Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 20, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Input Tax Credit - GST paid on vouchers and subscription packages - vouchers are given free of charge as a gift or otherwise - The redemption of loyalty points, admittedly involves no flow of consideration from the customer. Thus redemption of loyalty points by the customer for receiving vouchers from the applicant implies that the vouchers are issued free of cost to the customer and amounts to disposal of vouchers(goods) by way of gift and squarely covered under clause (h) of Section 17(5) of the Act, ibid. - AAR
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Classification of goods - non-alcoholic malt drink 'Kingfisher Radler' - the impugned product does not qualify to be a non-alcoholic beer, but it is a non-alcoholic beverage. - The impugned product is a mixture of Barley malt, sugar, mixed fruit juice, hops, lemon extract, carbon dioxide, water, flavor & other additives and Black carrot juice, amongst which the predominant is mixed fruit juice, in all variants of the product. Thus the product needs to be classified on the basis of predominant material/substance in terms of Rule 2(b) of General Interpretation Rules. - AAR
Income Tax
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Procedure for assessment - scope of e-Assessment Scheme - A link for personal hearing shall be sent to the petitioner and the petitioner shall be heard within a period four weeks. An order of assessment shall be passed within a period of eight weeks from the date of conclusion of personal hearing. Since the petitioner states that the time granted for filing reply at the first instance was inadequate, the petitioner shall also be permitted to file additional reply upon conclusion of the personal hearing. - HC
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TDS u/s 194A - Non deduction of tax on interest paid on deposits - DR has not objected for the same disallowance of 100% made by CIT(A) has been restricted to 30% in view of the amendment vide Finance Act 2014 to Section 40(a)(ia) - Accordingly, the disallowance made by the A.O in respect of defaulting payment of TDS is restricted to 30%. - AT
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TP Adjustment - Comparable selection - In view of the fact that the AR has simply harped on the high profit margin as a reason for seeking exclusion without pointing out any abnormal business conditions existing with that company for the year under consideration, we find no reason to disturb the conclusion drawn by the CIT(A) in echoing the inclusion of ICC International Agencies Ltd. (Segment) in the list of comparables. - AT
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Addition on account of alleged freebies to doctors - On mere perusal of the sale campaign programme extracted above, it would reveal that the respondent-assessee company had not indulged in distribution of any freebies, gifts to medical professionals, which amounts to misconduct - Decision of Apex court in Apex Laboratories (P.) Ltd has not application in the present case - AT
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Levy of interest for delayed payment of TDS - there was exfacie delay in depositing the deducted tax (TDS) within the stipulated due dates, for the reasons interest u/s 201(1A) found charged and such levy is automatic and without escapement - AT
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Revision u/s 263 by CIT - cash payment made for purchase of old gold jewellery - Actually the assessee has not made any purchases in cash in alleged transactions and only net consideration i.e total sale value less value of old jewellery exchange is received by the assessee in cash/cheque. - There is no violation of provisions of section 40A(3) - AT
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Nature of expenditure - expenditure on repair works - The expenditure being huge is not the consideration to decide whether it is revenue or capital expenditure. The expenditure can be one time affair or recurring affair. Determination of capital or revenue expenditure is totally based on the circumstances of each case. - AT
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Deduction u/s. 80IB - The exemption provisions are to be strictly construed. Even if we accept that books of accounts, vouchers etc. were destroyed in a fire, firstly the assessment order in first round was passed prior to the date of fire, and secondly even if primary evidences are not available, the assessee could have collected secondary evidences to demonstrate its bona-fide in case of installation of plant and machinery during the year under consideration - Assessee could have been procured as secondary evidence to justify employability of twenty or more workers in manufacturing process. - AT
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Unexplained credits u/s. 68 - Bogus LTCG - Penny stock purchases - Nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. - AT
Customs
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Seeking provisional release of confiscated goods - Import of Aircraft availing benefit of exemption - The use of the aircraft has been in accordance with the scope of non-scheduled (passenger) services and there is no violation of the undertaking to use the aircraft for non-scheduled (passenger) services. - AT
Indian Laws
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Dishonor of Cheque - acquittal of the accused - It is to be presumed that the cheque, which was presented for the second time within the period of 6 months is re-represented and statutory notice dated 14.12.2011 marked as Ex.P6 is a valid statutory notice - this Court finds that the dismissal of the complaint is erroneous. - HC
IBC
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Validity of Auction held by the Liquidator - reduced Upset Price - the act of Liquidator stands to be valid as the process was conducted in accordance with the IBBI Rules and Regulations, especially as per Rule 4A and 4B, the Liquidator has power to reduce the Reserve Price by 25% for subsequent action. There is no error in the impugned order w.r.t. this aspect. - AT
Service Tax
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Denial of refund of CENVAT credit - service tax paid under reverse charge mechanism after 30.06.2017 - The adjudicating authority is directed to grant refund within a period of 60 days from the date of receipt of copy of this order along with interest under section 11BB of the Central Excise Act. - AT
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Levy of Service tax - GTA Services - Mega exemption - It makes clear that tax liability under this heading does not arise against the individual person who owns the truck. It also becomes clear that the agency who is providing service of Goods Transport Agency is not required to be the owner of vehicle which are to be used by such agencies for transportation of the goods. - AT
Case Laws:
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GST
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2022 (9) TMI 842
Input Tax Credit - GST paid on vouchers and subscription packages procured by the applicant from third party vendors that are made available to the eligible customers participating in the loyalty program against the loyalty points earned / accumulated by the said customers - Section 16 of the CGST Act 2017 - HELD THAT:- The input tax credit is an entitlement to a registered person which can be taken subject to such conditions and restrictions as may be prescribed. In this regard it is seen that sub-section (5) of Section 17 prescribes that input tax credit shall not be available in respect of certain supplies. Whether the inward supply i.e. the vouchers merits classification as 'goods' or 'service' and if they are goods, whether they were disposed of by way of gift or otherwise? - HELD THAT:- The subscription packages procured by the applicant from third party vendors and supplied to customers against loyalty points, is also a 'voucher' as it places an obligation on the potential supplier to accept it as consideration for supply of goods or services to the holder of the instrument or the customer. Thus the subscription package has all the required qualities to qualify as a voucher. Whether the inward supply of vouchers including subscription packages, by the third party vendors to the applicant, amounts to supply of goods or services? - HELD THAT:- The term 'goods' is not restricted to tangible property, instead refers to every kind of movable property which is capable of being transmitted or supplied. Vouchers are a movable property, capable of being transmitted electronically or supplied physically, thus they qualify as 'goods' - Thus voucher is undoubtedly a moveable property and squarely gets covered under intangible goods. Further Schedule II to Section 7 of the CGST Act 2017 stipulates the activities or transactions to be treated as supply of goods or supply of services. Para 1(a) of Schedule II to Section 7 specifies that any transfer of the title in goods is supply of goods. The transaction of supply of vouchers in the instant case involves transfer of the title and hence they are covered under supply of goods. Whether the vouchers are given free of charge as a gift or otherwise? - HELD THAT:- It can be seen from the loyalty program that the applicant, on the basis of a particular transaction / purchase by the customer through their e-commerce platform and subject to acceptance of the terms and conditions of the applicant by the customer, allows the customer to earn loyalty points - The redemption of loyalty points, admittedly involves no flow of consideration from the customer. Thus redemption of loyalty points by the customer for receiving vouchers from the applicant implies that the vouchers are issued free of cost to the customer and amounts to disposal of vouchers(goods) by way of gift and squarely covered under clause (h) of Section 17(5) of the Act, ibid.
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2022 (9) TMI 841
Classification of goods - non-alcoholic malt drink 'Kingfisher Radler' - covered as Carbonated beverages of fruit drink or carbonated beverages with fruit juice of chapter heading 2202 or not - applicability of Entry 12B of Notification No.1/2017 dated 28.06.2017 (as introduced by Notification No.8/2011-Central Tax (Rate) dated 30.09.2021) - whether the impugned product qualifies to be a non-alcoholic beer or not? - HELD THAT:- Reference made to the Explanatory Note 3 to chapter 2202 wherein it is specified that for the purposes of heading 2202, the term 'non-alcoholic beverages' means beverages of an alcoholic strength by volume not exceeding 0.5% vol. Further Explanatory Notes to Chapter Heading 2202 specify that the said heading covers non-alcoholic beverages - the 'non-alcoholic beer' is basically a beer having certain alcoholic strength which is reduced to 0.5% vol or less. It is an admitted fact in the instant case that the impugned product does not contain any alcoholic strength by volume, as it is not fermented and hence the question of reducing the said strength does not arise. Hence the impugned product is neither a beer initially nor it's alcoholic strength is reduced to 0.5% vol. Thus the impugned product does not qualify to be a non-alcoholic beer, but it is a non-alcoholic beverage. Whether the impugned product qualifies to be a malt based beverage or fruit based beverage? - HELD THAT:- The %age of Barley malt is less than the mixed fruit juice content in all the product variants. The Ginger lime variant is not considered as its production is discontinued, as per the applicant. Thus it could be inferred that the predominant component of the product is mixed fruit juice content - the contention of the applicant that the product is marketed and understood in common trade parlance as 'non-alcoholic beer' and on this basis alone it deserves to be classified under tariff item 2201 91 00 is not acceptable. The impugned product is a mixture of Barley malt, sugar, mixed fruit juice, hops, lemon extract, carbon dioxide, water, flavor other additives and Black carrot juice, amongst which the predominant is mixed fruit juice, in all variants of the product. Thus the product needs to be classified on the basis of predominant material/substance in terms of Rule 2(b) of General Interpretation Rules. Further all the variants of the product are admittedly carbonated and hence they are nothing but carbonated beverages - all the variants merit classification as carbonated beverages of fruit drink, covered under tariff heading 2202 99 90. Accordingly the product attract GST @ 28% along with applicable cess of 12% in terms of SI.No.12B of Schedule IV to the Notification No.1/2017-Central Tax (Rate) dated 28.06.2017, effective from 01.10.2021.
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Income Tax
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2022 (9) TMI 840
MAT Computation u/s 115JB - interest subsidy and excise refund - Whether would be treated as capital receipt or revenue receipt for the purpose of computation of book profit under the provision of Section 115JB? - HELD THAT:- The substantial question of law involved in this appeal is squarely covered in favour of the assessee and against the revenue in the light of the decision of M/s. Chaphalkar Brothers Pune 2017 (12) TMI 816 - SUPREME COURT] held that the finding of the Jammu and Kashmir High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that the subsidy took a particular form and the fact that it was granted only after commencement of production would make no difference. Identical issue was also considered in Ankit Metal And Power Ltd. [ 2019 (7) TMI 878 - CALCUTTA HIGH COURT] wherein apart from considering the effect of the subsidy the Court also considered as to whether when a receipt is not in the character of income as defined under Section 2(24) of the Act, whether it can be said to form part of the book profit under Section 115 JB. Decided against revenue.
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2022 (9) TMI 839
Procedure for assessment - scope of e-Assessment Scheme notified vide Notification 61 dated 12.09.2019, as amended by Notification No.60 dated 13.08.2020, and the procedure for assessment thereunder, especially clause (5), in terms of which, e-assessments have been finalised - HELD THAT:- Admittedly, there have been violations of timelines as well as procedure in the framing of the assessments, both on the part of the petitioners as well as the respondent/Income Tax Department. One reason for this is the pandemic that stood in the way of proper and timely compliance and secondly, lack of familiarity with the new procedure that had been introduced. For both the aforesaid reasons, the learned counsels for the petitioners as well as the learned Standing Counsel appearing for the Income Tax Department, in one voice, would agree that the following orders that have been passed in each writ petition would be taken to be consent orders. They request that the Court fix timelines afresh in all matters and undertake that the timelines so set out, will be adhered to scrupulously. Denial of natural justice - non providing of personal hearing - HELD THAT:- As passing of the assessment order without a personal hearing, moreover attempting to justify the same, is not proper and in my view, vitiates the assessment order, which is set aside. A link for personal hearing shall be sent to the petitioner and the petitioner shall be heard within a period four weeks. An order of assessment shall be passed within a period of eight weeks from the date of conclusion of personal hearing. Since the petitioner states that the time granted for filing reply at the first instance was inadequate, the petitioner shall also be permitted to file additional reply upon conclusion of the personal hearing. The entirety of the exercise as aforesaid shall be completed within a period of 90 days from the date of issue of certified copy of this order. The writ petition is allowed in the above terms.
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2022 (9) TMI 838
Penalty levied u/s. 271(1)(C) - Disallowance of claim of u/s. 80P(2)(d) on rental income - assessee claimed statutory deduction u/s. 24 of the Act and accepted the addition as the rental income - A.O. initiated penalty proceedings for furnishing inaccurate particulars of income. HELD THAT:- It is seen from the Penalty order that the assessee has filed a rectification petition u/s. 154 stating the rental income has already been offered by revising the return on 29.03.2017. AO also held that the bonafideness of the assessee remain unproved as it has filed Revised Return after 8 months of receipt of notice u/s. 143(2) of the Act i.e. the assessee offered the rental income only after the statutory proceedings were initiated by the department. The levy of penalty u/s. 271(1)(c) for filing inaccurate particulars of income does not arise when the assessee filed a Revised Return offering to tax the rental income. In our considered view, the penalty levied u/s. 271(1)(c) is hereby deleted. Appeal filed by the Assessee is allowed.
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2022 (9) TMI 837
Penalty levied u/s. 271(1)(b) - assessee firm could not comply with the notices issued u/s. 142(1) - main submission of the assessee is that the assessing officer has given only 15 days time to respond to the notices which is inadequate - HELD THAT:- CIT(A) has confined the levy of penalty u/s. 271(1)(b) very particularly to the notices which has issued and served on the assessee, wherein the assessee failed to comply/reply to the notices. Thus the ld. CIT(A) partially deleted the penalty levied against the assessee, wherein notices have been served to the assessee beyond the date of hearing or service of notices is not proved by the ld. A.O. Thus literally only one proper notice was served to the assessee, wherein adequate time is not given to the assessee to file its reply. Further as explained by the assessee, non-response to the notice is because of disputes between the Partners, considering the facts of the present case, the levy of penalty u/s. 271(1)(b) is liable to be deleted. - Decided in favour of assessee.
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2022 (9) TMI 836
Profits of non-residents from occasional shipping business u/s 172 - Applicability of provisions u/s 194C - Payments made to agents of Foreign Shipping Companies - Assessee reiterated its contention that it has made payments to agents of foreign shipping companies, therefore, these payments are covered u/s 172 of the Act, and are fully exempt from TDS deduction - HELD THAT:- CBDT Circular No. 723 dated 19.09.1995 clearly states that provisions of section 172 applies to payments made to agents of foreign shipping companies and therefore, provisions of section 194C of the Act do not apply. Since the aforementioned Circular has been followed by the ld. CIT(A), we do not find any reason to interfere with the findings of the ld. CIT(A). - Decided against revenue.
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2022 (9) TMI 835
Difference in Form 26AS and income declared by the assessee - AO made an addition on the ground that there is a difference in the gross receipts admitted by the assessee and the gross receipts from Indian Oil Corporation as per Form 26AS and the assessee expressed his inability to reconcile the difference in gross receipts - HELD THAT:- Assessee filed a rectification application u/s 154 stating that the credits added by the AO do not pertain to the assessee. - AO rejected the rectification application and in appeal, CIT (A) dismissed the appeal filed by the assessee, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of assessee that the Chief Divisional Retail Sales Manager of IOCL, Tirupati has issued form 26AS containing the details of payment and the addition made by the AO on account of difference in Form 26AS and income declared by the assessee does not belong to the assessee. It is his submission that given an opportunity, the assessee is in a position to reconcile the difference. We deem it proper to restore the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to reconcile the difference and decide the issue as per fact and law.The grounds raised by the assessee are accordingly allowed for statistical purposes.
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2022 (9) TMI 834
Penalty u/s. 271(1)(c) - adjustment of loss of interest paid to partnership firm setoff against salary income and income from house property - loss relates to interest paid on debit balance by the assessee to the partnership firm where the assessee is a partner - assessment and penalty proceedings as independent proceedings - contention of the assessee that merely rejection of his claim of interest on debit balance paid by the assessee to the firm does not attract penalty u/s 271(1)(c) - HELD THAT:- In the instant case, the matter relates to claim of interest paid by the assessee to the partnership firm where the assessee is a partner and from where the assessee also draws the remuneration. Both the interest paid and remuneration received from the partnership firm has been duly reflected in the return of income and it is thus manifest that the same will falls under the head Income from business/profession and given that interest paid is more than salary income, the same has resulted in a business loss and which has further been set off against income under the other heads of income during the year and which has resulted in net loss These facts are not been disputed by the Revenue and therefore, as far as furnishing of particulars of income including claim of expenditure are concerned, the same is evident from the return of income and the particulars so furnished cannot be said to be inaccurate. Given that there has been a delay in filing of the return of income, the AO is well within his right to restrict the carry forward of the net loss so claimed by the assessee, however, as far as claim of set off under the same head of income and against other heads of income during the year under consideration are concerned, the assessee is well within his rights to claim the same. Nothing has been stated in the order of the lower authorities nor brought to my notice which restricts such set off during the year under consideration. The issue of levy of penalty u/s 271(1)(c) in the instant appeal is pari-materia to A.Y 2014-15 wherein under identical set of facts and circumstances of the case, the penalty so levied by the AO has been deleted by the ld CIT(A) - Appeal of assessee allowed.
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2022 (9) TMI 833
TDS u/s 194A - Liability to deduct the TDS on interest paid on saving bank accounts - Non deduction of tax on interest paid on deposits by various invoking provisions of Section 40(a)(ia) - HELD THAT:- Disallowance on the ground that the same has been disallowed for the AY 2014-15, immediately succeeding assessment year under consideration. Assessee fairly submitted that the Section 40(a)(ia) was amended vide Finance Act, 2014 whereby the disallowance in respect of default in payment of TDS in case of payments to residents has been restricted to 30% instead of 100% and since the amendment is curative in nature and have been made to remove the undue hardships to the assessee, therefore, submitted that the disallowance of 100% of the expenditure may be restricted to 30%. DR has not objected for the same disallowance of 100% made by CIT(A) has been restricted to 30% in view of the amendment vide Finance Act 2014 to Section 40(a)(ia) - Accordingly, the disallowance made by the A.O in respect of defaulting payment of TDS is restricted to 30%. Ground No. 1 is partly allowed for statistical purpose. Addition on account of accrued interest on NPA - HELD THAT:- We are of the opinion that the assessee who is into banking activities has to follow RBI Guidelines and we do not find any error with the assessee in offering the interest on NPA for taxation in the assessment year relevant to such financial year of recovery. AO/CIT(A) have committed an error in disallowing Rs. 52,20,914/- on account of interest on non performing assets. Accordingly, ground of Appeal No. 2 of the assessee is allowed. Disallowance on account of amortization of premium on government securities - HELD THAT:- Disallowance of amortization premium for the Assessments Year 2010-11 and 2011-12 has been also mentioned by the A.O in the Assessment order, but has not followed the consistency. Apart from the same as per the RBI Guidelines dated 16/10/2000, the investment portfolio of the bank is required to be classified under three categories viz. Held to Maturity (HTM), held for Trading (HFT) and Available for Sales (AFS). Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortized over the period remaining to maturity. In the case of HFT and AFS securities forming stock in trade of the bank, the depreciation/appreciation is to be aggregated scrip wise and only net depreciation, if any, is required to be provided for in the accounts. Disallowance on account of democratization of premium of government securities is deserves to be deleted. Accordingly, we allow Ground No. 3 of the assessee.
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2022 (9) TMI 832
TP Adjustment - Comparable selection - Ma Foi Global Search Services Limited and Ma Foi Management Consultants Ltd.excluded on the ground that they maintained their accounts following calendar year as against the assessee following financial year - HELD THAT:- Having heard both the sides and gone through the relevant material on record, it is seen that this issue is no more res integra in view of the judgment of PTC Software (I) Pvt. Ltd. [ 2016 (9) TMI 1282 - BOMBAY HIGH COURT] holding that two companies with different financial year endings cannot be considered as comparable. The ld. AR was fair enough to accept the position against the assessee. We, therefore, countenance the exclusion of these two companies from the list of companies. ICC International Agencies Limited (Segment) company was wrongly included - In principle, there can be no bar on the assessee seeking exclusion of a company which was inadvertently included in the list of comparables. What is relevant for consideration is the comparability and not the suo motu inclusion or exclusion by the assessee. The way in which the TPO can exclude certain companies, included by the assessee in the list of comparables, which are actually not found out to be so, the assessee can also seek exclusion of a company which was wrongly treated by it as comparable. Our view is fortified by the judgment of the Hon ble jurisdictional High Court in CIT Vs. Tata Power Solar Systems Ltd. [ 2016 (12) TMI 1600 - BOMBAY HIGH COURT] . ICC International Agencies Ltd.company returning higher OP/OC for the year - We reiterate that an otherwise comparable company with a high or low profit margin cannot be excluded just because of low or high profit rate. It would merit exclusion if it is proved that such high or low profit margin was because of some abnormal business conditions relevant to the year under consideration. Apart from contending that this company returned higher OP/OC for the year, no specific argument was put forth by the ld. AR to show that such profit margin was not the normal incidence of business. The assessee has not disputed the functional comparability of this company or the FAR analysis. AR failed to bring to our notice the company not passing any of the filters. In view of the fact that the AR has simply harped on the high profit margin as a reason for seeking exclusion without pointing out any abnormal business conditions existing with that company for the year under consideration, we find no reason to disturb the conclusion drawn by the CIT(A) in echoing the inclusion of ICC International Agencies Ltd. (Segment) in the list of comparables.
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2022 (9) TMI 831
Estimation of income - Bogus purchases - reasonability of disallowance of bogus/tainted/disputed purchases - HELD THAT:- We find that Hon ble Jurisdictional High Court in various case laws, including in the decision in Simit P Seth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] and Bholanath Poly Fab [ 2013 (10) TMI 933 - GUJARAT HIGH COURT] held that only profit element embedded in such bogus purchases should be disallowed, to avoid the possibility of revenue leakage and not the entire aggregate of disputed purchases. Considering the fact that Shri Praveen Kumar Jain was well known entry provider. Shri Gautam Jain was also actively involved along with Praveen Kumar Jain. The department has taxed Shri Praveen Kumar Jain and Gautam Jain as entry provider and taxed certain percentage on total entry provided by them. We find that in a similar case, the combination of this Bench, wherein the cases of beneficiary in case of Shri Rajendra Jain, Gautam Jain or Praveen Kumar Jain, disallowance of similar purchases were either increased to 6% or wherein the disallowance was restricted at higher percentage, was restricted to 6%, therefore, taking a consistent view, the disallowance restricted by the ld. CIT(A) is modified and the Assessing Officer is directed to restrict the disallowance of purchases from all five parties to the extent of 6% only. Appeal of the revenue is partly allowed
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2022 (9) TMI 830
TP adjustment - international transaction on account of guarantee fees - HELD THAT:- The Jurisdictional High Court in the case of CIT vs. Everest Kento Cylinders Ltd [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] held that the Corporate Guarantee cannot be treated on par with Bank Guarantees, as the considerations which are applied for issuance of Corporate Guarantee are distinct and separate from bank guarantee and the Hon ble Jurisdictional High Court held that the corporate guarantee fees charged at the rate of 0.5% cannot be called in question. The ratio of this decision was subsequently followed by the Hon ble Bombay High Court in the case of CIT vs. Glenmark Pharmaceuticals Ltd. [ 2017 (2) TMI 1305 - BOMBAY HIGH COURT] No illegality and perversity in the finding of the ld. CIT(A) restricting the TP adjustment on account corporate guarantee commission at the rate of 0.5%. Hence, we do not find any merit in the ground of appeal no.1 filed by the Revenue. Accordingly, ground of appeal no.1 stands dismissed. Addition u/s 14A r.w.r. 8D - necessity of recording a satisfaction as to the incorrectness of the claim of the respondent-assessee that the respondent-assessee incurred expenditure to earn the exempt income - suo-moto addition made by assessee - HELD THAT:- Admittedly, the respondent-assessee company made investments, which yielded the dividend income. The respondent-assessee company itself offered suo motu disallowance - The provisions of sub-section (2) of section 14A provides that resort to disallowance u/s 14A can be made only if the AO is not satisfied with the correctness of the claim of assessee in respect of expenditure incurred to earn the exempt income. Therefore, it is incumbent upon the Assessing Officer to record satisfaction, as to the correctness or otherwise of the assessee company that only an expenditure was incurred to earn the exempt income. In the preset case AO has not recorded satisfaction regarding the correctness of suo motu disallowance offered by the assessee u/s 14A and mere rejection of the explanation of the assessee per se, cannot be said to be a satisfaction as envisaged u/s 14A(2). Decided against revenue. Disallowance of foreign travel expenses by holding to be personal expenditure - CIT-A deleted the addition - HELD THAT:- In view of the law laid down by the Hon ble Jurisdictional High Court in the case of Alfa Laval (I) Ltd. [ 2005 (7) TMI 48 - BOMBAY HIGH COURT] it cannot be said that the expenditure incurred on foreign travel of the director of the respondent-assessee company and his wife cannot be said to be personal in nature. No illegality and perversity in the finding of the ld. CIT(A) allowing the foreign travel expenses as revenue expenditure. Thus, the ground of appeal no.3 filed by the Revenue stands dismissed. Disallowance of depreciation of items of stainless steel tables, stools, trollies used in the laboratory treating as Plant Machinery as against the treatment of these items as furniture items - HELD THAT:- Admittedly, the stainless steel tables, stools, trollies were used in the laboratory i.e. for the purpose of production and processing of chemical test. We find from the order of the Tribunal in assessee s own case (supra) that the Tribunal taking into consideration the ratio of the decision in the case of CIT vs. Parke Devi [ 1994 (12) TMI 46 - BOMBAY HIGH COURT] wherein it was held that if the scientists or lab technicians used the said stainless steel tables, stools, trollies, racks as part of the production of vaccine and other should be classified as plant and machinery, accordingly, the depreciation should be allowed at the rate applicable to plant and machinery. We do not see any illegality and perversity in the decision of this Tribunal . Weighted deduction u/s 35(2AB) in respect of the product development expenditure - HELD THAT:- In the light of law laid down by the Hon ble Gujarat High Court in the case of Cadila Healthcare Ltd [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] , we do not find any reason to interfere with the order of ld. CIT(A), as same is in consonance with the law laid down by the Hon ble Gujarat High Court in the case of Cadila Healthcare Ltd. [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] . Therefore, the ground of appeal no.5 filed by the Revenue stands dismissed. Capital expenditure incurred on product development as revenue expenditure u/s 35(1) - allowability of the expenditure incurred on the development of new products in the case of running business - HELD THAT:- Admittedly, the expenditure was incurred in the process of development of new product of drugs or vaccine which was not qualified for weighted deduction u/s 35(2AB) of the Act. The mere fact that the absence of approval of prescribed authority u/s 35(2AB) is not a bar for allowance of claim within the ambit of provision of section 35(1)(iv) or u/s 37(1) of the Act, inasmuch as, the expenditure is incurred is revenue in nature for running business. The treatment given in the books of account is not determinative of the allowability or otherwise the expenditure under the provisions of the Act as held in the case of (i) Kedarnath Jute Mfg. Co. Ltd. [ 1971 (8) TMI 10 - SUPREME COURT] and CIT vs. Smifs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT] - The Tribunal had rendered the decision following ratio rendered in those judgment and, therefore, we do not see any reason to interfere with the findings of the ld. CIT(A), inasmuch as, he only followed the decision of the Tribunal in assessee s own case for the assessment year 2008-09 [ 2016 (8) TMI 1047 - ITAT PUNE] . Therefore, we do not find any merits in the ground of appeal no.6 filed by the Revenue and hence, dismissed. Deduction u/s 10AA in respect of sales made to United Nations International Children s Emergency Fund (UNICEF) - HELD THAT:- The provisions of section 10AA(1) does not require that the goods manufactured in SEZ unit should be exported outside of India. In any event, they need not be a two-way traffic of exporting goods outside India and thereafter importing that goods into India. It is a mere empty useless formality. Therefore, in the light of the foregoing discussion, we are of the considered opinion that the benefit of deduction under the provisions of section 10AA cannot be denied to an assessee merely on the ground that the assessee had not exported the goods outside India despite the fact that the consideration was received in convertible foreign exchange in India. We do not find any fallacy in the reasoning of the ld. CIT(A). Accordingly, this ground of appeal filed by the Revenue stands dismissed. Additional depreciation in respect of civil works and electrical works associated with windmill - HELD THAT:- It is trite law as held by the Hon ble Supreme Court in the case of Challapalli Sugars Ltd. [ 1974 (10) TMI 3 - SUPREME COURT] that all the expenses incurred on the civil works to bring an asset into existence should be capitalized. Admittedly, in the present case, the civil works and electrical works are part and parcel of the windmill and cannot be treated separately from the windmill. Without executing civil works and electrical works, the windmill cannot be installed. In the case of CIT vs. K. K. Enterprises, [ 2015 (2) TMI 508 - RAJASTHAN HIGH COURT] had observed that the civil work and foundation is necessary for strong foundation and no windmill could be installed without having a strong foundation. As such depreciation on the cost of civil work should be allowed at the rate applicable to the windmill. Similarly, the electrical items, components and common power evacuation too are integral part of the windmill, as that could have not been operational without electrical works. - Decided against revenue. Addition on account of alleged freebies to doctors - allowability of discount passed on to the doctors on achieving such sales targets - HELD THAT:- On mere perusal of the sale campaign programme extracted above, it would reveal that the respondent-assessee company had not indulged in distribution of any freebies, gifts to medical professionals, which amounts to misconduct under the provisions of the provisions of Medical Council (Professional Conducts, Etiquettes and Ethics) Regulation Act, 2002. Therefore, the question of applicability of Explanation 1 to section 37 does not arise and the ratio of the Hon ble Supreme Court in the case of Apex Laboratories (P.) Ltd. [ 2022 (2) TMI 1114 - SUPREME COURT] have no application. Accordingly, we do not find any reason to interfere with the order of the ld. CIT(A). Thus, the ground of appeal no.9 filed by the Revenue stands dismissed. MAT computation u/s 115JB - provisions for wealth tax paid required to be added back to book profit for the purpose of computing the tax under the provisions of section 115JB or not? - CIT-A deleted the addition - HELD THAT:- Since the ld. CIT(A) only followed the decision of the Tribunal in assessee s own case for the assessment year 2009-10 [ 2018 (6) TMI 509 - ITAT HYDERABAD] and no contrary position of law was brought to our notice, we find no reason to interfere with the order of the ld. CIT(A). Accordingly, the ground of appeal no.10 filed by the Revenue stands dismissed.
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2022 (9) TMI 829
Disallowance being weighted deduction u/s 35(2AB) - Claim of assessee towards revenue expenditure being consultation fees which were actually in the form of remuneration and the entire R D activities were carried out in the appellant company s premises - whether claim of Appellant u/s 35(2AB) cannot be allowed without certification by the DSIR? - HELD THAT:- We find that neither before the A.O nor before the ld. CIT(A) the assessee was able to substantiate the claim of revenue expenditure.It is not apparent either from the order of the ld. A.O or from the ld. CIT(A) s order what relevant evidences/materials were provided by the assessee in order to substantiate its claim for weighted deduction u/s 35(2AB) - Whether the assessee was able to justify the alleged consultancy services paid to the concerned three professionals and whether those can be brought within the status of in-house research and development facilities, no such evidence is apparent in the orders of the subordinate authorities and whether at all, the assessee had submitted such evidences before them. As It is not apparent either from the order of the ld. A.O or from the ld. CIT(A) s order what relevant evidences/materials were provided by the assessee in order to substantiate its claim for weighted deduction u/s 35(2AB) of the Act. Whether the assessee was able to justify the alleged consultancy services paid to the concerned three professionals and whether those can be brought within the status of in-house research and development facilities, no such evidence is apparent in the orders of the subordinate authorities and whether at all, the assessee had submitted such evidences before them. Thus matter should be restored to the file of the ld. A.O for adjudication as per law and as prayed for by the assessee. They should provide all evidences/documents to substantiate their claim of weighted deduction u/s 32(2AB) of the Act before the ld. A.O - Appeal of the assessee is allowed for statistical purposes.
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2022 (9) TMI 828
Penalty of late fee u/s 234E - intimation passed u/s 200A r.w.s. 154 of the Act - as per AO assessee had failed to demonstrate sufficient and reasonable cause for delay in filing the quarterly statement of TDS of first quarter for financial year 2013-14 in Form No.24Q - HELD THAT:- It is only w.e.f. 01.06.2015 an amendment was made u/s 200A of the Act providing that fee u/s 234E could be computed at the time of processing of the return of income and intimation could be issued specifying the same payable by the dedutor as fee u/s 234E of the Act. As in the case of Fatheraj Singhvi vs. Union of India [ 2016 (9) TMI 964 - KARNATAKA HIGH COURT] held that the provisions of section 234E of the Act are substantive in nature and the mechanism for computing the late fee was provided by the Parliament only w.e.f. 01.06.2015. Therefore, late fees u/s 234E of the Act can be levied only prospectively w.e.f. 01.06.2015. Thus we direct the DCIT/ACIT, CPC-TDS to delete the late fee being levied u/s 234E of the Act. Appeal of assessee allowed.
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2022 (9) TMI 827
Estimation of income - bogus purchases - addition of commission on the bogus purchases - HELD THAT:- Recently in Deputy Commissioner of Income-tax v DBM Geotechnics and Construction (P.) Ltd. [ 2022 (3) TMI 1405 - ITAT MUMBAI] has upheld the income embedded at the rate of 12.5% in such purchases as income of the purchaser. As profit should be imputed to bogus purchases transactions, we deem it fit and proper that profit is required to be estimated only on the amount of bogus purchases. The quantum of the profit as generally estimated in the cases of bogus purchases should be at the rate of 12% of such purchases as held by the Honourable Jurisdictional High Court and we have not been guided by both the party as to why and how the said view of the Honourable Jurisdictional High Court is not acceptable in the present case. Accordingly, we reverse the order of the learned CIT A and direct the learned assessing officer to compute the unaccounted profit earned by the assessee at the rate of 12% on bogus purchases. As we have followed the jurisdictional high court decision where in the court has not guided as to make separate addition on the commission on the bogus purchases and therefore, respectfully following that judgement we do not find any merits in the appeal of the revenue to confirm the addition of commission and thus this ground of the revenue is dismissed and that of the assessee is allowed.
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2022 (9) TMI 826
Delayed employees share towards ESI and PF set up for the welfare of the employee u/s 36(1)(va) read with section 2(24)(x) - amount paid within the due dates of filing of return u/s 139 - HELD THAT:- As decided in HARENDRA NATH BISWAS VERSUS DCIT, CIRCLE-29 KOLKATA [ 2021 (7) TMI 942 - ITAT KOLKATA] we do not accept the CIT(A) s stand denying the claim of assessee since assessee delayed the employees contribution of EPF ESI fund and as per the binding decision of the Hon ble High Court in Vijayshree Ltd. [ 2011 (4) TMI 63 - ITAT KOLKATA] u/s 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds and we allow the appeal of the assessee. Disallowance u/s 14A - Expenditure incurred on exempt income - HELD THAT:- This is settled legal position that disallowance cannot exceed the exempt income. Accordingly we set aside the order of ld. CIT(A) on this issue and direct the AO to restrict the disallowance to exempt income. Disallowance u/s 14A to book profit u/s 115JB - HELD THAT:- After hearing the rival contention and perusing the applicable provisions of law with the ratio laid down by various judicial forums, we set aside the order of ld. CIT(A) and direct the AO not to make any addition to book profit qua the disallowance u/s 14A. The ground is allowed.
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2022 (9) TMI 825
Excess Contribution to Provident Fund, Superannuation Fund or Gratuity Fund - allowability of contribution with reference to section 36(1)(va) and 43B read with section 2(24)(x) - HELD THAT:- As gone through the order of AO, misconceived order of Ld. CIT (A) and submissions of assessee. We have gone through the Paper Book filed by the assessee dated 14.06.2022. To decide the matter, we need to take cognizance of Part-XII, Recognized Provident Funds, Part-XIII, Approved Superannuation Funds and Part-XIV Gratuity Funds. Rule-75 deals with limit for contribution in Recognized Provident Funds, Rule-87 deals with Ordinary Annual Contributions to Approved Superannuation Funds and Rule-103 deals with Ordinary Annual Contributions to Gratuity Funds. Part-XII, Part-XIII and Part-XIV of the I.T. Rules, 1962 deals with social security contributions made by employer for the benefit of its employees. Each part deals with different type of social security payments and have their own maximum limits prescribed for contribution by employer. Part-XII dealing with Employer Contribution to Provident Fund does not have any limit. Limit of 27% as prescribed in Rule 87 is applicable only in case of contribution to Superannuation Fund (minus contributions made to Provident Fund). We found force in the contentions of the assessee and considering the legal position enumerated above, we are of the view that contributions of the assessee to the Provident Fund may be even exceeding 27% is allowable. Ground No.1 2 of the assessee are allowed. Scope of maximum limit provided under Rule 87 - Heading of the rule 87, Ordinary annual contributions as per Part-XIII, Approved Superannuation Funds - HELD THAT:- The limit prescribed in Rule 87, having reference of the word Provident Fund is just for sake of fulfilment of conditions laid down with reference to maximum limit of contribution to be made under Superannuation Fund. It s nothing to do with Rule 75 applicable to contributions to be made under Provident Fund. The ordinary annual contribution by the employer to a fund shall be made on a reasonable basis as may be approved by the [Chief Commissioner or Commissioner] having regard to the length of service of each employee concerned so, however, that such contribution shall not exceed 81/3 per cent of the salary of each employee during each year. Credit of TDS - HELD THAT:- We considered the view of the ITAT in the case of Kirtida Rameshchandra Chandarana in [ 2022 (8) TMI 679 - ITAT MUMBAI] . In the result, Ground No.3 of the assessee is allowed subject to submission of certified documents mentioned above.
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2022 (9) TMI 824
TDS u/s 195 - disallowance u/s 40(a)(i) - assessee has paid management fees to company in Australia - assessee made application for granting certificate for Nil rate of TDS - HELD THAT:- DCIT (International Taxation) passed order u/s 195(2) of the Act, after taking note of the agreement entered into between the assessee and the Australian entity for providing administration/business support services, came to the conclusion that assessee is not liable for tax in India as per Article 12(3)(g) of DTAA as the support services intended to be provided by the Australian entity to the assessee does not result in making available any technical knowledge, experience, skill, know-how or processes or consist of the development and transfer of a technical plan or design. DCIT (International Taxation) also held that the said services are also not liable to be taxed under Article 7 read with Article 5 of India Australia DTAA, as the Australian entity doesn t have any PE in India. Accordingly, assessee was directed to withhold taxes at Nil under section 195(2) while making payment to Cover More Insurance Services Pty Ltd, during the financial year 2016 17. We find that similar Nil withholding tax certificates were issued by the Competent Authority relevant for assessment years 2018 19, 2019 20, 2020 21 and 2021 22. Hon ble Supreme Court of India in GE India Technology Cen. (P.) Ltd. [ 2010 (9) TMI 7 - SUPREME COURT] held that section 195(2) provides a remedy by which a person may seek a determination of the appropriate proportion of such sum so chargeable , where a proportion of the sum so chargeable is liable to tax. Once, the assessee has sought the remedy provided under the Act and the Competent Authority of the Income Tax Department after consideration of the facts, which are similar to the facts for the year under consideration, came to the conclusion under section 195(2) of the Act that Nil tax is liable to be withheld, in such a situation submission of the Revenue that assessee has failed to deduct tax at source on the payment made to the Australian entity is completely contrary to its own determination of such liability in the case of assessee. In view of the above, we find no infirmity in the impugned order passed by the learned CIT(A). Accordingly, all the grounds raised by the Revenue are dismissed.
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2022 (9) TMI 823
Levy of interest for delayed payment of TDS - Interest liability u/s 201(1A) for delayed payment of tax (TDS) to the credit of exchequer and consequential levy of interest thereon u/s 220(2) - whether default or failure to pay the TDS within prescribed time limit is sufficient to hold the appellant as an assessee in default within the ambit of section 201(1) of the Act? - HELD THAT:- For reason of delay in paying the amount of deducted tax (TDS) to the ex-chequer, the CPC-TDS by an order u/s 154 of the Act, held the appellant as the assessee in default in terms of provision of section 201(1) r.w.s. to 191 and consequently computed the compensatory interest u/s 201(1A) which remained uncontroverted by the appellant during the proceedings before CPC-TDS as well before both the appellate proceedings. Thus, in the present case, admittedly there was exfacie delay in depositing the deducted tax (TDS) within the stipulated due dates, for the reasons interest u/s 201(1A) found charged and such levy being automatic and without escapement finds force very same decision in Hindustan Coca-Cola Beverages Pvt. Ltd [ 2007 (8) TMI 12 - SUPREME COURT] which was relied by the Ld. AR and which reads as under this will not alter the liability to charge interest u/s 201(1A) of the Act till the date of payment of taxes by the deductee-assessee. Since the said default de jure is outside the exclusion carved out by the proviso to section 201(1) of the Act and the levy of interest u/s 201(1A) for the aforestated default being automatic liability of interest u/s 220(2) being consequential one, finds no shelter, for the reasons the orders of tax authorities below being flawless, needs to be sustained. We find no merit in the grounds raised by the appellant consequently there remained no iota of doubt in confirming the orders appealed against in pleno, ergo ordered accordingly.
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2022 (9) TMI 822
Revision u/s 263 by CIT - cash payment made for purchase of old gold jewellery - violation of section 40A(3) - whether the AO has conducted necessary enquiry regarding the issue raised in the Show Cause Notice and secondly, that whether the order of the AO is erroneous as well as prejudicial to the interest of the revenue? - HELD THAT:- As we find that the assessee is in the course of its business of selling of old gold jewellery and occasionally receives old gold jewellery in exchange from the customers. The value of such old gold jewellery is calculated by the assessee as per rates of the gold/silver/diamond or other precious stones as on the date of the transaction and the same is reduced from the sale value of new jewellery purchased by such customers. We can understand such transaction with the help of an example. The value of new gold jewellery is Rs. 1 lakh and customer gives old gold jewellery worth at Rs. 20,000/- to the assessee in exchange. After agreeing to the value of old jewellery the customer pays Rs. 80,000/-, which can be received in cash/cheque. In this transaction no cash is paid by the seller to purchase of old gold jewellery. Now in the books of account in order to make clarity and also to make proper quantitative details the assessee categorises the Rs. 1 lakh as sales and books purchase of old jewellery at Rs. 20,000/-. Actually the assessee has not made any purchases in cash in alleged transactions and only net consideration i.e total sale value less value of old jewellery exchange is received by the assessee in cash/cheque. There is no violation of provisions of section 40A(3) of the Act in the case of assessee as alleged by Ld. PCIT in the impugned order, as there is no actual transaction of payment of cash for making purchases exceeding the limit as prescribed u/s. 40A(3) of the Act. Since there is no violation of the said provisions of section 40A(3) of the Act, no such disallowance was called for in the hands of the assessee for alleged amount mentioned in the impugned order and Ld. AO has rightly carried out the assessment proceedings. PCIT erred in not considering the facts in correct perceptive and erred in holding that the assessment order is erroneous and prejudicial to the interest of the revenue. Since the impugned order is bad in law we quash the revisionary proceedings made u/s. 263 - We also hold that the order passed u/s. 143(3) dt. is neither erroneous nor prejudicial to the interest of the revenue and the same is accordingly restored. Appeal of assessee allowed.
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2022 (9) TMI 821
Unexplained Cash deposit - CIT-A deleted the addition - HELD THAT:- Deposit of cash in the saving bank account is duly recorded in cash book of the assessee and is out of the business turnover of the assessee for which the income has already been offered in his regular return. DR placed heavy reliance on the order of the AO and could not bring anything on record to controvert the findings given by the CIT(A). No reason to interfere with the fact based finding given by the CIT(A) and uphold the deletion of addition. Accordingly, this ground of appeal of revenue is dismissed. Bogus sundry creditors - as submitted there is no cessation of liability by the assessee in respect of these creditors u/s. 41(1) of the Act - the inspector could not point out any specific vendors in his report who were not found during the inspectionHELD THAT:- T. DR, could not bring anything contrary to the submissions made by the Ld. Counsel and on the findings given by the CIT(A) and placed reliance on the order of the AO. From the documents placed on record, it emanates that these are all small vendors supplying perishable items viz. fruits, vegetables, milk, cheese etc. Considering the nature of expenses, trading results, sales, purchases and the gross profit, more particularly owing to the nature of business of assessee comprising of manufacturing and sale of sweets and confectionery, we do not find any reason to interfere with the decision and the findings given by the ld. CIT(A). Accordingly, the ground of appeal of the revenue is dismissed. Disallowance of payment of electricity charges in cash in violation of section 40A(3) - HELD THAT:- Considering the documentary evidence placed on record in the form of ledger statement and bills for electricity charges and submission made by the Ld. Counsel, we find it proper to remit this matter back to the file of Ld. AO for the limited purpose of verification to ascertain the fact relating to each bill paid separately and accounted accordingly by the assessee in his books of account. Based on this verification and by considering the findings given in the judicial precedents, AO is directed to rework the disallowance, if any, u/s. 40A(3) of the Act. The assessee is also directed to furnish the relevant records and details to assist the Ld. AO in completing the verification exercise. Accordingly, this ground of appeal by the revenue is allowed for statistical purposes. Subscriptions donations which was not fully incurred for the purpose of the business - HELD THAT:- CIT(A) observed that in relation to have smooth business operation, assessee had to pay donation and subscriptions to various puja associations without which it would not be possible for him to maintain his business smoothly without any hindrance and treated these expenses as part of normal business activities and allowed the claim of the assessee by deleting the addition so made. Before us, Ld. Counsel reiterated the submissions and placed reliance on the decision of Ravi Marketing (P) Ltd.[ 2005 (1) TMI 20 - CALCUTTA HIGH COURT] wherein it was held that whether an expenditure is expedient for the purpose of business is to be looked at by the income tax authorities or the Court from the view point of the assessee, not from it armchair. It is not for the Court or the Income Tax Authorities to suggest or advise to presume or surmise as to the expedience. Considering the submissions made before us, we do not find any reason to interfere with the finding given by the ld. CIT(A) and affirm the deletion made thereon . Accordingly, ground of the revenue is dismissed.
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2022 (9) TMI 820
Deduction u/s.80IA(4)(ii) - eligible for deduction u/s 80IA(4)(iii) on the project namely Salarpuria Touchstone - HELD THAT:- As examination of facts and law that the assessee is eligible for deduction in respect of project namely Salarpuria Softzone in the light of the decision of the Hon ble Gujarat High Court n the case of Creative Infocity Ltd. [ 2012 (4) TMI 117 - GUJARAT HIGH COURT] and also case of erstwhile Salarpuria Softzone [ 2016 (2) TMI 1293 - ITAT KOLKATA] Assessee is not eligible to claim deduction u/s 80IA(4)(iii) in respect of his project namely Salarpuria Touchstone for want of notification/approval by the Government. Therefore, the order of the PCIT is modified by directing the Assessing Officer to withdraw/disallow the deduction in respect of Salapuria Touchstone project only. If at a later stage, Government approves/notifies the said project then the assessee will be entitled to move on an application to the AO to allow the deduction and the AO will examine whether such an approval is applicable to the said project and if so found eligible, the Assessing Officer will accordingly allow the deduction modifying the assessment order. In respect of the other project i.e. Salarpuria softzone , it is held that the assessee is eligible for deduction on the said project. Appeal of the assessee is treated as partly
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2022 (9) TMI 819
Nature of expenditure - expenditure on repair works - revenue or capital expenditure - CIT(A) directing the AO to delete the addition treating the same as revenue expenditure instead of capital expenditure - HELD THAT:- There is no dispute regarding quantum of expenditure incurred by the assessee, it is also not in dispute that the assessee has incurred repairs and there is no enhancement of capacity. No new asset came into existence as such the entire expenditure is allowable as revenue in nature. CIT(A) has categorically mentioned in his order that the expenditure incurred was not capable of increasing the capacity i.e. 14870 tonnes of ferro manganese. There is no contradicting material before AO to come to conclusion that the repairs enhances the capacity - the expenditure is meant for preserving and maintaining the existing asset, but not bringing or creating a new asset or advantage. The expenditure being huge is not the consideration to decide whether it is revenue or capital expenditure. The expenditure can be one time affair or recurring affair. Determination of capital or revenue expenditure is totally based on the circumstances of each case. AO s observations are not supported by material, therefore, on overall facts and circumstances, he opined that the expenditure is revenue in nature. CIT(A) has rightly considered the case of the assessee, therefore, we do not find any infirmity in the order passed by the Ld.CIT(A) and hence dismiss the grounds raised by the revenue.
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2022 (9) TMI 818
Revision u/s 263 by CIT - As per the CIT, AO has not recorded the findings on the share premium received by the assessee in the impugned assessment year - since the AO has not examined the issue of share premium, the order is considered to be erroneous to the interest of the revenue - HELD THAT:- From the assessment order passed u/s 143(3) of the Act, we observe that there is no finding recorded by the AO or any discussion on the share premium received by the assessee during the A.Y.2015-16. CIT, being the revisional authority considered the order of the AO as erroneous and prejudicial to the interest of revenue. As the AO has not verified or made any enquiries with respect to share premium received by the assessee company, we are of the considered view that the order passed by the Pr.CIT u/s 263 of the Act, considering the order passed by the AO u/s 143(3) of the Act as erroneous is in accordance with the provisions u/s 263 and hence the order of the Ld.Pr.CIT needs no interference. Accordingly, we uphold the order of the Ld.Pr.CIT and dismiss the grounds raised by the assessee.
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2022 (9) TMI 817
Addition u/s. 68 r.w.s 115BBE - disallowance of investments in the form of share capital and share premium received - HELD THAT:- As gone through the assessment order in the name of company granting investment to assessee passed U/s. 143(3) rws 147 of the Act wherein the fact that the company received funds by issuing equity shares at a premium was recorded in the assessment order. We therefore find merit in the argument of the Ld. AR that these funds were utilized by the investor company in the assessee company in the form of investment as share capital. We also see from the ledger accounts and bank statements submitted by the Ld. AR that the amounts were received through banking channels. CIT(A) has rightly observed that an amount of Rs. 1,95,25,000/- being the opening balance in the ledger account of M/s. Express Dealers Private Limited and the balance amount of Rs. 1,60,27,000/- was received into the bank account of the assessee during the current AY, and hence if the AO wished to tax the income u/s. 68 he should have added only on Rs. 1,60,27,000/- being the receipts during the current financial year and not the opening balance. We also observe from the ledger accounts submitted by the Ld. AR of M/s. Charansheela Consultants Private Limited the amounts were received through banking channels from 2011-12 onwards. AO has erred in treating the investments in the assessee company as unexplained cash credits u/s. 68 r.w.s 115BBE of the Act is not valid in law and we therefore find no infirmity in the order of the Ld. CIT(A) and hence no interference is required. - Decided against revenue.
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2022 (9) TMI 816
Revision u/s 263 by CIT - In view of the CIT , undisclosed cash deposits should have been treated as unexplained investment u/s. 69 instead of 8% of the receipts and taxed @30% as contemplated u/s. 115BBE - HELD THAT:- As evident from the records that during the assessment proceedings, the assessee had initially agreed to offer income @8% on the cash deposits - CIT observed that later on, the assessee retracted his statements for three times and changed his version at every stage of appellate proceedings. Pr. CIT further observed that the assessee had claimed expenditure relatable to his professional receipts of the relevant year and arrived at net profit of Rs. 3,18,600/-. Hence, the Ld. Pr. CIT opined that the entire undisclosed cash deposits of Rs. 11,68,000/- should have been treated as unexplained investment u/s. 69 of the Act and taxed @30% as contemplated u/s. 115BBE of the Act instead of 8% of the receipts and treated the order of the AO as erroneous and prejudicial to the interest of the revenue. CIT has directed the AO to recompute the total income by passing a consequential order. Hence no infirmity in the order passed u/s. 263. Grounds raised by the assessee's dismissed.
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2022 (9) TMI 815
MAT computation u/s 115JB - amount incurred towards CSR activity - addition made on the basis of explanation to section 115JB of the Act that the reserves were created - HELD THAT:- None of the clauses provides that CSR expenses have to be added to book profit. Except for the wild imagination of the Assessing Officer by no stretch of imagination, it can be said expenditure on CSR expenses is a transfer to/from reserve. Hon ble Apex Court in Apollo Tyers [ 2002 (5) TMI 5 - SUPREME COURT] have clearly laid down that the Assessing Officer or assessee, none can tinker with book profit disclosed in audited account. It is not the case that the accounts have not been prepared as per accepted accounting principle. Once the accounts have been prepared in accordance with standards in this regard, this tinkering by the Assessing Officer has no sanction of law. We have no hesitation in setting aside the addition to book profit in this regard. - Appeal of assessee allowed.
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2022 (9) TMI 814
Validity of reopening of assessment u/s.147 - Eligibility of reasons to believe - Manadation of application of mind in pursuant to reasons recorded for reopening of assessment - Whether reasons recorded by AO does not show any light on quantification of escapement of income and also failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment? - HELD THAT:- In this case, on perusal of form of initiation of proceedings u/s.147 of the Act, and for granting approval of the Commissioner of Income Tax for issuance of notice u/s.148 of the Act, it is abundantly clear that the Assessing Officer has recorded reasons for reopening of assessment without there being any allegation on the part of the assessee to disclose fully and truly all material facts necessary for that assessment year and said reasons had been mechanically approved by the Commissioner of Income Tax, Salem, by stating that Yes, I am satisfied . Therefore, we are of the considered view that notice issued u/s.148 in pursuant to reasons recorded for reopening of assessment dated 18.03.2013 and consequent approval granted by the CIT, Salem is without any application of mind and thus, reopening of assessment on the basis of said approval is bad in law and liable to be quashed. Hence, we quash notice issued u/s.148 of the Income Tax Act, 1961 and consequent reassessment proceedings completed u/s.143(3) r.w.s 147 of the Act. - Decided in favour of assessee.
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2022 (9) TMI 813
Penalty levied u/s 271(1)(c) - Addition u/s 68 - unexplained cash deposited in the bank account of manager of the assessee company - as submitted assessee is not aware of the bank account no. ending with 355 with the Saraswat Co-op Bank - HELD THAT:- As on a perusal of the bank-statement filed before us of this account number ending with SBPUB/355 it is noted that it is of Aamil Reza Hemani and there are transaction wherein assessee s name is found wherein he has been transferred Rs. 5000/- on 12.10.2000 and Rs. 1,00,000/- on 21.10.2009. From the facts narrated we are of the considered opinion, in the interest of justice for both side and taking into account the facts that the similar addition has been made in the hands of M/s. Kareem s Hospitality Pvt. Ltd and in the light of the additional information noted by us according to us denovo assessment is required after verification of the fact discussed (supra). Therefore, we set aside the impugned order of the Ld. CIT(A) and remand the same back to the file of AO with a direction to frame denovo assessment. Needless to say that if the cash deposited in assessee s bank account has already been taxed in the hands of M/s. Kareem s Hospitality Pvt. Ltd (employer of assessee) or in the hands of the director of the assessee company Mr. Kareem Dhanani then no addition is warranted in the hands of the assessee who was performing the duty of manager in M/s. Kareem Restaurant. Appeal of the assessee is allowed for statistical purposes. Penalty levied u/s 271(1)(c) - We taking note of the fact that we have already remanded the assessment back to AO for denovo assessment for AY. 2010-11, the penalty levied also does not survive. Therefore, the impugned penalty needs to be cancelled; and later after the assessment is reframed by the AO, he is at liberty to take action in accordance to the law.
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2022 (9) TMI 812
Unexplained cash credits u/s. 68 - As assessee failed to prove that the credits in the bank accounts was nothing but the cash received as advance for purchase of flats from the buyers - HELD THAT:- Assessee filed written submissions before the Ld. CIT(A), but the Ld. CIT(A) without considering the written submissions erroneously dismissed the assessee's appeal. Therefore, he pleaded for one more opportunity of being heard before the CIT(A). Considering the facts and circumstances of the case and in order to meet the principles of natural justice, we remit the matter back to the file of the Ld. CIT(A) for fresh adjudication after giving opportunity of being heard to the assessee. The assessee is also directed to comply with the notices and directions of the revenue authorities. Appeal of the assessee is allowed for statistical purpose.
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2022 (9) TMI 811
Deduction u/s. 80IB - disallowance of deduction as conditions cumulatively as are stipulated u/s 80IA(2) not met by assessee - assessee could not produce evidence to substantiate that it has employed twenty or more worker in the manufacturing process , while secondly , the assessee failed to produce evidence to substantiate the installation of machinery - HELD THAT:- Assessee has to cumulatively meet all the stipulated conditions u/s 80IA before any deduction can be allowed, and the onus is on the assessee to demonstrate that it complies with all the stipulated conditions , as it is the assessee who is claiming deduction u/s 80IA from the profits and gains of business. The exemption provisions are to be strictly construed. Even if we accept that books of accounts, vouchers etc. were destroyed in a fire, firstly the assessment order in first round was passed prior to the date of fire, and secondly even if primary evidences are not available, the assessee could have collected secondary evidences to demonstrate its bona-fide in case of installation of plant and machinery during the year under consideration , such as report(s) submitted to Directorate of Industries (DIC), or report submitted under MSME Act, report to Service tax department, report to Excise department etc. indicating installation of plant and machinery , trial runs and commencement of production, reports from machinery suppliers , electricity departments etc. could have been brought on record, to justify/substantiate its stand. Similarly, for employment of twenty or more worker in manufacturing process, reports/returns submitted under ESI/PF, TDS, or to any other government agencies specifying number/name etc of worker employed ,or payment of wages by bank etc. could have been procured as secondary evidence to justify employability of twenty or more workers in manufacturing process. Despite three round of litigation , the assessee is not able to justify/substantiate the meeting of conditions for claiming deduction u/s 80IA - Thus, presumption has to be drawn against the assessee, and we hold that the assessee is not entitled/eligible for deduction u/s 80IA of the 1961 Act as it has failed to meet the conditions cumulatively as are stipulated u/s 80IA(2), and this appeal filed by assessee lacks merit and is dismissed.
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2022 (9) TMI 810
Depreciation on toll collections rights - intangible asset u/s 32(1)(ii) - Whether assessee is entitled for depreciation on toll collection rights as it is an intangible asset as per the section 32(1)(ii)? - HELD THAT:- The assessee company is engaged in the business of design, engineering procure, construction, maintenance, management and operation of toll collection and has entered into agreement with Madhya Pradesh Road Developemnt Corporation (MPRDC) for the purpose of maintaining the roads on the basis of build, operate and transfer(BOT) basis and the A.Y 2012-13 is the first year were the asset was put to use and the assessee has claimed the depreciation u/s 32(1)(ii) treating as the intangible asset and the A.O has made the disallowance of depreciation, and on appeal, the CIT(A) has allowed the claim of the assessee. On further appeal filed by the revenue ITAT has dismissed the revenue appeal considering the decisions in the case of North Karnataka Express Highway Ltd [ 2014 (11) TMI 351 - BOMBAY HIGH COURT] and West Gujarat Expressway Ltd, [ 2016 (4) TMI 1184 - BOMBAY HIGH COURT] . AR has demonstrated the voluminous information in the paper book supporting the claim - Whereas, in the present case the depreciation@25% was claimed treating the toll rights as intangible Assets. We find the present facts in respect of claim of depreciation on toll rights are similar to earlier assessment year. Accordingly we follow the judicial precedence and set aside the order of the CIT(A) and direct the assessing officer to allow the claim of depreciation and allow the grounds of appeal in favour of the assessee.
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2022 (9) TMI 809
Unexplained credits u/s. 68 - Bogus LTCG - Penny stock purchases - disallowance of claim of exempted long term capital gain on sale of shares - HELD THAT:- The orders of the authorities below cannot be accepted. There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer in the name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. Nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Akash Agarwal may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn.Further, the alleged operators have not named the assessee as a beneficiary in their statements. In the light of the decisions of Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] and considering the facts in totality, the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account. Appeal of assessee allowed.
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2022 (9) TMI 790
Unexplained cash deposits - non explanation to source of cash deposit with supporting evidences - assessee explanation to re-deposit done after five months is too farfetching - HELD THAT:- Addition which are claimed by the assessee are nothing but re-deposits in the bank account which was not verified by the Ld. AO. Further the claim of the assessee that the deposit made by respective other persons have suffered tax in their hands and again bringing to tax in the hands of the assessee will amount to double taxation, which is not permissible under law. To meet the ends of justice, we deem fit that the case be remitted to the file of the AO to verify the same by providing an opportunity to the assessee to explain its case and then complete the assessment in accordance with law. The assessee is directed to cooperate with the AO by producing all the necessary evidences before him. Thus, the grounds raised by the assessee is partly allowed.
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2022 (9) TMI 789
Revision u/s 263 by CIT - unexplained source of the purchase expenditure u/s 69C - HELD THAT:- This is not a fit case for initiation of proceedings under 263 for the following reasons. Firstly, we observe that from the facts before us, simply because TCS has not been collected on certain purchases does not automatically imply that the said purchase is non-genuine/bogus. Assessee has brought on record sufficient evidence to prove the genuineness of transactions so conducted with the seller. Secondly, we observe from the memo of appeal before CIT(Appeals) filed by the assessee against the original assessment order that the issue whether the purchase is bogus or not is also the subject matter of appeal before Ld. CIT(Appeals). It is well-settled law that once the proceedings are before CIT(Appeals) in respect of certain issues, then the same issue again cannot be re-agitated by taking recourse to proceedings under section 263 as held in VAM RESORTS HOTELS PVT. LTD. [ 2019 (8) TMI 1418 - ALLAHABAD HIGH COURT] and SMT. RENUKA PHILIP [ 2018 (12) TMI 129 - MADRAS HIGH COURT] where it is not held that when an appeal is pending before Commissioner (Appeals), exercise of jurisdiction under section 263 by Principal Commissioner would be barred. Thirdly, it is a well-settled law that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to interests of Revenue. As in the instant facts, if the AO after giving due application of mind on the issue before him during the course of assessment proceedings has disallowed 30% of the expenditure by invoking the provisions of 40(a)(ia) then the Principal CIT cannot, in our view, resort to proceedings u/s 263 of the Act on the basis that the AO ought to have disallowed the entire expenditure u/s 69C of the Act and erred in invoking 40(a)(ia) of the Act. Therefore, in our considered view in the light of the facts/legal position discussed above, this is not a fit case for invoking the provisions of section 263 of the Act. In the result, appeal of the assessee is allowed.
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2022 (9) TMI 788
Exemption u/s 11 - advances given by Assessee as violation of the provisions of section 11(5) - whether gold purchased and contract expenses claimed are furtherance of objects of trust and cannot be treated as investment? - HELD THAT:- After verification of the correspondence by the assessee Trust with Kapila Infratech Pvt. Ltd and Kapila Infratech Pvt. Ltd vide its reply letter that they were facing problem in construction without supportive construction supervisor, disputes with management for construction work and non-availability of labour force. This is not disputed by the Ld. D.R., therefore the finding recorded by the Ld. CIT(A) does not require interference. Purchase of gold, the assessee filed list of thirty name of the students with each engineering division and with their percentage of mark who were been awarded with gold medals which is available at page no. 41 of the Paper Book. Therefore the factual finding recorded by the Ld. CIT(A) is not being contravented by the ld. D.R. with appropriate records. Therefore the findings of the Ld. CIT(A) on this ground does not require any interference. Payment made to Chandansingh CIT(A) has observed that the payment is made for construction work on which TDS has been deducted and a fresh confirmation with signature of the contractor and his PAN No. etc. have been submitted and the amount is incurred for the furtherance of the projects of the trust only. Similarly the donation made to various NGO s trust institutions for which the assessee has proved the genuineness of the payment namely Rs. 1 lakh paid to the Sabarkantha Relief Committee vide Receipt No. 183 dated 09.07.2013, This donation was given at the request of the District Collector for an Govt. Organization, which is as per Clause No. 3 of the Objects of the Trust. Similarly Rs. 25,000/- donation paid to SahyogKushtha Yagna Trust vide Receipt No. 80922 dated 13.08.2013, this donation is given for the purpose for leprosy patients which is as per Clause No. 2 of the Trust Deed. Similarly other donations for education purpose and for providing food to the needy students which are donations, as per Clause No. 1 of the Trust Deed. Therefore it cannot be said the same amount was not applied for the objects of the trust and the same cannot be incurred in violation of Section 11 of the Act. Therefore the grounds raised by the Revenue are devoid of merits.
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2022 (9) TMI 787
Disallowance u/s 14A - Expenditure incurred on earning exempt income - Assessee argued disallowance cannot be exceed more than the exempt income received - HELD THAT:- We found substance in the submission of ld.AR that the disallowance cannot be exceed more than the exempt income received during the year as per the decision of Pragathi Krishna Gramina Bank [ 2018 (6) TMI 1283 - KARNATAKA HIGH COURT ] Applicability of the amendments made by the Finance Act 2022 - We observe that the co-ordinate bench of ITAT Gauhati the date of decision [ 2022 (7) TMI 451 - ITAT GAUHATI ] whereas the judgment rendered by the Hon ble Delhi High Court [ 2022 (7) TMI 1093 - DELHI HIGH COURT ] which is later judgment on the same issue. Therefore, we are allowing the appeal of the assessee subject to para No.10 of the said judgment of Hon ble Delhi High Court in the case of M/s Era Infrastructure (India) Ltd. cited supra which reads as under:- Accordingly, the appeal and application are dismissed. However, it is clarified that the order passed in the present appeal shall abide by the final decision of Supreme Court in the SLP filed in the case of PCIT Vs. IL FS Energy Development Company Ltd. [ 2018 (5) TMI 2126 - SC ORDER ], We allow the appeal of the assessee by following the decision of the Hon ble Delhi High Court Judgment cited supra.
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Customs
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2022 (9) TMI 808
Eligibility for exemption under Serial No. 477 of Notification No. 21/2002-Cus. - HDPE compounded with 2% carbon black - Department has denied the exemption on the ground that exemption is available only to the HDPE and not for the HDPE compound whereas in the present case the HDPE is compounded with 2% Carbon - HELD THAT:- The issue is decided in favour of the appellant reported at M/S. PSL LIMITED VERSUS COMMISSIONER OF CUSTOMS, KANDLA [ 2018 (12) TMI 1046 - CESTAT AHMEDABAD] , where it was held that the issue is settled in the case of Ratnamani Metal Tubes Limited vs. CC, Kandla [2013 (8) TMI 851 - CESTAT AHMEDABAD], where it was held that In the absence of any support for the conclusion that the product imported by the appellant has been chemically modified or it is not known as HDPE in the market, the benefit of exemption under Sr. No. 477 has to be extended to the appellant. The impugned order is not sustainable - the appeal is allowed.
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2022 (9) TMI 807
Seeking provisional release of confiscated goods - levy of redemption fine and penalty - Aircraft - whether the use of aircraft imported by the appellant with benefit of exemption from customs duty under serial 347B of notification no. 21/2002-Cus dated 01.03.2002, as amended by notification no. 61 of 2017 dated 03.05.2007, the exemption notification, for providing passenger air transport service to its group company by carrying personnel of the group company for remuneration would amount to violation of Condition No.104 of the said exemption notification? - whether it is open to Customs to contend that such use in not in accordance with the permit for non-scheduled (passenger) services granted by Director General of Civil Aviation, DGCA when the DGCA has not found such use to be in violation of such permit and had renewed the permit from time to time? HELD THAT:- Aircrafts and helicopters are classified under Customs Tariff Heading 88 of the First Schedule to the Customs Tariff Act, 1975. The tariff rate of duty till 28.02.2007 on the import of aircraft was 3% / 12.5%. Subsequently, pursuant to the proposal made in the Finance Bill 2007, exemption notification no. 20/2009 dated 01.03.2007 was issued inserting Entry 346B and Condition No. 101 in the earlier exemption notification dated 01.03.2002, whereby, the effective rate of duty on import of aircraft for scheduled air transport service was made nil . No exemption was, however, granted to non-scheduled air transport service and private category aircraft. However, with the issuance of the exemption notification dated 03.05.2007, the effective rate of duty on the import of aircraft for non-scheduled air transport service was made nil . This exemption notification was as a consequence of the statement made by the Hon ble Finance Minister in the Parliament. The exemption notification dated 03.05.2007 inserted Condition No. 104 which requires at the stage of import, an approval from MCA to import the aircraft for non-scheduled (passenger) service and an undertaking by the importer to the Customs authority that the aircraft would be used only for non-scheduled (passenger) services and that the operator would pay on demand, in the event of his failure to use the aircraft for the specified purpose, an amount equal to the duty payable on the said aircraft but for the exemption under the notification. The use of the aircraft has been in accordance with the scope of non-scheduled (passenger) services and there is no violation of the undertaking to use the aircraft for non-scheduled (passenger) services. It is not possible to sustain the impugned order dated 31.08.2010 passed by the Commissioner in so far as it concerns the appellant. For these reasons, the penalty imposed upon Sudhir Nayak cannot also be sustained - impugned order set aside - appeal allowed.
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Corporate Laws
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2022 (9) TMI 806
Seeking restoration of the name of the company, which was struck off by the Registrar of Companies, NCT of Delhi - section 252 of the Companies Act 2013 - HELD THAT:- It is seen from the documents available on record that the company possesses lands registered in its name. Besides it is seen that the appeal has been filed within the stipulated period prescribed under Section 252 of the Act. Needless to say, that Income Tax Department and ROC have raised no specific objection against the restoration of the Company subject to filing of statutory returns on payment of fees as prescribed. Moreover, nobody would be prejudiced by the restoration of the name of the Company. On the contrary, the restoration is clearly in the interest of the Company. Even, if the management of the Company entrusted with the responsibility of filing of statutory returns had failed to do so, yet since the Company is a running company and the application has been filed in time, the Tribunal clearly has the power to restore the name of the Company. The lapses on the part of the management in non-filing of annual returns and financial statements in time can be countered by imposing cost. In the given facts and in order to achieve the most satisfactory and fairest solution, the restoration of the running company despite its default is clearly in the interest of the company, although, there is a delay in filing the annual returns as well as financial statement before the RoC, however, the same can be compensated by way of requisite late filing fees. The filings of the annual return as well as balance sheet before the RoC were only inadvertent in nature and not willful. Accordingly, the impugned order dated 29.10.2019 passed by the RoC, whereby the name of the present appellant was struck-off from the Registrar of the Companies is hereby set aside, subject to deposit of cost of Rs. 1,00,000/- in the Prime Minister Relief Fund - It is ordered that the company's name will stand restored to its original position, as if it had not been struck-off, but the same is subject to filing of all outstanding documents as required under law - Appeal allowed.
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Insolvency & Bankruptcy
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2022 (9) TMI 805
Auction of the barge which was hypothecated with the bank - initiation of proceedings under SARFAESI Act - HELD THAT:- The Adjudicating Authority committed error in rejecting the application only on the ground that appellant has no locus. The order impugned is set aside and the application filed by the appellant is revived before the Adjudicating Authority which may be considered and decided in accordance with law - Appeal allowed.
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2022 (9) TMI 804
Validity of Auction held by the Liquidator, without proper Notice to Shareholders/Stakeholders of the Company - Sale was valid, when Payment from Auction Purchaser is not received within 90 days or not - grant of extension - act of Auctioneer to Sell the Property at Revised and Reduced upset price can be treated as valid or not - selling the entire Assets of the company when Sale of a part of the Assets of the Company would have been sufficient to discharge the liability of the company or not - conduct of Auction Proceedings without forming the Committee of Stakeholders, as envisaged under the I B Code, 2016 - review its own order by Adjudicating Authority. Whether the Auction held by the liquidator, without proper Notice to the Shareholders/Stakeholders of the Company is valid in accordance with the IBBI Rules and Regulations, 2016? - HELD THAT:- The auction held without notice shall be invalid, as the language of the abovementioned Regulation seems to be a clear direction and mandatory - it is noted that the IBBI (Liquidation Process) Regulations, 2016 (Liquidation Regulations) as it stood before the amendment dated 25th July 2019, provided that the Liquidator shall Liquidate the Corporate Debtor (CD) within a period of two years from the Liquidation Commencement Date (LCD). Keeping in mind the principle of time value as enshrined in the BLRC report, the said time limit was reduced to one year vide amendment dated 25.07.2019. This Tribunal find that the required Notice was issued correctly by the Liquidator in accordance with the Rules, as provided in I B Code, 2016, and there was no infringement of rights of the Appellant. There are no error in the impugned order on this issue. Whether sale was valid when payment from the Auction Purchaser is not received within 90 days? - Can any extension be granted for the same? - HELD THAT:- The extension was granted due to the Covid-19 lockdown. The order passed by the Adjudicating Authority stands valid on the grounds that almost all functioning were restricted during Covid-19 outbreak, vide Order dated 05.05.2020 - Moreover, the property was said to be in subsistence of attachment of Income Tax Department, and due to the same, the Registrar was not registering the property in the name of the Successful Bidder and subsequently the Adjudicating Authority directed the Income Tax Department to issue a NOC, and then the property was registered successfully in name of Successful Bidder - There are no error on the part of the liquidator. The Adjudicating Authority correctly gave the impugned order on this issue. Whether the act of Auctioneer to Sale the property at revised and reduced Upset Price can be treated as valid? - HELD THAT:- Time value in any commercial transaction is of paramount importance. It is the onerous responsibility of the Liquidator to ensure maximum realisation of the property and therefore, it is expected that he shall take decisions in the sale of the property to Auction, based on the Commercial Wisdom as being done in case of Corporate Insolvency Resolution Process by the Committee of Creditor. In catena of Judgment of the Hon ble Supreme Court of India, it has been clearly held that the Adjudicating Authority or the Appellate Authority, need not to dwell upon the Commercial Wisdom of the Committee of Creditors. Although, there is no scope for the Liquidator to be treated at par with the Committee of Creditors, however we need to recognise the Commercial Wisdom of the Liquidator in conduct of an Auction to realise Maximum Value - the act of Liquidator stands to be valid as the process was conducted in accordance with the IBBI Rules and Regulations, especially as per Rule 4A and 4B, the Liquidator has power to reduce the Reserve Price by 25% for subsequent action. There is no error in the impugned order w.r.t. this aspect. Whether the Liquidator was justified in selling the entire assets of the company when sale of a part of the Assets of the company would have been sufficient to discharge the liability of the company? - HELD THAT:- The liability was not even the 1/10th and could have been satisfied with only selling some particular part of the property and there was no need to sell the whole property. Whether the Liquidator was justified in conducting the Auction Proceedings without forming the Committee of Stakeholders, as envisaged under the I B Code, 2016? - HELD THAT:- Retrospective effect is restricted and prohibited in Law, and are not enforceable in the rule of Law. This Tribunal, therefore do not find any error in the Impugned Order, on this ground. Whether the Adjudicating Authority can review its own order? - HELD THAT:- The Applicant filed an Appeal to NCLT to review and revise their order regarding commencement of Liquidation Proceeding, here arises the principle of Res judicata the principle that a cause of action may not be pursued further once it has been judged on the merits. Finality is the term which refers to when a court renders a final judgment on the merits - the Adjudicating Authority was right in taking a decision that it has no power to Review/Recall its own order. This Tribunal, is of the considered opinion that no ground is made out for any interference by this Tribunal - Appeal dismissed.
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2022 (9) TMI 803
Seeking replacement of IRP appointing another professional as the RP - Section 22 of the IBC - HELD THAT:- It is seen from the material on record that the CoC in its second meeting held on 15.07.2022 decided to replace IRP. In fact, there is no much difference in between provisions of Section 22 of IBC and Section 27 of IBC except that the Section 22 of IBC to be invoked for replacement of IRP to the RP and Section 27 of IBC to be invoked in case of replacement of RP during the CIRP of Corporate Debtor. However, both the provisions mandates that the CoC to pass such resolution by not less than 66% of votes. The Adjudicating Authority, in general to accept such recommendation and forward the same to IBBI for confirmation. In short the CoC has power to replace IRP by invoking Section 22 of IBC. In this case, it is not done in the first CoC meeting but it has been in 2nd CoC meeting. The resolution to replace IRP passed by 92.76% votes. Appointment of Mr. Ashish Chhawchharia is objected on the ground that he is not independent qua Corporate Debtor. There is no law imposing such restrictions on appointment of the RP. In the case which is relied on by the learned counsel for the Suspended Management, the facts were quite different. CIRP in that case was almost at concluding stage. The RP in that case had worked a lot and this Adjudicating Authority found that RP sought to be replaced by the CoC was without disclosing any reasons. In this case, the CIRP of the Corporate Debtor is just commenced. The objection raised by the Suspended Management of the Corporate Debtor are not sustainable. The Suspended Management appears to raise objection only to protract the CIRP of the Corporate Debtor. Appeal allowed.
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2022 (9) TMI 802
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- On perusal of the pleadings, it is found that the operational creditor filed the present application on the basis of demand notice dated 06.06.2019, which was duly served on and replied by the Corporate Debtor on 22.06.2019 and therefore, this contention raised above has no basis. It is an admitted fact that the applicant in the present petition has supplied the goods; therefore, the applicant falls within the definition of the Operational Creditor. The debt and default are also not denied by the Corporate Debtor. The only issue left before this Adjudicating Authority is whether there was any 'pre-existing dispute' raised by the corporate debtor before issuance of section 8 notice by the Operational Creditor - In the present matter demand notice u/s. 8 of IBC, 2016 was sent on 06.06.2019 by the operational creditor and same was replied by the corporate debtor on 21.06.2019, wherein, the corporate debtor has raised objection with respect to deficiency in services, misrepresentation of facts and losses suffered by corporate debtor and also raised the objection with respect to format of demand notice u/s. 8 of IBC, 2016. In order to establish that there is pre-existing dispute pending, the corporate debtor relied on the emails dated 20.03.2017, 23.03.2017, 28.03.2017, 03.04.2017, 28.08.2017, 10.09.2017, 25.10.2017, 01.11.2017, 04.11.2017, 05.12.2017, 12.12.2017, 13.08.2018. It is pertinent to discuss herein, that the corporate debtor has made payments of an amount of Rs. 3,98,958/- on 08.02.2018, Rs. 22,36,225/- on 15.02.2018 and Rs. 10,00,000/- on 12.06.2018 i.e., even after raising dispute through emails as evident from ledger account annexed as Annexure A-2 - there is no preexisting dispute pending on the date when the operational creditor sent the demand notice u/s. 8 of IBC, 2016 and therefore the judgment of Hon'ble Supreme Court relied upon by the Corporate Debtor is not applicable in the present matter. Therefore, this Adjudicating Authority is inclined to initiate the CIR Proceeding of the Corporate Debtor. Application admitted - moratorium declared.
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Service Tax
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2022 (9) TMI 801
Denial of refund of CENVAT credit - service tax paid under reverse charge mechanism after 30.06.2017 - Rejection of refund on the ground that there was no statutory provision available under the existing law or in the CGST Act to grant refund - rejection also on the ground of time limitation - transitional provision under section 142(3) of the CGST Act - Principles of Unjust Enrichment - HELD THAT:- It is found that under transitional provision under section 142(3) of CGST Act, the limitation has been done away with and the only thing required for refund under the facts and circumstances is to see whether unjust enrichment is attracted. In the facts and circumstances, it is held that no unjust enrichment is attracted as the appellant have admittedly paid service tax in August, 2018 out of their own pocket. Accordingly, this appeal is allowed and the impugned order is set aside - The adjudicating authority is directed to grant refund within a period of 60 days from the date of receipt of copy of this order along with interest under section 11BB of the Central Excise Act. Appeal allowed - decided in favor of appellant.
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2022 (9) TMI 800
Levy of Service Tax - commercial training or coaching service - revenue sharing agreement or not - MAAC was rendering franchise service to the appellant, which was an independent transaction - period of dispute involves in the two show cause notices dated 15.04.2011 and 07.10.2011 is from 2009-10 and 2010-11 - HELD THAT:- The said issue stands covered in favour of the appellant in the decision of the Tribunal rendered in the case of the appellant itself in M/S. SAMADHAN SYSTEMS (P) LTD. VERSUS C.C.E., JAIPUR-I [ 2018 (2) TMI 1049 - CESTAT NEW DELHI] . The decision relates to an earlier period from 2004-05 to 2008-09, while the dispute in the present appeal is from April 2009 to March 2011 and holds that the appellant is not liable to pay service tax under the category of commercial training or coaching service, particularly when tax on such service had been discharged by MAAC. This apart, a conjoint reading of the Agreement, coupled with the intent of the parties, shows that it was to give effect to an arrangement which is in the nature of co-venture where two parties work for a common purpose, i.e., rendering commercial training/coaching service to the students. Such an agreement has been held to be in the nature of a revenue sharing arrangement by a Division Bench of the Tribunal in SHRI NIRAJ PRASAD VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, KANPUR [ 2019 (11) TMI 436 - CESTAT ALLAHABAD] . Service tax could not have been levied upon the appellant - the order passed by the Commissioner (Appeals) cannot be sustained and is set aside - Appeal allowed - decided in favor of appellant.
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2022 (9) TMI 799
Levy of Service tax - GTA Services - Demand on the ground that appellant has not submitted any documentary evidence to establish which truck/ vehicle was used for providing the taxable service - extended period of limitation - HELD THAT:- It is not the case of the department that appellant was also registered as the Goods Transport Agency. Thus, it becomes clear that the appellant was an individual who was the owner of the trucks and was in the business of giving them on rent to goods transport agency. As is apparent from the definition of taxable service of Goods Transport Agency that the taxability does not at all arise on an individual. Goods Transport Agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called; Thus, it can be seen that issuance of a consignment note is the sine-qua-non for a supplier of service to be considered as a Goods Transport Agency. It makes clear that tax liability under this heading does not arise against the individual person who owns the truck. It also becomes clear that the agency who is providing service of Goods Transport Agency is not required to be the owner of vehicle which are to be used by such agencies for transportation of the goods. Mega exemption of 20.06.12 clarifies that truck can be taken on hire by the GTA and in that case, the truck owner is exempted from any service tax liability. Hence the demand confirmed with respect to the amount received against the truck on hire, is also held to not to be sustainable, as such, is liable to be set aside. Time Limitation - HELD THAT:- Vide the Show Cause Notice of the year 2020, the demand for the period October, 2014 to June, 2017 has been proposed to be regular. The show cause notice is apparently beyond the normal period of limitation. I do not find any positive evidence nor any specific allegation in the show cause notice about any malafide intent of the appellant to evade the payment of service tax liability. Accordingly, it is held that the Department has wrongly invoked the extended period of limitation. Thus, it becomes clear that the demand against the appellant has wrongly been confirmed by the Adjudicating Authority below. He is held to have no service tax liability - appeal allowed - decided in favor of appellant.
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2022 (9) TMI 798
CENVAT Credit - case of the Department is that since the appellant in respect of some contracts availed Cenvat credit and discharged the Service Tax on 100% gross value of service - eligibility for abatement of 67% in terms of Notification No. 1/2006 ST - HELD THAT:- The issue in the appellant s own case has been settled by this Tribunal in M/S SMP CONSTRUCTIONS PVT LTD VERSUS C.C.E. S.T. -VADODARA-II [ 2018 (8) TMI 179 - CESTAT AHMEDABAD] where it was held that In the present case the appellant in respect of the service on which N/N. 1/2006-ST availed, admittedly not availed cenvat credit in respect of input or capital goods or input services used in providing such taxable services. Therefore, the condition of the Notification was complied with, merely in some of the contract the appellant had availed the cenvat credit, and the same has no effect on the service where the exemption Notification No. 1/2006-ST was availed. From the above decision of this Tribunal, it can be seen that the legal issue and the facts are identical to the present case, the only difference is the period of dispute, which is prior to the decision cited above - since the issue is already settled in the above decision of appellant itself, the impugned order is set aside. Appeal allowed - decided in favor of appellant.
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Central Excise
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2022 (9) TMI 797
CENVAT Credit - capital goods - structural items in the nature of MS sheets, angles etc. - period involved is from 28.1.2008 to 30.7.2008 - HELD THAT:- The authorities below have mainly relied upon the decision of the Tribunal in VANDANA GLOBAL LTD. VERSUS CCE [ 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] wherein the Larger Bench held that the amendment brought forth in the definition of capital goods with effect from 7.7.2009 is retrospectively applicable. The said decision has been set aside by the Hon'ble High Court of Chhattisgarh in M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE [ 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT] . The Commissioner (Appeals) has relied upon the decision of the Hon'ble High Court of Allahabad in UPPER GANGES SUGAR INDUSTRIES LTD. VERSUS COMMR. OF C. EX., MEERUT-II [ 2013 (8) TMI 501 - ALLAHABAD HIGH COURT] which actually analysis the definition of capital goods under the erstwhile MODVAT credit rules. The said definition is not applicable after 2004 and so the reliance placed on the said decision is misplaced. There is no dispute that the MS items were used for fabricating and installing paint plant within the premises of the appellant. The said paint plant is also integral to the manufacturing activity. After appreciating the facts and applying the decision in the case of THE COMMISSIONER OF CENTRAL EXCISE SERVICE TAX VERSUS M/S. INDIA CEMENTS LTD. [ 2014 (7) TMI 881 - MADRAS HIGH COURT] , it is held that the credit availed on MS items has to be allowed to the appellant. Appeal allowed - decided in favor of appellant.
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2022 (9) TMI 796
CENVAT Credit - duty paying document - entitlement to credit on the basis of supplementary invoices issued by the supplier pursuant to payment of duty that became recoverable on account of non-levy or short levy by reasons of fraud or collusion - Rule 9(1)(b) of the CENVAT Credit Rules, 2004 - HELD THAT:- The Revenue does not dispute the legal position that the aforesaid Rule restricting the credit would not apply in case the credit has been availed on goods which are not sold by the supplier manufacturer - It is the case of the Revenue that the assessee and the conversion agents are neither related nor sister unit and there is no stock transfer amongst the aforesaid parties. On perusal of Rule 9(1)(b), it is found that the bar from availing credit on the supplementary invoice is only when the goods are sold to the recipient who has claimed the credit on the basis of supplementary invoices. There is no criterion laid down in the said Rules that the transferring unit should be a sister unit or a related party in order to become eligible for availing credit. The Revenue has not disputed the arrangements between the parties that the converted aluminium ingot has not been sold by the conversion agent to the assessee appellant - the restriction imposed under Rule 9(1)(b) has no application in the present case so as to deny the credit availed by the Appellant on the basis of supplementary invoices issued by the conversion agents in absence of sale of goods by the conversion agents to the assessee appellant herein. The demand cannot be sustained and is hence, set aside - Appeal allowed - decided in favor of appellant.
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2022 (9) TMI 795
Refund of Excise Duty paid - rejection on the ground that the documents were not submitted - HELD THAT:- There is no dispute that the appellant has paid excess duty due to mistake such as double payment of duty, addition of duty against the cancelled invoice and wrong mentioned of amount in the invoice etc. Learned counsel invited the attention to the adjudication order wherein it was clearly recorded that all the documents sought for by the department has been submitted which is clearly mentioned in the reply to SCN at para 11 and the same has also been mentioned in para 5.5 of the OIO . Therefore the main ground of the rejection that document has not been submitted is of no basis as surprisingly after recording the details of the documents submitted by appellant at para 5.5 the Adjudicating Authority n the finding mentioned contrary that the documents were not submitted. There is no dispute that there is excess payment of duty due to bonafide mistakes the refund must be granted to the appellant after verifying the facts as regard unjust enrichment. Therefore, the matter needs to be reconsidered by the Adjudicating authority - Appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2022 (9) TMI 794
Refund the amount of Input Tax Credit (ITC) along with interest - export sales that have been treated as zero rated sales - period from January, 2007 to August, 2007 - HELD THAT:- Form-W has been filed, admittedly, belatedly and beyond the period as provided for under the Rules, being 180 days from the date of exports as per Section 18 of the TNVAT Act, 2006. The application was filed on 12.08.2008 with an insubstantial delay, that in my view, is not fatal to the claim of refund. For this purpose, one need only refer to the oft-quoted decision of this Court in this very assessee, in R.K. KNITS VERSUS ASSISTANT COMMISSIONER (CT) ADYAR II ASSESSMENT CIRCLE, CHENNAI AND OTHERS [ 2011 (11) TMI 779 - MADRAS HIGH COURT] that has been consistently followed in several other cases. In the interests of consistency, there is a direction to the respondent to decide the representation filed by the petitioner within a period of twelve (12) weeks from today, bearing in mind the decisions of this Court in the cases of R.K.Knits as well as the decisions in Writ Appeals, if available, by then. Petition disposed off.
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Indian Laws
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2022 (9) TMI 793
Dishonor of Cheque - discharge of legally enforceable debt or not - rebuttal of statutory presumption - failure to pay the cheque amount when demanded through legal notice and thereby committed and offence punishable u/s. 138 of the Negotiable Instruments Act - section 397 read with section 401 of the Cr.P.C. - HELD THAT:- It may be mentioned that in this case, the petitioner has not been able to demonstrate that the impugned orders suffer from any legal or factual error, or there was an abuse of the process of the Court, or that the petitioner was convicted by relying on any inadmissible evidence. Therefore, this case does not meet any of the parameters under which a concurrent finding by both the Courts below can be interfered with. Nonetheless, the merit of the case has also been examined in the process, which was to be otherwise examined only if the petitioner had filed a revision under section 397 read with section 401 of the I.P.C. The sentence against the petitioner to undergo rigorous imprisonment for a period of one year and also to pay a fine of Rs.10,00,000/- (Rupees ten lakh only) under section 357 Cr.P.C. needs no interference because the petitioner has been able to dodge paying his lawful debt for more than 11 years. Criminal petition dismissed.
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2022 (9) TMI 792
Dishonor of Cheque - funds insufficient - legally enforceable debt or not - vicarious liability of the directors - petitioners have resigned to the posts of Directors of company - section 138 of NI Act - HELD THAT:- This Court, on perusal of catena of decisions, is of the view that the petitioners who were the Directors of Company, but have resigned much prior to the issuance of the cheque, the question of facing criminal trial after lapse of 1 years would be travesty of justice. It is essential that once cheque was issued for discharge of legally enforceable debt, the company as well as the persons incharge of day to day affairs of the company can be prosecuted for the dishonour of such cheque. But the same cannot be alleged as against quondam Directors, who before the issuance of cheque have resigned to the posts of Directors. The petitioners are not signatories to the cheque. Hence, directing the petitioners herein to face trial would be nothing but abuse of process of Court and same would be a futile exercise. The Criminal Petition is allowed.
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2022 (9) TMI 791
Dishonor of Cheque - insufficiency of funds - acquittal of the accused - rebuttal of statutory presumption - Section 118 and 138 of NI Act - HELD THAT:-The non production of license or permission issued to the complainant to run the chit is neither relevant nor vital. The issuance of cheque and dishonour of the same is the pivotal point for determination in the case in hand. The authorisation letter marked as Ex.P1 is substantially sufficient to sustain the private complaint by a registered company. In the light of the presumption under Section 118 of the Negotiable Instruments Act, 1881, the complainant is expected to prove the fundamental facts like, issuance of cheque and prima facie evidence to show that the said cheque was issued to discharge an enforceable debt. So, even without adverting to the evidence on the side of the complainant, on the reading of DW-1 testimony, it is seen that the accused admits he had chit transaction with the complainant company - To rebut the presumption of legally enforceable debt, the accused rely upon three documents. But they had not substantiated the defence, contrarily only confirm the case of the complainant. Ex.D1 pass book is in respect of group G2 E1459 GAN ticket 04. The entries indicates that as on 19.05.2010, the accused is liable to pay the amount of Rs.53,058/-. Ex.D2 is the receipt to show that the accused paid a sum of Rs.5,600/- by way of cash. Ex.D3 is the notice issued by the lawyer on behalf of the complainant company to the accused that towards the chit prized money received there is a running balance of Rs.39,442/- is due and payable and further a sum of Rs.9,456/- payable towards default interest. It is to be presumed that the cheque, which was presented for the second time within the period of 6 months is re-represented and statutory notice dated 14.12.2011 marked as Ex.P6 is a valid statutory notice - this Court finds that the dismissal of the complaint is erroneous. Hence, it is liable to be set aside - Appeal allowed.
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