the adjudicating authority to examine the evidence available with the Department as well as the evidence that may be submitted by the appellant, to verify the claim that the service tax on transportation had been paid by the buyers/consignees of the coal. The Tribunal in the remand order has observed that if the service tax for transportation from mines to washery is paid by the buyer of the coal, then there is no liability on the appellant. The impugned order has to be examined through the prism of the remand order. The Tribunal in its order has very clearly directed the adjudicating authority to consider the evidence available with Revenue and the evidence that may be submitted by the appellant - The Tribunal had directed the adjudicating authority to examine the documents available with Revenue, such ST-3 returns of all these consignees. The authority could have called for the connected invoices/Tax deposit Challans to ascertain payment. The adjudicating authority had to co-relate the same with the evidence that may be submitted by the appellant. It is to be noted that the Tribunal has carefully used the term may for the appellant, and the responsibility was placed on Revenue to examine the documents which were available with the Department. The department could have obtained the copy of the relevant ledgers, invoices etc., from the consignees through the jurisdictional Range officers. This has not been done by the adjudicating authority which clearly shows that he has not followed this Tribunal s remand order in letter and spirit. The Revenue has failed miserably to lead any evidence despite specific orders by this Tribunal. Secondly, having considered the issue on merits, we are of the firm opinion that the appellant acted as an agent or an intermediary between the seller of coal i.e., SECL and the buyer of the coal - it is also found from the evidence led by the appellant that SECL was the consignor and buyers of the coal were consignees and referring to large number of instances where the incidence of freight was actually borne by the consignees and which has not been disputed by the Revenue, it is the buyers of the coal who are liable to make the payment of service tax on freight amount paid to the transporter for transportation of coal in terms of Rule 2(1)(d) 21(v) of Service Tax Rules, 1994. The impugned order set aside - appeal allowed.

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• Central Excise

• 2023 (9) TMI 717
  Invocation of extended period of limitation - Valuation of manufactured goods - Waste Rubber Granules (Patta) and Waste Rubber Granule (RD) - rejection of declared value - Rule 8 of Customs Valuation Rules, 2000 - demand of interest and penalty - revenue neutrality - HELD THAT:- It is not in dispute that Section 11A provides for a limitation of one year for issuing the SCN. This period can be extended to five years in case the duty is not paid, short paid, not levied, short levied or erroneously refunded on account of fraud or collusion or willful statement or suppression of facts or violation of the provisions of Act or Rules with an intent to evade the payment of duty - while the assessee was required to self assess duty and file ER-1 return, a check against such self-assessment was the scrutiny which the officers were mandated to do by Rules. Audit is the next level of check against the scrutiny by the officers. If the audit points out some wrong assessment which was not pointed out by the officer scrutinising the ER-1 return, the fault lies at the doorstep of the officer. It does not, by itself, establish that the assessee had suppressed any facts. Revenue Neutrality - HELD THAT:- Revenue neutrality is a concept which has evolved through a series of decisions only for the limited purpose of determining if the assessee could have had an intention to evade payment of duty. This intention is an essential ingredient to invoke extended period of limitation. If it is Revenue neutral situation where, the excess duty, if paid, would have been available to the appellant itself or its another unit or a related unit as CENVAT credit, there cannot be an intention to evade because the assessee would gain nothing by evading - Beyond the limitation, Revenue has no remedy although the charge remains. It is like a time-barred debt which, though owed, cannot be recovered by the creditor. If differential duty was chargeable but was not paid and it is later discovered by audit and it gets time barred under Section 11A, the responsibility for it rests squarely on the officers mandated to scrutinize the returns in time and raise a demand in time. Since the entire demand is beyond the normal period of limitation, the demand in the impugned order or the consequential interest and penalties cannot be sustained. The impugned order is set aside - Appeal allowed.

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• 2023 (9) TMI 716
  CENVAT Credit - Recovery of 6% of the value of honey treating it an exempted goods cleared by the appellant - Rule 6(3)(i) of the CCR, 2004 - HELD THAT:- As regards credit of other services ISD applied provisions of rule 6(3)(ii) of Cenvat Credit Rules, 2004 and apportioned the remaining credit in production value ratio of all the units and such apportionment, only so much credit as proportionate to the taxable turnover of all the units was distributed by the ISD. The credit was not distributed by ISD was reversed at its end. For period post 01.04.2014 except the credit pertained to trading activity, the ISD distributed the entire credit among all the units in their production value ratio and thereafter the appellant themselves applied the provisions of rule 6(3)(ii) of CCR on cenvat credit distributed by the ISD in the ratio of taxable turnover to the total turnover during the preceding financial year on provisional basis and the same was adjusted by the appellant on the basis of final ratio by 30th June of the next financial year. On going through the said pre-show cause notice consultation letter and dropping proceeding against the appellant, it is clear that the appellant is reversing proportionate cenvat credit, as per Rule 6(3)(a) therefore appellant is not required to pay 6% of the value of Honey cleared by them. The provisions of rule 6 are not applicable to the facts of this case as Honey is not an exempted goods - the proceedings against the appellant are not sustainable under Rule 6 of the Cenvat Credit Rules, 2004. The impugned orders deserve no merits, accordingly the same are set aside - Appeal allowed.

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• 2023 (9) TMI 715
  Reversal of CENVAT Credit - liability to pay 5% / 10% / 6 % of value of the exempted final products cleared for the disputed period 01.02,2008 to 30.11.2012 in terms of Rule 6 (3) (i) of CCR 2004 as proposed in the SCN - extended period of limitation - HELD THAT:- The facts bring out that the appellant has reversed the proportionate credit to the tune of Rs.10,91,346/- along with interest on 05.01.2013. In spite of this, the show cause notice has been issued on 05.03.2013 alleging that the appellant has to pay an amount equivalent to 5% / 10% / 6% of value of exempted final goods for the reason that the appellant has not filed declaration giving the option to the department that they intend to reverse the proportionate credit of the inputs used in the manufacture of exempted products. The issue stands covered by decision in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [ 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT] . The Hon ble High court held the second respondent did not choose to exercise power under this Rule but relied upon Rule 6(3)(i) and made the choice of the option thereunder for the petitioner, viz., to pay 5%/6% of the value of the exempted services. The statutory scheme did not vest the second respondent with the power of making such a choice on behalf of the petitioner. Similar view was decided by the Tribunal in the case of M/S NAVA BHARAT VENTURES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS SERVICE TAX, HYDERABAD (VICE-VERSA) [ 2021 (11) TMI 426 - CESTAT HYDERABAD] where it was held that The obligations under Rule 6 are in the form of various alternatives and the assessee is free to choose any option. There is no mechanism either in the CCR or in the Act to enforce any of the options or one of the options on the assessee. If the assessee does not choose any of the options and still avails CENVAT credit, such irregularly availed CENVAT credit can, of course, be recovered under Rule 14 of the CCR. Thus, the demand cannot sustain and requires to be set aside. The issue on merits is decided in favour of the appellant. In the present case the appellant has reversed the proportionate credit before the SCN. There is no evidence put forward by the department to establish that there was suppression of facts with intent to evade payment of duty. For this reason, the appellant succeeds on the ground of limitation also. The impugned order is set aside. The appeal is allowed.

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• 2023 (9) TMI 714
  Exemption from Excise duty on Sludge Oil (Soap Stock) under N/N. 89/95-CE dated 18.09.1995 or not - emerging during the manufacture of refined coconut oil - clearance of refined coconut oil availing full exemption under Notification No. 4/2005-CE dated 01.03.2005 - HELD THAT:- The very same issue was considered by the Tribunal in the case of M/S RICELA HEALTH FOODS LTD., M/S J.V.L. AGRO INDUSTRIAL LTD., M/S KISSAN FATS LIMITED VERSUS CCE, CHANDIGARH, ALLAHABAD [ 2018 (2) TMI 1395 - CESTAT NEW DELHI] where it was held that Noting that the reference is to decide whether these are to be treated as waste for the purpose of exemption Notification No. 89/95-C.E. we note though the excisability of the product itself is seriously in dispute as per the opinion expressed by us, as above, these cannot be considered as anything other than waste and as such will be covered by the exemption Notification No. 89/95-C.E. The said decision has been upheld by the Hon ble Supreme Court in the case COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-I VERSUS MARICO LTD. [ 2022 (10) TMI 1174 - SC ORDER] . The Tribunal in the case of M/S. SSD OIL MILLS COMPANY LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE CHENNAI IV [ 2019 (11) TMI 241 - CESTAT CHENNAI] had followed the decision of the Larger Bench and set aside the demands. Thus, the demand cannot sustain - impugned orders are set aside - appeal allowed.

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• 2023 (9) TMI 713
  CENVAT Credit - input services - insurance of Staff/Directors services - construction and restoration services for upgradation of factory premises - period of April-2008 to October-2012 - HELD THAT:- From the definition of input service under Rule 2(l) before and after 01.04.2011, the services in relation to modernization, renovation and repairs of factory premises was clearly covered under the inclusion part of the definition. As per the invoices of the service provider there is no dispute that the appellant have used the construction service in relation to modification, renovation, upgradation of the existing plant. Therefore, in view of the definition for both the period, which includes these services in the definition of input service, appellant has correctly availed Cenvat credit on construction service in the present case. In the case of COMMISSIONER CENTRAL EXCISE COMMISSIONERATE, DELHI-III VERSUS M/S BELLSONICA AUTO COMPONENTS INDIA P. LTD. [ 2015 (7) TMI 930 - PUNJAB HARYANA HIGH COURT] the Punjab Haryana High Court has held that The Tribunal rightly did not agree with the Commissioner s findings that the services in question had been used for brining into existence an immovable property and not for the manufacture of the final product. The said services cannot be said to be remotely connected to the final product as observed by the Commissioner. In the case of MILESTONE PRESERVATIVES PVT. LIMITED VERSUS C.C.E. S.T. -VADODARA-I [ 2022 (5) TMI 1038 - CESTAT AHMEDABAD] this Tribunal has held these services were used for repair and renovation work in the existing factory. As held in various judgments only such construction services which are used in initial setting up of factory are excluded. However, in the present case, the factory was already existing and this construction and architectural service were used for repair and renovation of the existing factory plant. As per the inclusion clause of definition of Input Services, repair and renovation/modernization is specifically included in the inclusion clause. Therefore, construction or architectural service if used for initial set up of plant will only be ineligible for Cenvat credit. From the above judgments, it can be seen that constant view was taken by various forums that in case of construction service used in relation to modernization, renovation of the existing factory is admissible input service, in terms of inclusion part of the definition under Rule 2(l) of Cenvat Credit Rules, 2004 therefore, the issue is no longer res-Integra. Accordingly, the appellant is entitled for the Cenvat credit on construction service used for modernization, renovation, upgradation of the existing factory. Cenvat credit on insurance service for health insurance of staffs/directors - HELD THAT:- Similar issues has been considered and it was held that Cenvat credit on insurance service for staffs /directors is admissible - In the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE-III, COMMISSIONERATE VERSUS STANZEN TOYOTETSU INDIA (P.) LTD. [ 2011 (4) TMI 201 - KARNATAKA HIGH COURT] , where the Hon ble High Court of Karnataka has held that the said Group Insurance Health Policy taken by the assessee is a service which would constitute an activity relating to business which is specifically included in the input service definition. In view of the above judgment the credit on insurance for staff/ directors is admissible input service. However, the appellant have admittedly reversed the Cenvat credit in respect of insurance service for the period post 01.04.2011. Accordingly, the demand of Cenvat credit on insurance service which was reversed by the appellant is maintained, without expressing any view on merit. Considering the overall facts and circumstances of the case the penalty is also set aside - appeal allowed.

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• 2023 (9) TMI 712
  Exemption benefit under N/N. 67/95-CE dt. 16.03.1995 as amended - captively consumed molasses - HELD THAT:- The Tribunal in the case of RAJSHREE SUGARS AND CHEMICALS LTD. AND OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY AND OTHERS [ 2014 (11) TMI 919 - CESTAT CHENNAI ] held that the denial of exemption notification 67/95 on molasses captively consumed to manufacture Rectified Spirit DNA cannot be justified. The demand cannot sustain and requires to be set aside - Appeal allowed.

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• 2023 (9) TMI 711
  Utilization of Cenvat credit in respect of Education-cess and Higher Education-cess - N/N. 12/2015-CE(NT) dated 30.04.2015 - HELD THAT:- Nothing has been bought on record whereby Central Government has in exercise of this power made any such rules whereby the accumulated-unutilized credit of Education Cess or Secondary and Higher Education Cess with the appellant could have lapsed on the on 01.03.2015 i.e. when these cesses were subsumed in excise duty, or they could not have been utilized for the payment of any kind of duty. In absence of any such notification or legal provision for which necessary power existed in the Central Excise Act, 1944, the utilization of the credit by the appellant towards payment of duty cannot be faulted with. The decision of this Tribunal in the case of M/S PUSHPIT STEELS PVT LTD VERSUS COMMISSIONER OF CENTRAL TAX TIRUPATI-GST [ 2019 (6) TMI 322 - CESTAT HYDERABAD] relied upon by the revenue do not take into account any of the above mentioned observations either from the Hon ble Finance Minister s speech or the provisions of CGST Act. Accordingly, the said decision cannot be a bounding decision for deciding the present issue. Further the said decision does not say that there is bar in cross utilization of the credit for the period after 30.04.2015, it holds that credit could have been cross utilized after issuance of Notification No 12/2015-CE (NT) dated 30.04.2015, stating that the notification is prospective. Therefore the said decision in any case does not support the case of revenue. There are no merits in the impugned order and the same is set aside - appeal allowed.

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• 2023 (9) TMI 710
  Short payment of duty in respect of the goods cleared to Nepal, by invoking the proviso to Section 11A of the Central Excise Act, 1944 - Rule 8 and Rule 18 of the Central Excise Rules read with the N/N. 40/2001-CE(NT) dated June 26, 2001 and Notification No. 20/2004-CE (NT) dated September 6, 2004, as amended - HELD THAT:- The Appellant exported lubricant oil to Nepal. They exported their own manufactured goods as well as traded goods procured from other manufacturers on payment of duty. So far as manufactured goods exported to Nepal was concerned, the Appellant paid duty by raising debit in PLA or Cenvat Account whereas in respect of the traded goods exported to Nepal the Appellant debited the duty as well as quantity in the RG-23D. The duty demanded has been confirmed on the allegation that the duty paid nature of the traded goods has not been established. In respect of the traded goods exported, we observe that the Appellant has prepared corresponding dealers invoices under Rule 11, which were also signed by the Superintendent, before export. The Dealers Invoice provided details of manufacturer s Invoice No. and date and the total quantity covered in such Invoice and proportional duty paid on the quantity exported to Nepal. An account in RG23-D was maintained for duty paid goods - the Appellant were following the procedures and formalities required to be followed by a registered dealer for storing of duty paid goods. The appellant issued cenvatable invoices with cross reference of invoices of manufacturers of the subject goods and filed quarterly returns under the Rule 9(8) of the said Rules. These documents clearly establish the duty paid nature of the traded goods which were exported to Nepal. Thus, the department cannot again demand duty from the Appellant for the traded goods exported, as duty has already been paid by the concerned manufacturers at the time of clearance of those goods - the demands of duty, interest and imposition of penalty on the Appellant in the impugned order are not sustainable. The impugned order is set aside - appeal allowed.

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• CST, VAT & Sales Tax

• 2023 (9) TMI 724
  Validity of preassessment notices - impugned notices are barred by limitation in terms of Rule 5 (6) of the Central Sales Tax (Puducherry) Rules 1967 or not - HELD THAT:- This Court is not inclined to entertain the batch of writ petitions at the stage of show cause notice for it is trite law that though there is no absolute bar or embargo against entertaining writ petitions against notices, however, interference should be in rare cases and not as a matter of routine. Though, the restriction is self imposed it has been consistently held that High Court shall exercise restraint in entertaining writ petitions under Article 226 of the Constitution of India at the stage of show cause notice. This Court is of the view that whether the notices are barred by limitation or not can be adjudicated by the authority issuing the notice and it is open to the petitioner to submit its objection to the proposal including the plea of limitation. Limitation is a mixed question of fact and law which is yet another reason as to why this Court is not inclined to entertain the writ petition at the stage of show cause notice. The writ petitions are disposed of.

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• 2023 (9) TMI 709
  Legality of impugned recovery notice - proceedings initiated against the Petitioner before the National Company Law Appellate Tribunal (NCLAT) and substantive order dated 15th October 2018 passed by the NCLAT - HELD THAT:- All the materials are required to be considered by the designated officer and the officer to take a decision whether the impugned notice dated 28th June 2021, in the peculiar facts and circumstances of the case and in view of the order passed by NCLAT, needs to be withdrawn. The Petitioner s detailed representations are required to be considered in accordance with law. The Assistant Commissioner of State Tax are directed to hear the Petitioner on the Petitioner s representation dated 6th July 2021 (Exhibit- D ) and the representation dated 28th April 2023 (Exhibit - H ) and pass a reasoned order, considering as to whether the impugned action under the impugned notice ought to be withdrawn - petition disposed off.

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• 2023 (9) TMI 708
  Classification of services - HIMANI BOROPLUS ANTISEPTIC CREAM - Medicament or not - to be classified as medicines falling within the scope of Entry 46 of Part-II of Schedule B appended to the Orissa Value Added Tax Act, 2004 - HELD THAT:- Reliance placed on judgment of the Supreme Court in Puma Ayurvedic Herbal (P) Ltd. v. Commissioner, Central Excise, Nagpur, [ 2006 (3) TMI 141 - SUPREME COURT] , in which the two tests were accepted. There can be no fact finding in adjudication of the revision petition. Keeping that in mind we have to understand what are the two tests that have been accepted by the Supreme Court. The first test is common understanding of the product to be a medicament, which is called the common parlance test. A user of the product would use it only for treating a particular ailment and stop its use after the ailment is cured. The second test is regarding ingredients used in the product, whether mentioned in authoritative textbooks on Ayurveda. The Tribunal did not direct remand, for ascertaining the question of fact regarding ingredients of the product. Instead, without itself ascertaining on the fact, it went on to dismiss the appeal of revenue. There was no satisfaction rendered by opposite party (assessee) on the second test. It must be said that it was for opposite party to prove the product fell under the entry as the Tribunal erred in saying the burden was on petitioner (Revenue) to prove the negative. Coming back to the first test, on perusal of both, impugned order as well as the one made by the Commissioner carrying concurrent findings, we have been unable to notice that there was finding also on fact, regarding common parlance test. It must be mentioned here that the advertisement relied upon by petitioner was so done at this stage and not in the earlier proceedings, ascertained by us on query made. Hence, we disregard the advertisement in our adjudication. Revision disposed off.

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• Indian Laws

• 2023 (9) TMI 707
  infringement of copyright and passing-off - Claiming permanent injunction restraining the respondent from infringing copyright in its artistic label - prayer for a decree of injunction restraining the respondent from manufacturing, selling, offering for sale, advertising, or otherwise dealing in country liquor having the appellant s trade mark label - HELD THAT:- For establishing goodwill of the product, it was necessary for the appellant to prove not only the figures of sale of the product but also the expenditure incurred on promotion and advertisement of the product. Prima facie, there is no evidence on this aspect. While deciding an application for a temporary injunction in a suit for passing-off action, in a given case, the statements of accounts signed by the Chartered Accountant of the plaintiff indicating the expenses incurred on advertisement and promotion and figures of sales may constitute a material which can be considered for examining whether a prima facie case was made out by the appellant-plaintiff. However, at the time of the final hearing of the suit, the figures must be proved in a manner known to law - Even assuming that the allegation of deceptive similarity in the labels used by the respondent was established by the appellant, one of the three elements which the appellant was required to prove, has not been proved. Therefore, we find that the High Court was justified in staying that particular part of the decree of the Trial Court by which injunction was granted for the action of passing-off. Infringement of copyright - HELD THAT:- In the facts of the case, it appears that when permission was sought by the respondent to use the impugned labels, the appellant raised objections in writing to the grant of permission to the respondent to use the said labels. It is not as if those objections were not pursued, but there was a positive act on the part of the appellant of withdrawing the said objections by submitting the letters of withdrawal in which, admittedly, it was not mentioned that the withdrawal was conditional. This important factual aspect supports the order of stay granted by the High Court as regards the decree in respect of the infringement of copyright. The objections were withdrawn on 25th April 2016 and the suit was filed on 4th October 2017. A prima facie case of acquiescence by the appellant was made out by the respondent. There is a huge pendency of suits in the Trial Courts in the State of Maharashtra. If the members of the Bar do not cooperate with the Trial Courts, it will be very difficult for our Courts to deal with the huge arrears. While a trial is being conducted, the members of the Bar are expected to act as officers of the Court. They are expected to conduct themselves in a reasonable and fair manner. The members of the Bar must remember that fairness is a hallmark of great advocacy. If the advocates start objecting to every question asked in the cross-examination, the trial cannot go on smoothly. The trial gets delayed. In the facts of the case, looking at the persistent objections raised by the learned advocate, the Court was required to record a substantial part of the cross-examination in question and answer form which consumed a lot of time of the Court. The High Court was justified in granting the order of stay pending the final disposal of the appeal. The appeal is, accordingly, dismissed.

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• 2023 (9) TMI 706
  Dishonour of Cheque - legally enforceable debt or not - validity of cheque - cheques in question signed by only one Director of M/s Shalini Securities Private Limited - under what circumstances Amandeep Singh had issued the cheques in question in favour of Lokesh Thakkar particularly when he had resigned as Director from the M/s Shalini Securities Private Limited in the year 2012? - HELD THAT:- M/s Shalini Securities Private Limited and Amandeep Singh at this stage cannot be allowed to take advantage of their acts committed by issuance of the cheques in question in favour of Lokesh Thakkar. Lokesh Thakkar is appearing to be the holder of cheques in question and is entitled for presumption under section 139 of NI Act. It is for M/s Shalini Securities Private Limited to establish on record by leading probable defence that the cheques in question were not issued towards discharge of legally enforceable debt and are not valid instruments in the eyes of law as Amandeep Singh was not having any authority to sign and issue the cheques in question. The issues raised in the present complaint require evidence and cannot be decided in the present petitions. The counsel for M/s Shalini Securities Private Limited referred the judgment passed by the Supreme Court in MRS. ANITA MALHOTRA VERSUS APPAREL EXPORT PROMOTION COUNCIL (APPAREL EXPORT PROMOTION COUNCIL) [ 2011 (11) TMI 532 - SUPREME COURT ] wherein it was observed that the criminal proceedings for the dishonour of the cheques in question against the non-executive ex-Director who has resigned from the company six years back are liable to be quashed. However, in the present case, the cheques in question were issued by Amandeep Singh from the account of M/s Shalini Securities Private Limited. The issue whether there is any liability against M/s Shalini Securities Private Limited and Amandeep Singh qua the cheques in question can only be decided by evidence during the trial. The present petitions are dismissed with the cost of Rs. 25,000/- (Rupees Twenty Five Thousand only) each on M/s Shalini Securities Private Limited and Amandeep Singh which is to be paid to Lokesh Thakkar before the trial court on the next date of hearing.

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• 2023 (9) TMI 705
  Dishonour of Cheque - existence of legally recoverable debt or liability - non-reporting of giving of cheques in question as security for transaction of sale of plot - HELD THAT:- Under Section 397 of the Cr.P.C, the Court is vested with the power to call for and examine the record of any inferior Court for the purpose of satisfying itself as to legality and regularity of any proceedings or order made in a case. The object of this provision is to correct the patent defect or an error of jurisdiction or the perversity which has crept in the proceedings. The High Court, in revision, exercises supervisory jurisdiction of a restricted nature. It cannot re-appreciate the evidence, as Second Appellate Court, for the purposes of determining whether the concurrent finding of fact reached by the learned Magistrate and the learned Additional Sessions Judge was correct. The Supreme Court BHARAT BARREL DRUM MANUFACTURING COMPANY VERSUS AMIN CHAND PAYRELAL [ 1999 (2) TMI 627 - SUPREME COURT] , held that once execution of the promissory note is admitted, the presumption under Section 118( a ) would arise that it is supported by consideration. The accused has failed to establish his defence even on preponderance of probability, therefore, there was no occasion to shift onus of proof on the complainant to establish existence of legally recoverable debt or liability. Manoj Kushwaha (PW-1), Hotam Singh (PW-2) and Amrit Lal Kushwaha (CW-1) also stated about availability of funds sufficient to advance the loan, therefore, considering the statutory presumption in favour of holder of cheque absence of documentary evidence to establish financial capacity of the complainant is immaterial. In opinion of this Court, no patent illegality, perversity or impropriety is made out in the concurrent finding of conviction by learned Trial Court and the First Appellate Court. The sentence imposed by learned trial Court and affirmed by the First Appellate Court is proper and appropriate. Consequently, no interference in concurrent finding of conviction of petitioner for offence punishable under Section 138 of the Negotiable Instruments Act and sentence imposed, is called for in exercise of revisional jurisdiction. Revision petition dismissed.

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• 2023 (9) TMI 704
  Dishonour of Cheque - territorial jurisdiction - whether an inquiry under Section 202 of the Code of Criminal Procedure is mandatory before issuance of process in a complaint under Section 138 read with Section 141 of the Negotiable Instruments Act when the accused resides outside the territorial jurisdiction of the learned Chief Judicial Magistrate at Kolkata? - HELD THAT:- This Court has already held that Section 202 of the Cr.P.C was introduced in the statute book in order to prevent lodging of false complaint only to cause harassment of innocent persons who reside outside the jurisdiction of the court of the learned Magistrate. When the learned Magistrate on scrutiny of record prima facie came to a decision that process ought to have been issued even against a person who resides outside the jurisdiction of the court of the learned Magistrate and passed an order under Section 204 of the Cr.P.C, it is obvious that the learned Magistrate also took into account the provision under Section 202 of the Cr.P.C. In SMS PHARMACEUTICALS LTD. VERSUS NEETA BHALLA [ 2005 (9) TMI 304 - SUPREME COURT] , the Hon ble Supreme Court while construing the provision of Section 141 of the N.I Act, 1881, has noted that the position of a Managing Director or a Joint Managing Director of the company is distinct since persons occupying that position are in charge of and responsible for the conduct of the day to day business of the company. It was observed that though there is a general presumption that the Managing Director and Joint Managing Director are responsible for the act of the company, the director will not be held liable if he was not responsible for the criminal conduct of the company at the time of the commission of offence. Now to conclude, it is found from the record that the petitioner was arraigned as an accused in the aforementioned cases under Section 138 read with Section 141 of the N.I Act on the ground that he at the relevant point of time was the Managing Director of the company. Secondly, in the petition of complaint it was not stated that the petitioner resides outside the jurisdiction of the learned Magistrate. Thirdly, while issuing process the learned Magistrate adverted to the petition of complaint, evidence of the complainant affirmed under Section 145(1) of the N.I Act and the documents filed by the complainant. Thus, before issuance of process, the learned Magistrate obviously came to the conclusion that there are prima facie reasons to issue process against the petitioner and lastly, if the impugned order prima facie proves application of mind by the learned Magistrate in respect of compliance of mandatory provision under Section 202 of the Cr.P.C, the order cannot be set aside only on technical ground for absence of the magic words that inquiry under Section 202 was held and the learned Magistrate was satisfied that process should be issued against the accused. There are no merit in these bunches of criminal revision and accordingly the revisional applications are set aside.

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• 2023 (9) TMI 703
  Dishonour of Cheque - legally enforceable debt or not - present complaint filed only with the sole motive to extort money from the petitioners without any legally enforceable debt against them - respondent had not mentioned or enclosed any document or agreement against which the alleged loan was tendered to the petitioner - HELD THAT:- It is apparent that cheques bearing no 997642 which is basis of present complaint is dated 01.06.2018 while the petitioner no 1 through the petitioner no 2 intimated its banker vide letter dated 27.09.2014 to stop any payment against these cheques and made a complaint to the SHO, Police Station Mehrauli, New Delhi on 27.9.2014 vide NCR No. 1361/2014 dated 01.10.2014 i.e. much prior from alleged dates of issuance of cheque bearing no 997642. However plea of the petitioners that cheque bearing no 997642 which is basis of present complaint was lost in year 2014 much prior to issuance of the cheque in favour of the respondent no 2 can only be established during trial and on basis of the evidence to be led by the petitioners and the respondent no 2. The proposed defence of the petitioners as detailed cannot be legally considered at time of taking cognizance by the trial court which is obliged to take cognizance merely on basis of allegations as made in complaint and pre summoning evidence if any. On the basis of pleas as taken in the present petition and arguments advanced by the learned Senior Counsel for the petitioners, the summoning order dated 23.10.2018 cannot be recalled. The petition is devoid of any merit - Petition dismissed.

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• 2023 (9) TMI 702
  Validity of Look-Out Circulars (LOC) issued - cognizable offences or not - curtailing a person s fundamental right to travel under Article 21 - HELD THAT:- Sub-section (6) of Section 212 provides that notwithstanding anything contained in the Code of Criminal Procedure, an offence covered under section 447 of the 2013 Act (which we have also discussed above) shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless the Public Prosecutor has been given an opportunity to oppose the application for such release and where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail. In the present case, as rightly pointed by learned counsel for the petitioners, the stage of investigation within the contemplation of Section 212(1) (4) of the 2013 Act is not yet over. Thus, as of today, whatever may the allegations against the petitioners or the Company of which they were Directors and guarantors, the same cannot tantamount to a cognizable offence against the petitioners. Insofar as classification of an account as fraud is concerned, the same was disclosed only subsequently and does not find place in the SFIO request to the Immigration Authority for issuance of LOC. Whether the high ground of issuance of LOC has been made out at all by the SFIO in its request for issuance of LOC? - HELD THAT:- It has to be kept in mind that the high grounds which are required to be made out for restraining the personal liberty of a person as guaranteed under Article 21 of the Constitution and the right of a person to move within the country under Article 19, a necessary corollary of which is the right to travel abroad, have to be on a much elevated footing than mere pendency of an investigation or allegations of financial frauds against the concerned person - mere paranoia of the authorities whenever a person against whom allegations are levelled seeks to leave the country cannot be sufficient for issuance of LOCs and curtailing the person s personal liberty to travel abroad. No ground has been made out for issuance of LOC against the petitioners and/or restricting them from travelling abroad. - Petition allowed.

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