Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 21, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
DGFT
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34/2015-2020 - dated
20-9-2022
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FTP
Extension for the period of exports of broken rice (HS code 1006 40 00) from 15th September, 2022 till 30th September, 2022 as mentioned in Notification No. 31 dt. 08.09.2022
GST - States
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08/2022-State Tax (Rate) - dated
16-7-2022
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Tripura SGST
Seeks to amend Notification No. 3/2017-State Tax (Rate), dated the 29th June, 2017
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07/2022-State Tax (Rate) - dated
16-7-2022
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Tripura SGST
Seeks to amend Notification No. 2/2017-State Tax (Rate), dated the 29th June. 2017
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06/2022-State Tax (Rate) - dated
16-7-2022
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Tripura SGST
Amendment in Notification No. 1/2017-State Tax (Rate), dated the 29th June, 2017
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05/2022-State Tax (Rate) - dated
16-7-2022
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Tripura SGST
Seeks to amend Notification No. 13/2017-State Tax (Rate), dated the 30th June, 2017
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04/2022-State Tax (Rate) - dated
16-7-2022
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Tripura SGST
Amendment in Notification No. 12/2017-State Tax (Rate), dated the 29th June, 2017
Income Tax
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110/2022 - dated
19-9-2022
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IT
Income-tax (31st Amendment) Rules, 2022.
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Cancellation of registration certificate of petitioner - rejection of revocation application - the registration of the petitioner shall be restored - Liberty given to Revenue to issue SCN - Given the circumstances in which the petitioner was placed, on account of the actions of the respondent/revenue, no interest or penalty will be levied on account of delay in filing the pending returns- HC
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Classification of goods - The Bus air-conditioning system inclusive of Rooftop unit, compressor and installation kit for one consolidated price to a single customer merits classification under heading 8415 20 10. - The Rooftop unit, compressor and installation kit sold to single customer for a single fitting at customer end, but price negotiated and agreed separately for each unit also merits classification under heading 8415 20 10. - The compressor sold alone merits classification under tariff heading 84148011 - AAR
Income Tax
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Reopening of assessment u/s 147 - Time limit for notice - since the time period for issuance of reassessment notice for assessment year 2013-14 stood extended until 30th June, 2021 and the income alleged to have escaped assessment is beyond Rs.50 lakhs, the first proviso of Section 149 (as amended by the Finance Act, 2021) is not attracted in the facts of this case and even without the benefit of Instruction No.01/2022 the impugned notice is within limitation. - HC
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Addition u/s 68 - The burden is very heavy on the assessee to satisfy cumulatively the ingredients of Section 68 as to identity and establish the credit worthiness of the creditors and genuineness of the transaction to the satisfaction of the AO, otherwise the AO shall be free to proceed against the assessee company and make additions u/s. 68 of the Act as unexplained cash credit. - AT
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TDS u/s 195 - payment of commission for export of goods - payment of commission to its associated enterprises in Foreign Countries that did not have any permanent establishment in India or were not carrying on any business in India but were rendering services outside India - No TDS liability - AT
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Correct head of income - Gain on sale of properties - assessee has not incurred any ‘cost of acquisition’ - consideration for being part of the arrangement to earn profit from transactions involving lands - Since the 90% of the profit arising from these transactions has already been taxed as “Business Income" by the Department. Principles of uniformity demands that the balance 10% also to be taxed as “Business Income” in the hands of the assessee. - AT
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Penalty u/s 271F - not filing the return of income (ITR) - It is noteworthy to mention that the provisions of Section 273B categorically mentions that penalty u/s 271F is not leviable in case the assessee proves that there was a reasonable cause for not filing the return of income during the year under consideration, as per provisions of Section 139 of the Act. - AT
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Additions made on notional interest on loans & advances - AO has completely erred in imputing notional interest on loans & advances. As the argument of the assessee that said loans & advances paid for purchase of land. - AT
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TP Adjustment - MAM Adjustment - ALP adjustment -In TNMM what is to be seen is the functional comparability and not the product comparability. Further, it is observed that the Ld. AR has not objected to the comparables made by TPO under TNMM, but the assessee has come up with a set of 7 comparables under TNMM wherein the average OP/OC works out to 2.83% - TNMM adopted by the Ld. Revenue Authorities would be Most Appropriate Method for determining the ALP of the international transactions entered into by the assessee with the AE. - AT
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Addition on account of interest on seed money - CIT(A) that where any amount has actually paid by the assessee to the State Government that would be allowed as expenditure in the year it is actually paid and give that no amount has been paid by the assessee during the year, the AO was fully justified in adding interest received on seed money - additions confirmed - AT
Customs
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Illegal export - synthetic fabric materials - it is alleged that exporters were attempting to smuggle synthetic fabric - The trucks parked in CWC cannot be treated as foreign going vehicle until Bill of export is submitted and examination of the cargo is physically done by the customs - AT
FEMA
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Interpretation of statute - The heading of a section of an enactment may be used as an aid for interpretation of that section but does not control the meaning or import of the section where the language of the section is free from ambiguity. - The contention that delay in filing of the annual return under the FCR Act is not an offence, is rejected. - HC
Indian Laws
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Dishonor of Cheque - vicarious liability can be fastened on the partner of the firm or not - When in view of the basic averment process is issued the complaint must proceed against the Directors or partners as the case may be. But, if any Director or Partner wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he is really not concerned with the issuance of the cheque, he must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his contention - SC
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Reopening of award by the Facilitation Council - MSMED Act - What is worse is the fact that the illegality committed by the Facilitation Council in the year 2016 has now received a stamp of approval, by the High Court remanding the matter back to the Facilitation Council. The High Court has failed to examine the powers conferred upon the Facilitation Council. The High Court has also omitted to take note of the fact that MSMED Act was not intended to provide a gateway for hopelessly time barred claims. - SC
IBC
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Initiation of CIRP - Period of limitation - It is now well settled that the provisions of the Limitation Act are applicable to proceedings under the IBC as far as may be - The limitation for initiation of winding up proceedings in the Madras High Court stopped running on the date on which the Winding Up petition was filed. The initiation of proceedings in Madras High Court would not save limitation for initiation of proceedings for initiation of CIRP in the NCLT under Section 7 of the IBC. - SC
Service Tax
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Refund of Service Tax - tax deposited on mistake of law - there is no reason to deny the refund claim on the ground of limitation inasmuch as the period of limitation prescribed under Section 11B would not be a bar for the assessee to claim refund of tax paid under mistake - AT
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Exemption from service tax provided to DMRC - Railways - composite contacts - works contract service - The exclusion of the alleged ‘taxable service’ sought to be fastened on them from any contract other than service simpliciter erases the distinction of commercial outcome suggested by the reviewing authority. In any case, even if Delhi Metro Rail Corporation were to be the final recipient of the service rendered by the respondent, the decision of the Hon’ble High Court of Calcutta in M/s Afcons Infrastructure Ltd. categorising them as ‘railway’ forecloses taxability even if the dispute pertains to laying of water pipelines. - AT
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Levy of Service tax - Mailing list compilation and Mailing services - e It is seen that the appellants are not compiling any list or providing list of names addresses etc. The appellants are merely providing scores in respect of names of candidates supplied by the clients (Non-IIM Institutes). Moreover, the activity of ‘Mailing list compilation and mailing’ is done for or on behalf of the client. - demand set aside - AT
VAT
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Initiation of Recovery proceedings - transfer of goods, plant, and machinery (immoveable property) - bonafide purchaser - the assessment proceedings were concluded in the year 1984 and the same was reopened in the year 1988. The recovery certificate was issued against the original assessee on 15.04.1990. Thus, at the time of transfer of immoveable property of the assessee which was for value/consideration, no proceedings under the Act were pending, Section 34 of the Act shall not be applicable. - SC
Case Laws:
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GST
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2022 (9) TMI 890
Cancellation of registration certificate of petitioner - rejection of revocation application - existence of principal place of business or not - Section 33 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The entire proceedings, right up to the stage of passing of the order-in-appeal was legally flawed. Accordingly, the impugned order is set aside. Liberty is, however, given to the respondent/revenue, to issue a fresh SCN, if deemed necessary, with regard to the registration certificate, issued under the Act - the registration of the petitioner shall be restored. Given the circumstances in which the petitioner was placed, on account of the actions of the respondent/revenue, no interest or penalty will be levied on account of delay in filing the pending returns - Petition disposed off.
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2022 (9) TMI 889
Lifting of provisional attachment - constitutional validity of Rule 159 and sub rules (1) (5) and (6) of CGST - section 83 of CGST Act - HELD THAT:- As is evident, more than two (2) years have passed since the provisional attachment was ordered of the subject bank account. Provisional attachment was ordered in the case on 14.08.2020. It is pertinent to note that there is no discussion whatsoever in the order dated 28.09.2020 with regard to the maximum time-frame set out for investigation under section 83 of the Act and the resultant consequences of that period having been crossed - The order dated 28.09.2020, insofar as it seeks to continue the provisional attachment order is set aside. Petition disposed off.
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2022 (9) TMI 888
Classification of goods - Bus air-conditioning system inclusive of Rooftop unit, compressor and installation kit for one consolidated price to a single customer - Rooftop unit, compressor and installation kit sold to single customer for a single fitting at customer end, but price negotiated and agreed separately for each unit - Rooftop unit, compressor and installation kit sold as Rooftop unit alone - Classification of Rooftop unit, compressor and installation kit sold as Rooftop unit and compressor - Rooftop unit, compressor and installation kit sold as Compressor - Rooftop unit, compressor and installation kit sold as Installation Kit - Rooftop unit, compressor and installation kit sold as Compressor and installation kit - Rooftop unit, compressor and installation kit sold as Rooftop unit and installation kit - Rooftop unit, compressor and installation kit sold as Rooftop unit and compressor. Classification of Bus air-conditioning system which comprises of Rooftop unit, compressor and installation kit for one consolidated price to a single customer - HELD THAT:- It is observed from the Customs Tariff Act 1975 that Chapter 84 covers machinery and mechanical appliances and parts thereof and heading 8415 covers Air conditioning machines, comprising a motor driven fan and elements for changing the temperature and humidity, including those machines in which the humidity can't be separately regulated. Heading 8415 20 covers air conditioning machines of a kind used for persons in motor vehicles and the heading 8415 2010 covers the said machines for buses - In the instant case, it is an admitted fact that the applicant supplies the air conditioning system, comprising of Rooftop unit, Compressor and Installation kit, as a single product for a consolidated price to a single customer, exclusively for buses. Thus the said air conditioning system for buses merits classification under heading 8415 20 10 as the same is specifically classified under the said heading. Classification of Rooftop unit, compressor and installation kit sold to single customer for a single fitting at customer end, but price negotiated and agreed separately for each unit - HELD THAT:- It could be inferred from the question that the applicant is undoubtedly supplying bus air condition system only comprising all the three major components as in the case of first question, but the prices of individual components have been negotiated and agreed separately for each of the units. Further it is an admitted fact and pertinent to mention here that these parts are meant for a single fitting at customer end. In other words the entire air condition system is fitted into a particular bus and for a particular customer except that the components are negotiated and agreed separately - In the instant case when Rooftop Unit, Compressor and Installation Kit are supplied together to a single customer for a single fitting at customer end, it amounts to supply of a composite machine designed for the purpose of performing the principal function of a bus air conditioning system, and hence such supply is classifiable under tariff heading 84152010 and attracts GST accordingly. Classification of Rooftop unit, compressor and installation kit when sold individually or combinations - HELD THAT:- Rooftop unit and Installation kits are not classified individually under the Customs Tariff Act 1985, but are identified/recognised as parts of the composite machine i.e. air condition system for a bus itself. Thus the above items either individually or in combinations, are to be classified as parts of said composite machine, as they are suitable for solely or principally with a particular composite machine i.e. air conditioning system for bus. Thus they merit classification under heading 8415.90.00 i.e., parts of air conditioning machines and attracts GST accordingly. Classification of compressor when sold individually - HELD THAT:- It could be seen from the table above that pas compressor of kind used in air-conditioning equipment are classified under tariff heading 84148011. Reference invited to Note 2 (a) of Section XVI, mentioned at para 14 supra, which specifies that parts which are goods included in any of the heading of Chapter 84 or 85 (Other than headings 8409,8431,8448,8466,8473,8487,8503,8522,8529,8538 and 8548 are in all cases to be classified in their respective headings . Thus the gas compressors used in air-conditioning equipment which are classified under tariff heading 84148011 merit classification in all cases in their respective heading only and accordingly the compressor in the instant case merits classification under tariff heading 84148011 and attract GST accordingly.
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Income Tax
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2022 (9) TMI 887
TP Adjustment - adjustment on account of ALP determined for royalty payment and on account of managerial remuneration to the director - Advertisement, Marketing and Promotion ( AMP ) expenses incurred by the assessee for the benefit of the AE s trademark and brand - rejection of two comparables, namely, Columbia Laboratories Inc. and Premier Consumer Products Inc. - HELD THAT:- Both fact finding authorities have concurrently held that the rejection of the two comparables by the TPO is based on conjectures and surmises and thus, deleted the addition made on account of transfer pricing adjustment for transaction related to royalty. Appellant concedes that if the rejected two comparables are taken into consideration, the payment made by the assessee to its AEs towards royalty would be at arm s length and no adjustment would be merited. He also concedes that the said two comparables comply with all the filters prescribed by the TPO. We therefore find that the reliance placed by CIT(A) and ITAT on the judgment of this Court in Chrys Capital Investment [ 2015 (4) TMI 949 - DELHI HIGH COURT] was correct - an enquiry under Rule 10B(3) ought to be carried out, to determine as to whether the material differences between the assessee and the said entity can be eliminated. Unless such differences cannot be eliminated, the entity should be included as a comparable. No substantial questions of law arise for consideration.
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2022 (9) TMI 886
Disallowance u/s 36(1)(viii) - not considering the total receipt of business for the purpose of working out the proportion to be used in calculating the ratio for deduction under the said provision - HELD THAT:- The Supreme Court in Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India Ltd., [ 2019 (7) TMI 1449 - SUPREME COURT] has held that Courts must promote the interest of certainty in tax litigation. According to the Apex Court, there is a significant value which one must attach to observing the requirement of consistency and certainty. It further held that individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty and to detract from those principles is neither expedient nor desirable. In view thereof, a challenge to the deletion of the disallowance made u/s 36(1)(viii) of the Act is not made out. Disallowance made u/s 14A - CIT(A) issued a notice of enhancement u/s 251 and disallowed the entire expenditure claimed by the assessee therein instead of restricting the disallowance to the amount which was claimed as exempt income - HELD THAT:- With respect to the challenge of the deletion of the disallowance made u/s 14A of the Act, this issue is no longer res integra. It is an admitted fact that the exempt income was earned by the assessee from the investment held by it as stock-in-trade. This issue has been conclusively determined in Maxopp Investment Ltd.[ 2018 (3) TMI 805 - SUPREME COURT] - In this matter, the Supreme Court was concerned with a batch of appeals which also included a challenge to the judgment in CIT v. State Bank of Patiala [ 2017 (5) TMI 843 - PUNJAB AND HARYANA HIGH COURT] and the facts of the said case are para materia to the case in hand. In the case of State Bank of Patiala, the AO restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in Rule 8-D and holding that Section 14A of the Act would be applicable. CIT(A) issued a notice of enhancement under Section 251 of the Act and disallowed the entire expenditure claimed by the assessee therein instead of restricting the disallowance to the amount which was claimed as exempt income. The ITAT set aside the order of the AO as well as CIT(A). The High Court upheld the order of the ITAT and dismissed the appeal filed by the Revenue. The Supreme Court after deliberating on the object and purpose of Section 14A, conclusively held that in cases where shares are held by assessee as stock-in-trade, the dividend earned on the said shares is incidental and would not attract the provisions of Section 14A of the Act. No substantial question of law arises for consideration in the present appeal and accordingly, the same is dismissed.
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2022 (9) TMI 885
Bogus purchases - addition made as AO was not satisfied with the genuineness of purchases made from three out of four parties - purchases made from the three parties, which could not be verified, treating the same as bogus expenses - HELD THAT:- We not absolve the assessee from discharging the onus of satisfying the AO with respect to the genuineness of purchases in question through independent corroborative evidence. AO shall consider afresh the documentary evidence produced by the assessee before the ITAT in accordance with the directions contained in the ITAT order except to the limited extent modified above. Appellant has expressed an apprehension that the AO may not consider the evidence placed on the record of the ITAT and draw an adverse inference against the assessee and raise a presumption that the ITAT did not accept the sufficiency of the said documents. We have perused the impugned order and it is evident that the ITAT has not rejected the said documents or expressed any opinion on the admissibility of the said documents. ITAT has remanded the matter back to the AO to verify the said documents and the issue for a fresh decision. We accordingly direct the AO to consider all the documents produced by the assessee for verification of the purchases including the documents filed before the ITAT while deciding the issue.
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2022 (9) TMI 884
Disallowance of interest expenditure - whether borrowed funds advanced by the Assessee to the Contract Bottling Units ( CBUs ) used by the Assessee for the purposes of business since no revenue was disclosed from such activities? - addition made as Assessee had failed to prove a direct nexus of the said interest expenses for its business purposes as stipulated u/s 36 and 37 - ITAT upholding the order of CIT(A) and deleted the disallowance - HELD THAT:- CIT(A) has returned a finding of fact that the working capital loan taken by the Assessee for its business purposes was provided to the CBUs as per the terms and conditions of its agreement. The said working capital provided to the CBUs was taken into account by the parties while fixing the bottling charges payable under the agreement. CIT(A) concluded that the working capital loan availed by the Assessee from the Standard Chartered Bank had been used wholly and exclusively for the business purposes and therefore, deleted the addition on account of interest payment on loan made by the AO. Expenses of legal and professional fees as well as the warehousing and demurrage charges, debited to the profit and loss account CIT(A) held that since the AO has not alleged that these expenses are bogus or of a personal nature the same do not warrant any disallowance. CIT(A) held that the said expenses have been incurred wholly and exclusively for the business purposes and therefore, deleted the disallowances. ITAT and CIT(A), both fact finding authorities have concurrently held that the expenses claimed by the assessee were duly incurred in the course of business. In the present appeal, the appellant has not placed any material on record to contradict the aforesaid concurrent finding of facts returned by the ITAT and CIT(A) while reversing the disallowances made by the AO. The appellant has failed to point out any error of law in the findings of the ITAT - No substantial questions of law arise for consideration and accordingly, the appeal is dismissed.
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2022 (9) TMI 883
Reopening of assessment u/s 147 - Time limit for notice - Scope of new provision section 148A - mandatory procedure of Section 148A followed or not? - HELD THAT:- The time limit for issuing notice under unamended Section 149 which was falling between 20th March, 2020 and 31st March 2021 was extended by Section 3 of TOLA read with Notification No. 20/2021 dated 31st March, 2021, and Notification No. 38/2021 dated 27th April, 2021, until 30th June, 2021. The initial notice in the present proceedings was issued on 23rd June, 2021 i.e. extended time limit. The said notice was quashed by this Court in petitioner s earlier writ petition as Mon Mohan Kohli [ 2021 (12) TMI 664 - DELHI HIGH COURT] as the mandatory procedure of Section 148A of the Act was not followed before issuing the said notice. In the said judgment though this Court struck down the Explanations A(a)(ii) and A(b) to the said notifications, yet it clarified that the power of reassessment that existed prior to 31st March, 2021 continued to exist till the extended period i.e. till 30th June, 2021; as the Finance Act, 2021 had merely changed the procedure to be followed prior to issuance of notice with effect from 1st April, 2021. When the judgment of this Court in Mon Mohan Kohli [ 2021 (12) TMI 664 - DELHI HIGH COURT] was carried forward in appeal, the Supreme Court held that the Section 148 notices issued between 1st April 2021 to 30th June, 2021, will be deemed to have been issued under Section 148A of the Act and therefore the notice dated 23rd June, 2021, issued to the petitioner stood revived. Consequently, since the time period for issuance of reassessment notice for assessment year 2013-14 stood extended until 30th June, 2021 and the income alleged to have escaped assessment is beyond Rs.50 lakhs, the first proviso of Section 149 (as amended by the Finance Act, 2021) is not attracted in the facts of this case and even without the benefit of Instruction No.01/2022 the impugned notice is within limitation. Accordingly, the present writ petition along with the pending application is dismissed.
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2022 (9) TMI 882
Capital gain - addition u/s. 50C - AO referred the matter u/s. 50C(2) Valuation Officer who determined the valued - Assessee being 50% co-owner assessed as the sale consideration and determined the LTCG - CIT(A) holding that the DVO cannot revisit his order and the second report is not binding either of the AO or the Appellate Authority, since assessment has already been done in that case as against the principle of Audi Alteram Partem - HELD THAT:- DVO was entrusted to consider assessee s objection on the valuation of the property. Further the DVO vide its letter admitted that preliminary report was not given to the assessee calling upon its objection during the original valuation proceedings. Therefore taking into account, the assessee s objection second valuation report dated 28.02.2018 was submitted determining the value of the property - CIT(A) erred in holding that the DVO cannot revisit his order and the second report is not binding either of the AO or the Appellate Authority, since assessment has already been done in that case. This is against the principle of Audi Alteram Partem. It is clear find from the facts that the DVO in its first valuation report determined the value of Rs. 1,35,88,000/- without providing preliminary report to the assessee calling for his objection. When the assessee particularly raised its objection and the method of valuation, the Ld. DVO admitted the mistake and heard the objections of the assessee and then determined the value of the property vide second valuation report dated 28.02.2018. CIT(A) is legally in correct in interfering the Expert s opinion, which cannot be determined either by the Assessing Officer or the Appellate Authority. DVO is himself admits preliminary report was not given to the assessee calling for its objection. When this mistake was being rectified by second valuation report determined by the DVO, the same cannot be rejected by the Ld. CIT(A) which is unjustified. Therefore the grounds raised by the assessee are hereby allowed and the appeal is allowed.
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2022 (9) TMI 881
Addition u/s 68 - additions received as advance against sale of stock in trade i.e flats is against facts - HELD THAT:- Section 68 cast obligation on the assessee where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source of credit thereof or the explanation offered by the assessee is found not satisfactory in the opinion of the AO, the sum so credited may be treated as income and charged to income-tax as income of the assessee of that previous year. Burden/onus is cast on the assessee and the assessee is required to explain to the satisfaction of the AO cumulatively about the identity and capacity/creditworthiness of the creditors along with the genuineness of the transaction to the satisfaction of the AO. All the constituents are required to be cumulatively satisfied. If one or more of them is absent, then the AO can make the additions u/s. 68 as an income. The burden is very heavy on the assessee to satisfy cumulatively the ingredients of Section 68 as to identity and establish the credit worthiness of the creditors and genuineness of the transaction to the satisfaction of the AO, otherwise the AO shall be free to proceed against the assessee company and make additions u/s. 68 of the Act as unexplained cash credit. The use of the word any sum found credited in the books in Section 68 indicates that it is widely worded and the AO can make enquiries as to the nature and source thereof. AO can go to enquire/investigate into truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of accounts and in case the AO is not satisfied with the explanation of the assessee with respect to establishing identity and credit worthiness of the creditor and the genuineness of the transactions, the AO is empowered to make additions to the income of the assessee u/s. 68 of the Act as an unexplained credit in the hands of the assessee company because the AO is both an investigator and adjudicator. Thus, in the instant case, we hold based on facts and circumstances of the case, that the assessee fails to satisfy the mandate of Section 68 as creditworthiness of these persons as well genuineness of the transactions could not be proved by the assessee, and we sustain the addition of Rs. 54 lacs as was upheld by ld. CIT(A). The assessee fails on this issue. Additions to being amount received by cheque which was credited in assessee s bank account, and the assessee has claimed that the said amounts were towards finishing work in the flats - HELD THAT:- It is claimed that the said finishing work was done in the subsequent year and the amount was offered for taxation by assessee in immediately succeeding year. The assessee has also filed quotation issued by it to these two persons for doing the finishing work - The complete name and addresses of these two persons are on record. We are of the view that claim of the assessee requires verification, and the matter is restored back to the file of AO for fresh adjudication. We clarify that we have not commented on the merits of the issue. AO shall provide proper and adequate opportunity of hearing to the assessee in set aside remand proceedings.
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2022 (9) TMI 880
TDS u/s 195 - commission paid to associated enterprise for procurement of export orders - HELD THAT:- In the present case the associated enterprises do not carry on any business operation in India, they merely acted as selling agents of the assessee outside India. The issue is squarely covered by the decision in DIT v Wizcraft International entertainment private limited [ 2014 (5) TMI 149 - BOMBAY HIGH COURT] wherein it has been held that the non-resident agent did not perform any services in India but rendered services outside India and therefore the commission income to the agent is not liable to tax in India and therefore there was no obligation on part of the assessee to deduct tax at source at the time of making such payment - In the case of the assessee the identical issue has been accepted by the learned revenue authorities in earlier years. In view of this, we do not agree with the findings of the lower authorities that the assessee should have deducted tax at source on payment of commission to its associated enterprises in Foreign Countries that did not have any permanent establishment in India or were not carrying on any business in India but were rendering services outside India. Accordingly, ground number 1 of the appeal of the assessee is allowed and the learned assessing officer is directed to delete the disallowance because of commission paid to associated enterprise for procurement of export orders. Provision for commission incurred by the assessee to associated enterprise for procuring export orders - mere provision cannot and ascertained liability and therefore provisions are not deductible as an expenditure - HELD THAT:- We find that when the sales are concluded during the year, naturally the corresponding expenses of commission have also accrued to the assessee. For such commission, the amount of commission, recipients of commission as well as the basis of such commission payment are known to the assessee. The liability for payment of commission has already been incurred by the assessee as soon as sales are concluded for the reason that corresponding bills have not been received from the associated enterprises cannot come into the way of deduction claimed by the assessee. It is not the case of the revenue that subsequently also the assessee did not receive the bill or no export commission was required to be paid on such sales. Therefore, it is an ascertained liability of the assessee as soon as sales are made. TPO by determining the arm s-length price of the commission expenses clearly proved that the services been rendered by those agents.It cannot be said that such provision is not allowable. In View of this, we do not find any reason to uphold disallowance made by AO holding that provision for commission payable to associated enterprises for procuring export order is merely a provision and not an ascertained liability. Hence, we direct the learned assessing Officer delete the disallowance on this account stop accordingly ground number 2 of the appeal is allowed. TDS u/s 195 - disallowance of provision of warranty expenditure provided by the assessee at the rate of 1.25% of the pumps sold on account of between charges that firstly it is merely a provision and not an ascertained liability and secondly even if it is deductible as an expenditure, assessee has failed to deduct tax at source - addition u/s 40(a)(ia) - HELD THAT:- As relying on ANGLO FRENCH TEXTILES LIMITED [ 1991 (6) TMI 11 - MADRAS HIGH COURT] we agree with the assessee that no tax is required to be deducted u/s 195 of the income tax act on the said sum of warranty expenditure paid to associated enterprises. Therefore , disallowance of warranty expenditure on this account is also not warranted. Accordingly, ground number 3 of the appeal of the assessee is allowed. Disallowance of professional fees paid to associated Enterprises and non associated enterprises for the reason that assessee has failed to deduct tax at source - HELD THAT:- As find that if the claim of the assessee is found to be correct that the assessee has already deducted tax at source on the above payment, no disallowance could have been made. Therefore, in the interest of justice, we set-aside this ground of the appeal to the file of the learned assessing officer with a direction to the assessee to show that on these payments the assessee has deducted tax at source u/s 195 of the income tax act, the learned assessing officer way verify the same and decide the issue in accordance with the law. Accordingly, ground number 4 of the appeal is allowed.
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2022 (9) TMI 879
Correct head of income - Gain on sale of properties - whether income from sale of these two properties should be taxable under the head Capital Gain or under the head Business Income ? - HELD THAT:- The assessee and Shri. Dharmeshbhai Patel (SDP) entered into an arrangement wherein, Shri. Dharmeshbhai Patel (SDP) provided the money required to buy such property, physical possession of which, is not possible in the name of assessee. Therefore these properties would be later sold for profit and the profit is shared at ratio of 10:90 after recovering the investment made by Shri. Dharmeshbhai Patel (SDP). We note that no investment is made by the assessee. The assessee has not incurred any cost of acquisition . Hence, the lands cannot be called as his capital assets. The assessee has only allowed his name to be used in the transactions and has personally involved in the making of these deals. The income earned by the assessee is not an appreciation of his investment, but it is consideration for being part of the arrangement to earn profit from transactions involving lands. The income earned is towards his personal involvement and for time contributed. There is no transfer of capital asset by the assessee. For this reason too the income earned by the assessee cannot be said to be capital gains. It is evident from the bank account, the amounts invested by Shri. Dharmeshbhai Patel (SDP) and 90% the profit made on two transactions is remitted to his account. Shri. Dharmeshbhai Patel (SDP) has disclosed the profit made from these two transactions in his return of income under the head Business Income which is accepted u/s 143(3) - Since the 90% of the profit arising from these transactions has already been taxed as Business Income by the Department. Principles of uniformity demands that the balance 10% also to be taxed as Business Income in the hands of the assessee. - Decided against revenue.
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2022 (9) TMI 878
Disallowance of forfeited security deposit on leased premises - AO disallowed assessee s claim on the ground that forfeiture of the security deposit cannot be considered as revenue expenditure and he disallowed the same as being capital expenditure - HELD THAT:- We find no infirmity in the order of the CIT(Appeals) who has correctly held that forfeiture of security deposit is normal business loss in the assessee s line of business and the same is allowable as revenue expenditure in light of the decision in the case of Fab India Overseas Private Limited [ 2013 (9) TMI 301 - ITAT DELHI] Addition u/s 40(a)(ia) - assessee made payments to various Clearing and Forwarding agents for commission as well as towards reimbursement of expenditure - assessee had deducted TDS on commission part and no TDS was deducted on the reimbursement element - HELD THAT:- CIT(Appeals) has given relief in respect of non deduction of TDS for cases where (i) the agent had issued separate invoice for reimbursement expenditure (ii) relief was also granted in respect of cases where there was no requirement for TDS since falling within the limit of ₹ 20,000 (iii) when the payee was filing his return of income and had reflected the said receipts and his return of income. However, in such cases where the assessee could not file the relevant proof of the payee filing its return of income and reflecting such income in the return of income, CIT(Appeals) disallowed the same. In our considered view, we find no infirmity in the order of CIT(Appeals), either in facts or application of law. Addition on account of difference in stock statement - HELD THAT:- On a perusal of the records and on going through the order passed by the CIT(Appeals), we are of the considered view that the CIT(Appeals) has not erred in facts and in law in deleting the additions made by the AO. Addition on account of difference in balance sheet with supplier - HELD THAT:- We are of the considered view that in the instant facts CIT(Appeals) has not erred in facts and in law in granting relief the assessee. Merely because the supplier has not written back the amount in his books of account mainly because it was awaiting Form no. 18A would not vitiate the fact that the duty was not refundable to the 'appellant and ultimately it had to go to the profit and loss account. Addition of purchases - HELD THAT:- On perusal of the facts before us, it is observed that the assessee has been able to prove the genuineness of the transaction and has given substantial evidentiary proof to show that the assessee had made purchases from these two parties. Accordingly, we find no infirmity in the order of the CIT(Appeals), wherein on appreciation of facts, he allowed the assessee s ground. Addition on account of discount given to supplier - HELD THAT:- No infirmity in the order of Ld. CIT(Appeals). In our view, income can be recognised by the assessee only when the same comes to the knowledge of the assessee. It is quite common in any line of business that the assessee cannot be expected to know about the discount unless the same is intimated to him. It is also observed that in the subsequent year i.e. AY 2006-07, the assessee recognised the discount in its books of accounts, when it came to know about the same. Accordingly, a find no infirmity in the order of CIT(Appeals). Addition for non-reflection of transaction the books of supplier - HELD THAT:- CIT(Appeals) allowed the assessee s appeal on the ground that the assessee had made payment to M/s Gajjar fabrication through banking channels after deduction of TDS, and this fact was completely ignored by the AO while making the above aforesaid addition. The assessee has also produced invoices of the concerned party to whom job work payment was made. CIT(Appeals) allowed this ground of the assessee. Addition treating repairing expenditure as capital expenditure - HELD THAT:- No infirmity in the order of CIT(Appeals), who upon proper appreciation of the facts of the case, allowed the assessee s appeal on this issue. The assessee had carried out minor repairs which are allowed by the CIT(A) on appreciation of proper evidence as revenue expenditure. No doubt has been casted on the genuineness of the expenditure.
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2022 (9) TMI 877
Disallowance u/s 14A - Expenditure on earning exempt income - HELD THAT:- Hon'ble Delhi High Court in the case of Era Infrastructure (India) Ltd. [ 2022 (7) TMI 1093 - DELHI HIGH COURT] has considered the issue of disallowance u/s.14A when there is no exempt income and held that no disallowance u/s 14A could be made if no exempt income was earned by the assessee - we hold that no disallowance is warranted u/s 14A and delete the disallowance made in this regard. This ground is allowed in favour of assessee. Addition towards prior period items - AO therefore disallowed the same for the reason that it is not allowable being a prior period expenditure - CIT(Appeals) confirmed the disallowance by stating that the assessee has not brought anything on record to substantiate the claim that the expenses became crystallized during the year and that these expenses are project expenses is not supported by any evidence - HELD THAT:- We notice that the AO has made the addition based on what is stated in the 3CD report and has not discussed about examine the nature of expenditure in the assessment order. CIT(Appeals) has also not considered the submissions of the assessee that the said expenditure is not debited to the P L a/c of the assessee, but upheld the addition based on what is stated by the auditors in Form 3CD - Key issue that needs to be verified with regard to the addition made towards project expenses is, whether the said expenditure is debited to the P L account as mentioned in Form 3CD or capitalized in work-in-progress account as contended by the assessee. We therefore remit this issue back to the AO to examine factually whether the project expenses are debited to the P L account or kept in work-in-progress based on evidence and decide the allowability accordingly. Needless to say that the assessee may be given opportunity of being heard. Addition u/s. 56(2)(vii) - addition under the head income from other sources - HELD THAT:- For the purpose of arriving at the fair market value of unquoted shares, the book value of the assets should be considered as prescribed in Rule 11UA(1)(c)(b). We notice that the AO has relied on the valuation report given by the CA which is based on DCF method for making the addition in the hands of the assesse u/s. 56(2)(viia). DCF method is not the prescribed method of valuation in accordance with Rule 11UA for the purpose of section 56(2)(viia) and the Act provides a separate Rule i.e., Rule 11UA(1)(c)(b) for this purpose which is the fair market value. AO therefore should have computed the fair market value of the unquoted shares based on the method prescribed as per the above Rule and should have calculated the disallowance u/s. 56(2)(viia). We therefore remit the issue back to the AO to recomputed the value of the shares of M/s. Zebra Cross Resorts P. Ltd. and M/s. Waterline Hotels P. Ltd. and arrive at the addition, if any, warranted u/s. 56(2)(viia). The assessee is directed to provide the necessary information as may be required in this regard before the AO and cooperate with the proceedings. Appeal by the assessee is partly allowed.
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2022 (9) TMI 876
Capital gain computation - applicability of section 50C - Scope of amended proviso to section 50C - sale of immovable property belonged to nine co-owners and capital gain arising thereon and application of provisions of section 50C and 54F - HELD THAT:- As more than 99% of the payment was received by cheque mode by the assessees. Thus the genuineness of the transaction namely the sale consideration as per the date Agreement of Sale namely Rs. 7,000/- are substantially paid to the sellers. When the same piece and nature of land when registered as Sale Deed, 22 months thereafter then prevailing Jantri value of Rs. 16,500/- cannot be applied in this case. Taking overall circumstances of the case, in our considered opinion, it is a fit case to set aside the matter back to the file of the AO with direction to compute capital gain on sale of the property by applying amended proviso to section 50C of the Act and recompute the capital gain. Deduction u/s 54F - Similarly, the assessee having produced details of expenses incurred in the construction of house for availing benefit under section 54F of the Act, the ld.AO is directed to consider supporting evidences filed by the assessee and also examine the evidences for claiming improvement expenses incurred by the assessee, while computing capital gains and granting exemption u/s. 54F - we allow grounds of appeal of the assessee for statistical purpose - Appeal of the assessee is allowed for statistical purpose.
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2022 (9) TMI 875
Penalty u/s 271F - not filing the return of income for the year under considerations - HELD THAT:- If the benefits were allowed to the assessee then in that eventuality the capital gain arose on the sale of immovable property could have been below taxable limit. It is noteworthy to mention that the provisions of Section 273B categorically mentions that penalty u/s 271F is not leviable in case the assessee proves that there was a reasonable cause for not filing the return of income during the year under consideration, as per provisions of Section 139 of the Act. After analyzing the facts of the present case, Bench finds that AO has passed the assessment order ex-parte taking into consideration the assessee has not advanced any documents pertaining to sale of house in question. It is also noted from the record that the assessee is not having any taxable income and the AO has not given the benefit of indexed cost of acquisition and indexed cost of improvement on the immovable property in question and thus in that eventuality the capital gain arose on the sale of immovable property would have been below taxable limit. This plea of the assessee in view tantamounts to reasonable cause as is prescribed u/s 273B - While giving benefit of the same, the Bench deletes the penalty levied by the AO u/s 271F - Appeal of the assessee is allowed.
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2022 (9) TMI 874
Reopening of assessment u/s 147 - notice beyond 4 years after the completion of relevant assessment years - same issue allowed to be taken second round or not? - HELD THAT:- The assessee was assessed twice in same assessment year in same issue. In first phase, the appeal was completed on basis of the part relief. ITAT allowed the assessee s appeal on basis of the technical ground. The same issue which the CIT(A) had disallowed in first phase was taken as subject matter of reopening as recorded reasons by the assessing authority. In second phase the notice u/s 148 was issued by the ld AO. The same issue cannot be agitated twice. There is no such any fresh material - See Kelvinator of India 2010 (1) TMI 11 - SUPREME COURT The assessing authority had reopened the issue which was already taken in the assessment order u/s 143(3) of the Act. The same issue cannot be taken second round on the ground that the ld. CIT(A) had disallowed. The ITAT had quashed the revenue appeal on technical ground and the issues were untouched by the ITAT.Therefore, the Assessing Officer was indeed in error in adopting such a hyper-pedantic approach and in holding that there was valid reopening U/s 148 on the issue which were already delt in first phase of assessment U/s 143(3) of the Act in same assessment year. Recorded reason is itself bad in law and the assessment order is liable to be quashed. Appeal of assessee allowed.
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2022 (9) TMI 873
Delayed employees share of PF and ESIC etc - late deposit of the Employees share of PF and ESIC - Amount paid before due date for filing Return of Income under the provisions of section 139(1) - HELD THAT:- As identical issue has been decided in recent decision of Co-ordinate Bench of this Tribunal in the case of Prashant Arun Sangai [ 2022 (6) TMI 1305 - ITAT PUNE] wherein, the Tribunal decided the issue in favour of the assessee.as held position of law as set out by various Hon ble High Courts including the one in CIT vs. Nipso Polyfabriks Ltd. [ 2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT] squarely applies to the facts and circumstances of the instant case, thereby not warranting any disallowance since the amount in question was admittedly deposited before due date u/s 139(1) of the Act. The addition is therefore, directed to be deleted. - Decided in favour of assessee.
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2022 (9) TMI 872
Exemption u/s 11 - advance paid for purchase of land be investment referred to u/s.11(5) - assessee is a public charitable trust registered u/s.12AA - assessee has made investments in the mode other than mode as specified u/s.11(5) of the Act, and further, there is violation provisions of section 13(1)(d) - HELD THAT:- Assessee could not file any evidence - unless the assessee proves its claim with evidence, arguments of the counsel for the assessee cannot be accepted. Therefore, we set aside the issue to file of the AO with a direction to re-examine claim of the assessee that loans advances shown in the balance sheet is for purchase of land. In case, the assessee files necessary evidence to prove its claim, then the AO is directed to allow benefit of exemption claimed u/s.11 for both the assessment years. In case, the assessee is unable to prove its case with necessary evidence, then the AO is right in denying benefit of exemption u/s.11 for both the assessment years. However, fact of the matter is that even if, there is violation referred to u/s. 13(1)(c) / 13(1)(d) of the Act, then tax can be levied only on the income which is in violation of provisions of section 13(1)(d) of the Act, as held by the Hon ble High Court of Madras in the case of DIT Vs. Working Women s Forum [ 2015 (9) TMI 1447 - SC ORDER] - In case, there is violation as referred to u/s.13(1)(d) of the Act, then the Assessing Officer is directed to tax income which is in violation of provisions of section 13(1)(d) of the Income Tax Act, 1961 for both the assessment years. Additions made on notional interest on loans advances - AO has imputed notional interest @ 12% on loans advances for both the assessment years - HELD THAT:- First of all, concept of notional interest on loans advances does not arise, because it is not case of the assessee that loans advances were given by the assessee to third party. Even if it is a loan, then also question of imputing notional interest does not arise, because there is no contractual obligation between the assessee and third party. AO has completely erred in imputing notional interest on loans advances. As the argument of the assessee that said loans advances paid for purchase of land. In case, the assessee succeeds in its argument on this ground also, question of imputing notional interest does not arise. Both counts, additions made by the AO towards notional interest on loans advances cannot survive - we direct the AO to delete additions made towards notional interest on loans advances for both the assessment years. Appeals filed by the assessee for both the assessment years are allowed for statistical purposes.
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2022 (9) TMI 871
Addition u/s 68 - denial of exemption u/s 10(38) - Bogus LTCG - unaccounted money of the assessee under the guise of long term share transaction - HELD THAT:- The action of the assessee is nothing but pre-motivated and deliberate conduct done for converting the unaccounted money of the assessee under the guise of long term share transaction and that too without paying requisite tax on the same. This clearly amounts to tax evasion. It is also beyond preponderance of probabilities that the fantastic sale price of a little known shares i.e. Mishka without any economic or financial basis to increase from Rs. 6/- to Rs. 50.25 per share, and likewise whereby the assessee manipulated the capital gain which was bogus and was done to claim exemption u/s 10(38) therefore, we do not find any reason to interfere with the findings of the CIT(A) and the same is upheld. Therefore, the addition u/s 68 of the Act and denial of exemption u/s 10(38) of the Act is upheld. Addition u/s 69C - commission of about 1-2% of the transaction is paid to the broker who negotiates the deal - HELD THAT:- When there is no doubt that such transactions involve certain money paid to the operators/arrangers of such fraudulent capital gains, the revenue authorities have reasonably calculated 5% of the sale consideration and accordingly such addition was upheld. In the present case also, admittedly the share transactions were manipulated through entry provider, stockbrokers in order to obtain fraudulent income by rigging share prices and selling them in order to justify the unaccounted income of the assessee and for all these activities the broker is making all the negotiations and arrangements and therefore, there is no doubt that such transactions involves money, paid to entry provider for such fraudulent capital gains and hence disallowance @ 1% is held to be reasonable and we do not find any infirmity with the findings of the ld. CIT(A) on this issue also. The order of the ld. CIT(A) is accordingly upheld on this issue as well. Addition of investment made by the assessee - AO held that the assessee has not been able to prove the source of investment - HELD THAT:- As we do not find any reason to interfere with the findings since they have been arrived at by proper examination of facts and verification.It is strange to note that the broker is based in Surat and assessee is in Nashik and in the bill the broker has not charged any commission and the bill also does not bear the mode of receipt and the bill mentions that the amount is due from the assessee. It clearly shows that the bill has not been issued in a normal manner but has been a paper work to show the offline purchase of shares through a broker. As the amount is paid in cash,, the A.O is right in holding that the investment is from unexplained sources. The ground of appeal is therefore, dismissed.
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2022 (9) TMI 870
Validity of order of CIT u/s 250 - Addition of cash deposit in the bank account - whether the assessee was informed by his representative or not, find that the ld. NFAC/CIT(A) has dismissed the appeal by passing a non-speaking order? - HELD THAT:- The order of NFAC/CIT(A) is not in accordance with mandate of Section 250(6) - Section 250(6) of the Act mandates that the CIT(A) while deciding the appeal is required to pass order on points of determination (grounds of appeals), decision therein on and reasons for such decision. Assessee remained unrepresented before the AO as well as before the CIT(A)/NFAC, therefore, in our considered view, the assessee deserves one more opportunity to explain his case at the end of NFAC/CIT(A), therefore, all the grounds raised by the assessee in the present appeal are restored back to the file of assessing officer to pass the order afresh. The assessee is also given liberty to file all the relevant evidence, information or evidence before the assessing officer without any further delay. Needless to direct that the assessing before passing the order afresh shall grant reasonable and fair opportunity to the assessee. The assessee is also directed to be more vigilant and not to seek adjournment without any valid reason and to make compliance in time. The email address and phone number provided by the assessee, which we have mentioned in the array of parties, may be used for communication of dates of hearing by assessing officer. In the result, the grounds of appeal raised by the assessee are allowed for statistical purpose.
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2022 (9) TMI 869
Estimation of income @ 15% on the gross receipts without allowing the depreciation - HELD THAT:- Admittedly the books of accounts are not susceptible for verification. In these circumstances, AO has been left with no other option but to estimate the profit @ 15% net of all deductions including depreciation. No doubt, the estimation of net profit is one of the methods of the determination of income from business considering the facts and circumstances of each case. AO has failed to bring on record any comparable cases to support the net profit estimated by him. We find that in the case of ITO vs. Sri Gundapaneni Nageswara Rao [ 2014 (5) TMI 344 - ITAT HYDERABAD] under similar set of facts, has directed the AO to estimate net profit of 3% of all deductions including depreciation. There are divergent view from the appellate authorities, the view which is more beneficial to the assessee has to be adopted in case of CIT vs. Vegetable Products Limited [ 1973 (1) TMI 1 - SUPREME COURT] - Therefore, we are of the considered view that since the assessee has not proved the ownership of assets to claim the depreciation and also that the facts of the present case are similar to the facts of the case considered by the ITAT [ 2014 (5) TMI 344 - ITAT HYDERABAD] we deem it appropriate to direct the AO to estimate net profit of 3% on gross receipts net of all deductions including depreciation. We direct the AO to estimate net profit of 3% on gross contract receipts net of all deductions for the AY 2010-11. Assessee appeal allowed.
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2022 (9) TMI 868
Addition u/s 56(2)(viib) - excess value received by the assessee company in terms of the Fair Market Value (FMV) - method of valuation and the assessee s issuance of unquoted shares - Net Asset Method as adopted by the assessee on the basis of the Stamp Duty Valuation - HELD THAT:- It is a fact on record that the assessee has furnished the valuation on the basis of Discounted Cash Flow Method and on the basis of the Net Asset Method by adopting the stamp duty valuation of the immovable property as on 15.03.2014, for which, necessary evidences have been furnished but the AO and CIT (A) are of the view that the book value of the shares has to be adopted which comes to Rs. 101.62/- per share against the value of Rs. 110/- per share and which is less than the value as per Net Asset Method and the value as per the Discounted Cash Flow Method . CIT (A) have not been able to find any fault in the Discounted Cash Flow Method and for the Net Asset Method , though, the Amendment came from Finance Act, 2017 for adopting the stamp duty valuation but since, it is curative and beneficial provision, it has to be given retrospective effect. We hold that the Net Asset Method as adopted by the assessee on the basis of the Stamp Duty Valuation is in order, being beneficial provision and covered by the judgment in the case of Shiv Pal Singh Chaudhary [ 2018 (7) TMI 1850 - PUNJAB HARYANA HIGH COURT] and further in the case of Kolkata Export Co. [ 2018 (5) TMI 356 - SUPREME COURT] - We further opine that even the valuation by the Discounted Cash Flow Method is in order - Decided in favour of assessee.
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2022 (9) TMI 867
TP Adjustment - MAM Adjustment - ALP adjustment - Comparable Uncontrolled Price (CUP) method adopted as the MAM for the purchases and the CPM adopted by the assessee for the sales made to the AEs - HELD THAT:- As substantiated that the price of imports from the group companies will have impact on the export pricing charged to the group companies. This is also evident from the Cost Accountant certificate where the per unit meter cost of the elastic in respect of the goods supplied to the AE is lower than the per unit meter cost of the elastic supplied to unrelated parties. Unlike the CUP method, TNMM does not require that comparable companies as to manufacture exactly the same product as that manufactured by the tested party. In TNMM what is to be seen is the functional comparability and not the product comparability. Further, it is observed that the Ld. AR has not objected to the comparables made by TPO under TNMM, but the assessee has come up with a set of 7 comparables under TNMM wherein the average OP/OC works out to 2.83%. As observed from the financials submitted by the AR that 71% of the elastic produced during the FY has been exported to AEs. AR also in his submissions accepted that the production price is similar and the ultimate finished goods are similar in properties and hence are comparable. Since the ultimate finished goods are similar in nature and properties, the submission of AR contradicts on the fact that the price per meter charged for AEs is far below the price per meter charged to non-AEs, where the difference is significant. TNMM adopted by the Ld. Revenue Authorities would be Most Appropriate Method for determining the ALP of the international transactions entered into by the assessee with the AE. We do not find any infirmity in the order of the DRP on this issue and the same is confirmed. Appeal of the assessee is dismissed.
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2022 (9) TMI 866
Disallowance u/s 14A r.w.r. 8D - Expenditure incurred on earning exempt income - HELD THAT:- In absence of any contrary material on record, we do not see any infirmity in the said findings of the CIT(A) who has followed the decisions of the Hon'ble High Court and Hon'ble Supreme Court in upholding the applicability of disallowance and restricting the same to the extent of exempt income. The ground taken by the assessee is accordingly dismissed. Disallowance u/s. 36(1)(viia) on account of provision of NPA written back - HELD THAT:- After hearing the DR and pursuing the material available on record, we do not see any infirmity in the findings of the CIT(A) where a consistent position has been adopted by the CIT(A) and nothing has been brought on record to contest the said findings for the earlier years and for the year under consideration. Hence, the findings of the CIT(A) are hereby confirmed and the ground of appeal is dismissed. Addition on account of interest on seed money - HELD THAT:- Assessee was entitled to collect and recover the seed money from entrepreneurs during the course of its business and therefore, the interest income on such seed money accrued to the assessee on its own right. It has been further held by CIT(A) that besides retaining the seed money, the assessee, the interest accruing on the seed money has been retained by the assessee and nothing has been brought on record to demonstrate the transfer of this amount to the State Government. CIT(A) observed that where any amount has actually paid by the assessee to the State Government that would be allowed as expenditure in the year it is actually paid and give that no amount has been paid by the assessee during the year, the AO was fully justified in adding interest received on seed money - we do not see any infirmity in the findings of the ld. CIT(A) and the same is hereby confirmed and ground of appeal taken by the assessee is dismissed.
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2022 (9) TMI 865
Unreported income detected during the survey - Unaccounted gross receipts without allowing deduction towards expenses in this regard - expenditure having been incurred in respect of unrecorded sales - HELD THAT:- It is imperative that certain expenses would have been incurred in respect unrecorded sales though not recorded in the books of accounts. During the survey proceedings, while answering to Q.No.30, the assessee stated that No, the entire expenditure related to these receipts is not accounted for in the books of accounts. Therefore it is ascertained by the assessee that there exists unexplained expenditure relatable to the unaccounted receipts. The computation of profit after inclusion of unaccounted sales in the turnover would necessarily require deduction of unrecorded expenses. The Courts in such cases have taken the view that there is a presumption of expenditure having been incurred in respect of unrecorded sales. We find that taxing the entire gross receipts, where the Net Profit ratio is at 82.49%, AO for the relevant assessment year is not justifiable by any stretch of imagination. Similarly the plea of the AR to adopt the Net Profit ratio of 16% based on the assessment order passed for the AY 2019-20 also could not be accepted because of the fact that the assessee himself has admitted a net profit ratio of 17.37% with respect to accounted and unaccounted income of the assessee for the AY 2016-17. We are of the considered view that the net profit ratio shall be computed at the rate of 18%, which is as accepted by the assessee during the survey proceedings. AO is directed accordingly.
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2022 (9) TMI 864
Rectification u/s 154 - assessee challenging the 143(1) order - HELD THAT:- As it is seen that in these peculiar facts and circumstances, no mistake can be said to have been committed by the CIT(A) in dismissing the appeal filed. The assessee presumably under ignorance instead of challenging the order passed u/s.154 has instead challenged the order u/s.143(1) - Accordingly, on facts no fault can be found with the exercise of power by the First Appellate Authority. Appeal of the assessee deserves to fail, it need also be observed that being live to the concerns of the assessee, it is hereby deemed necessary to observe that in the eventuality the assessee deems it fit to challenge the order passed by the AO u/s. 154, it is hoped that the First Appellate Authority considers the delay in the filing of the appeal fairly as admittedly in the facts of the present case, the assessee cannot be said to have acted carelessly or be accused of sleeping over his rights. The assessee as per record has suffered on account of the ignorance in understanding the nuances of law. Accordingly, on account of lack of proper advice available to the assessee, opportunity to claim redressal under law should not be crushed. It is seen that no undue advantage is gained by the assessee by approaching the First Appellate Authority by filing appeal against the order u/s.143(1) and no vested right of the Revenue is upset if the assessee is permitted to appeal against the order u/s. 154 - Appeal of the assessee is dismissed.
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2022 (9) TMI 863
Deemed dividend u/s. 2(22)(e) - share application money received as deemed dividend in the hands of the assessee - HELD THAT:- We have carefully pursued the assessment order as well as the order of the ld. CIT(A) and find that the ld. CIT(A) has taken into consideration the entirety of the facts and circumstances of the case and has, thereafter, recorded the findings stating that the real nature of the share application money is interest free loan and advance parked in the books of the assessee company and the same is clearly covered u/s. 56 r.w.s. 2(22)(e) - we do not see any infirmity in the findings of the ld. CIT(A), which are hereby confirmed and the grounds of appeal taken by the assessee is dismissed. Disallowance of depreciation on sewing machine - HELD THAT:- It is apparent that the AR of the assessee company has miserably failed to rebut the findings of the AO. These assets have been received at the last day of the financial year. The assessee cannot take undue advantage of the plea that once the assets are merged into the block of assets it loses its identity and the question of actual use of a particular asset in the year should not be relevant for allowing depreciation in respect of the same. Here the AO has given specific findings on the basis of bills produced by the assessee. No positive evidence has been brought on record by the AR of the assessee during assessment or appellate proceedings to rebut AO's findings. Ground No. 3 of the assessee's appeal is hereby dismissed.
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2022 (9) TMI 843
Bogus purchases - penny stock purchases - HELD THAT:- Mere payment by account payee cheque is not sacrosanct and it will not make otherwise non-genuine transaction genuine as held by the Hon ble Calcutta High Court in the case of CIT Vs. Precision Finance Pvt. Ltd. [ 1993 (6) TMI 17 - CALCUTTA HIGH COURT] We hold that the action of the assessee is nothing but pre-motivated and deliberate conduct done for converting the unaccounted money of the assessee under the guise of long term share transaction and that too without paying requisite tax on the same. This clearly amounts to tax evasion. In the present case also, it was beyond preponderance of probabilities that the fantastic sale price of a little known shares i.e. Mahavir Advanced Remedies Ltd., without any economic or financial basis to increase from Rs. 5/- to Rs. 282/- per share. The above increase is 56 times which is evident from the fact that by investing Rs. 2,35,000/- ( out of 50,000 shares 47,000 shares were sold) the assessee has got Rs. 1,32,48,345/- in a span of 28 months. There is no doubt that the capital gain was manipulated and bogus and was done to claim exemption u/s 10(38) of the Act. We therefore, do not find any reason to interfere with the findings of the ld. CIT(A) and the same is upheld. - Decided against assessee.
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Customs
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2022 (9) TMI 862
Illegal export - synthetic fabric materials - it is alleged that exporters were attempting to smuggle synthetic fabric materials to Bangladesh through Petrapole LCS, without declaring the same by tagging some illegal consignments with genuine export of similar goods in smaller quantity - Confiscation of goods loaded in two vehicles - redemption fine - penalty - HELD THAT:- The proceeding was initiated by DRI with detention of certain consignments in Central warehousing Corporation at Petrapole including the two vehicles loaded with export consignment of the appellant exporter on 04.8.2010. On the same day the office belonging to the C F Agent M/s Overseas Shipping Agency was also visited where G-card holder of the Custom House agent was present. During pendency of investigation goods were provisionally released to the exporter on furnishing of bond. Show Cause Notice was issued after a long gap on 29.6.2015 alleging violations of Section 33, 34, 40(a) and 50 of the Customs Act, 1962 which are solely linked with examination of the export cargo by the Customs. This shows that the Revenue did not find sufficient evidence in support of its initial intelligence that the export was intended for getting undue benefit of export incentive schemes by overvaluation - it is found from the records that both CWC and Customs confirmed that loaded trucks are allowed to be parked in the CWC and it is not mandatory to allow entry only after assessment of the Bill of Export. Examination of consignment as per customs norms is conducted inside CWC parking before Let Export order given by the Proper Officer of Customs. It is not disputed that trucks loaded with goods were parked in CWC parking which is notified as custodian of Import and export goods and that those were recorded in their books and that clearance for export could be allowed after examination and under physical supervision of the Customs Officer right from the CWC parking to Physical border, gives no space for doubt that it could be smuggled. The proceeding is based on the allegation that the goods loaded in WB23 4778would have been exported under cover of another vehicle in respect of that the bill of export was assessed by the Customs Officer. The trucks parked in CWC cannot be treated as foreign going vehicle until Bill of export is submitted and examination of the cargo is physically done by the customs - Other findings on procurement of documents produced by the exporter and inspection by SGS are not relevant as overvaluation and consequential gain is not alleged. In consideration of the factual matrix of the case, it is found that the Revenue has totally failed to adduce tangible evidence in support of the allegation to sustain the impugned order of confiscation. Penalties upon the CHA and the C F Agent each under Sections 114 (iii) and 114AA of the Customs Act, 1962 - HELD THAT:- The existence of, and the contents in, that document does not have any significance to, or nexus with, the situation referred to in Section 114AA of Customs Act, 1962. It certainly could not have had anything to do with the uncleared consignments as Shipping Bill in respect of the consignment loaded in WB23 4778 was yet to be filed. There are no specific charges in the SCN which directly implicates the appellants to have themselves caused falsification of any document. Also nowhere in the discussion and finding portion of the adjudication order has the authority discussed or justified the imposition of penalty under Section 114AA ibid in the matter - further, the Commissioner has wrongly come to the conclusion that the C F Agent is involved in the illegal export whereas he is only a Carrying and Forwarding Agent and has been facilitating transporting, loading and unloading on the basis of the documents furnished by the exporter. The allegation against the C F Agent has not been corroborated through any financial investigation and one cannot be punished on the basis of assumptions and presumptions. Appeal allowed.
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Insolvency & Bankruptcy
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2022 (9) TMI 861
Initiation of CIRP - Period of limitation - condonation of the delay in filing an application or appeal - NCLT dismissed the application - NCLAT allowed the application - HELD THAT:- The condition precedent for condonation of the delay in filing an application or appeal, is the existence of sufficient cause. Whether the explanation furnished for the delay would constitute sufficient cause or not would be dependent upon facts of each case. There cannot be any straitjacket formula for accepting or rejecting the explanation furnished by the Appellant/applicant for the delay in taking steps. When an appeal is filed against an order rejecting an application on the ground of limitation, the onus is on the Appellant to make out sufficient cause for the delay in filing the application. The date of enforcement of the IBC and/or the date on which an application could have first been filed under the IBC are not relevant in computation of limitation. It would be absurd to hold that the CIRP could be initiated by filing an application under Section 7 or Section 9 of the IBC, within three years from the date on which an application under those provisions of the IBC could have first been made before the NCLT even though the right to sue may have accrued decades ago - the pendency of the proceedings in a parallel forum, invoked by the Respondent, is not sufficient cause for the delay in filing an application under Section 9 of the IBC. By the time the application was filed, the claim had become barred by limitation. It is now well settled that the provisions of the Limitation Act are applicable to proceedings under the IBC as far as may be - Similarly, under Section 18 of the Limitation Act, an acknowledgment of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing of a fresh period of limitation, from the date on which the acknowledgment is signed. However, the acknowledgment must be made before the period of limitation expires. A claim may not be barred by limitation. It is the remedy for realisation of the claim, which gets barred by limitation. The impugned order of the NCLAT is unsustainable in law - appeal allowed.
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2022 (9) TMI 860
Maintainability of suit - related parties of the Corporate Debtor or not - commercial arrangements between Spade i.e. the plaintiff herein, AAA and the Corporate Debtor i.e. the defendant No. 1 - financial debt or not - HELD THAT:- The present suit for recovery cannot continue against the defendants. Defendant No. 1 is the Corporate Debtor as referred to by Hon'ble Supreme Court in its judgment dated 01.02.2021 Civil Appeal Nos. 2842/2020 and 3063/2020 [ 2021 (2) TMI 91 - SUPREME COURT ], defendant No. 2 herein is the erstwhile Director of defendant No. 1 - Once Hon'ble Supreme Court having categorically held that commercial arrangements between the plaintiff and the defendant No. 1 were collusive in nature and that they would not constitute a financial debt , there is no question of any suit being maintainable against either the defendant No.1 or defendant No.2, who is the erstwhile director of defendant No. 1. Similarly, as far as defendant No. 3 is concerned, defendant No. 3 is the auction purchaser of the defendant No. 1 company, carried out by YES Bank under the SARFAESI Act. It is seen that the proceedings before Hon'ble Supreme Court emanated from the applications filed on behalf of YES Bank before the NCLT. Thus, all the issues pertaining to defendant No. 3 have also been considered by Hon'ble Supreme Court. It has been informed by learned counsel appearing for the Resolution Professional that the moratorium in terms of Section 14 of the IBC still continues to operate against the defendant No. 1 company. Thus, there is clear bar to continuation of the present suit in terms of the provisions of the IBC. In view of the categorical findings by Hon'ble Supreme Court and also in view of provisions of IBC, it is held that the present suit cannot continue - application dismissed.
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2022 (9) TMI 859
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Time limitation - HELD THAT:- It is not in dispute that a Legal Notice dated 13.11.2015 was issued and a Demand Notice under Section 8 of the Code was issued on 04.04.2018 and subsequently the Section 9 Application was filed on 26.11.2018. Even if we do not take into consideration the disputed Debit Note dated 28.05.2015, the fact still remains that the last payment was made on 16.03.2015 whereas, the Demand Notice was sent on 04.04.2018. Having regard to the fact that the Legal Notice and the Demand Notice are within three years of the last payment made i.e., 16.03.2015, the Application is well within the limitation period. However, perusal of the material on record read together with the grounds of Appeal and the Rejoinder Affidavit, it is crystal clear that there is an admitted dispute between the parties. The Appellant themselves are admitting the existence of a dispute which is neither spurious or mere bluster. Further there is a Civil Suit O.S. NO. 271/2015 filed before the Additional District Judge, Kakenada for the amount claimed to be in default and is pending adjudication. This Appeal was filed with a delay of 392 days which was condoned - it is not a fit case to remand the matter to the Adjudicating Authority having regard to the fact that the Impugned Order is dated 15.10.2019 and almost three years has lapsed and additionally the Appellant themselves have admitted to the existence of a dispute. Appeal disposed off.
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2022 (9) TMI 858
Approval of the Resolution Plan - Acceptability of claim of debts which remain unverified during CIRP - Section 31 of I B Code - HELD THAT:- In the instant case, the information sought for by the RP vide email dated 16.04.2019 was provided by the Appellants vide email dated 12.07.2019, after a clear gap of three months. There are no substantial reasons given for this delay of three months specially keeping in view that IBC mandates a time bound process. It is also not in dispute that the Appellant represented the Ex-Directors of the Corporate Debtor in their personal capacity and therefore the Resolution Professional sought for information from the Appellant herein to ascertain the liability of the Corporate Debtor against the claims preferred by the Appellant. Admittedly, the Resolution Plan of the Corporate Debtor was passed by a majority of 87.57% Voting by the CoC Members way back on 17.10.2019 and this Application was preferred by the Appellants in September, 2019, which was listed on 22.10.2019 and disposed of vide Order dated 17.03.2021. In the absence of any cogent reasons for having delayed supplying the information to the RP who had sought for clarification on 16.04.2019, but the Appellant had admittedly provided the information only on 12.07.2019 after 90 days after the receipt of the email. This Tribunal is of the earnest view that the Successful Resolution Applicant cannot be asked to face with undecided claims after the Resolution Plan submitted by him has been accepted by the Committee of Creditors as this would amount to lot of uncertainty - Appeal dismissed.
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2022 (9) TMI 857
Seeking respective attachment/lien/prohibition order over the Bank account of the Corporate Debtor maintained with Axis Bank, Rajam Branch - seeking to allow the Applicant to take control of the bank account - seeking to direct both the Respondents to remove their attachment/lien/prohibition order on the account of the CD - seeking to refrain from doing so during continuance of the Corporate Insolvency Resolution Process (CIRP) of the CD - HELD THAT:- As regards the PF of the employees also, the Counsel for the Applicant submits that during the pendency of this Application they have submitted their claim and it is totally admitted. The Counsel for the Respondent No. 2 however submits that the employees have to be given preference in respect of the distribution of the assets of the CD. Section 53 (1)(b)(i) of IBC, 2016. In view of the IBC carving out a preference for the employees dues and the Government dues and in view of the fact that the claims of GST and EPFO were totally admitted, the prohibitory orders dated 19.02.2020 and 07.03.2022 issued by the respective departments to the Axis Bank are liable to be set-aside. Appeal allowed.
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FEMA
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2022 (9) TMI 856
Interpretation of statute - Compounding of offence for non-filing of the annual return by payment of penalty - delay in filing of the annual return - Validity of Notification bearing No.S.O. 1070(E) dated 26.04.2013 issued by the respondent u/s 41 of the Foreign Contribution (Regulation) Act, 2010 - whether impugned notification is ultra vires of the provisions of the FCR Act? - Whether the delay in filing of the returns is an offence punishable under the FCR Act? - HELD THAT:- Petitioner was required to furnish the annual returns in Form FC-6 along with its final accounts (income and expenditure statement, receipt and payment account and balance sheet) within nine months of the end of the relevant financial year. Therefore, the petitioner was required to file the annual return for the financial year ending on 31st March of any year on or before 31st December of that year. There is no ambiguity that the petitioner was required to file the annual returns within the prescribed period in compliance with the provisions of the FCR Act. It is not necessary that all offences be separately listed out in Chapter-VIII of the FCR Act. The plain language of Section 37 of the FCR Act clarifies that the punishment, as specified, would be applicable in case of noncompliance of any provision of the FCR Act for which no specific punishment is prescribed. Thus, violation of any provision of the FCR Act would attract punition, as specified. The heading of a section of an enactment may be used as an aid for interpretation of that section but does not control the meaning or import of the section where the language of the section is free from ambiguity. The contention that delay in filing of the annual return under the FCR Act is not an offence, is rejected. The question as noted in paragraph 2(b) is answered in the affirmative. Composition of certain offences - challenge to the validity of the impugned notification - Section 41 of the FCR Act expressly provides that any offence, other than an offence, which is punishable by imprisonment only, made prior to institution of any prosecution be compounded for such sums as the Central Government may specify. The impugned notification has been issued by the Central Government in exercise of powers under Section 41 of the FCR Act. It does not fall foul of any provision of the FCR Act. We are unable to accept that the impugned notification is ultra vires to the Constitution of India. It merely stipulates the terms on which given offences can be compounded.Question as noted in paragraph 2(a) is answered in the negative. Whether the impugned order is sustainable? - Admittedly, the petitioner had failed to file the annual return within the time prescribed and thus, had failed to comply with the provisions of Section 18 of the FCR Act read with Rule 17 of the FCR Rules. In terms of the impugned notification, the delay in filing of the annual return would be compounded by payment of penalty as stipulated therein. The tabular statement specifying the offences, the amount of penalty and the officer competent to compound the same, as set out in the impugned notification. The obligation to file the annual return for the financial year 2010-11 had arisen on 01.05.2011 and the same was required to be filed before 31.12.2011. Failure to do so is failure to comply with the provisions of the FCR Act. This does not amount to imputing any act committed prior to the FCR Act coming into force as an offence under the said Act. The impugned order to the extent it stipulates payment of penalty for the delay in filing the annual return for the financial year 2009-10, is set aside.The questions, as noted in paragraph 2(c) and 2(d), are answered accordingly. Considering the mitigating circumstances, this Court also considers it apposite to grant the petitioner further four weeks time from today to deposit the penalty, as stipulated, for the financial years 2010-11 and 2011-12 along with the requisite application for compounding the offence.
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Service Tax
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2022 (9) TMI 855
Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - whether any leeway was granted to any other person, concerning the extension of the deadline provided in the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019? - HELD THAT:- The respondents/Revenue are expected to deal with the petitioner s representation, having regard to what has been observed by the coordinate bench on 11.05.2022. Since the same has not been done thus far, the writ petition is disposed of, once again, with a direction to the respondents/Revenue to pass an order, which would deal with the issue highlighted hereinabove, and in the order dated 11.05.2022. The respondents/revenue will take the necessary steps and pass a fresh order, within the next six weeks.
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2022 (9) TMI 854
Refund of Service Tax - tax deposited on mistake of law - denial of refund on the ground that service tax was wrongly deposited by them on warehousing services provided - Negative list of services or not - refund denied on the ground of time limitation - applicability of period of one year as prescribed under Section 11B of the Central Excise Act - HELD THAT:- It is not in dispute that assessee is not liable to pay service tax in respect of warehousing services which is categorically specified in the negative list of the services. The Division Bench of the Hon ble Karnataka High Court in KVR. CONSTRUCTIONS VERSUS COMMISSIONER OF CENTRAL EXCISE, BANGALORE [ 2009 (8) TMI 150 - KARNATAKA HIGH COURT] has examined the provisions of Section 11B at length and has also considered the judgement of Hon ble Supreme Court in the case of Mafatlal Industries Ltd. vs. Union of India [ 1996 (12) TMI 50 - SUPREME COURT] , where it was held that that Section 11B provides for making a claim to refund duty. Admittedly, the sums deposited by the petitioner is held to be a deposit and not as a duty, therefore, there was no necessity for the petitioner to have made a claim invoking Section 11B of the Act for refund. Hon ble High Court of Bombay in the case of Parijat Construction Vs. Commissioner of Central Excise, Nashik [ 2017 (10) TMI 659 - BOMBAY HIGH COURT] , had held that the limitation prescribed under 11B of the Central Excise Act, 1944, is not applicable to refund claim for service tax paid under mistake of law. Hon ble Supreme Court in the case of Salonah Tea Company Ltd. Etc. v. Superintendent of Taxes, Nowgong Ors. [ 1987 (12) TMI 3 - SUPREME COURT] had held that if there is no provision for realisation of the money under a statute, then the act of payment is ultra vires and such money, if paid, is not paid under such statute and accordingly, the provisions under such statute would not apply - it is found that even in the present case, the amount so paid by the Appellant was not payable during the relevant period. Since the issue already stands decided, there is no reason to deny the refund claim on the ground of limitation inasmuch as the period of limitation prescribed under Section 11B would not be a bar for the assessee to claim refund of tax paid under mistake - Ld. Commissioner (Appeals) has disputed the claim of refund on the ground that the appellant failed to produce reliable evidence to support the refund claim - appeal allowed - decided in favor of appellant.
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2022 (9) TMI 853
Exemption from service tax provided to DMRC - Railways - composite contacts - works contract service - erection, commissioning and installation service - supply of tangible goods service - execution of contracts for laying of water pipelines - doctrine of noscitur a sociis and of ejusdem generis - relied upon documents - rectification of mistake apparent in the record under section 35C of Central Excise Act, 1944, as made applicable to Finance Act, 1994 - HELD THAT:- It is found that the allegations against the respondent herein for fastening the tax liability rests upon the allegation that erection commissioning or installation service has been rendered. The said service was, along with others, included within the scope of work contract service upon incorporation in Section 65 (105) of Finance Act, 1994 with effect from 1st June 2007 and it has been held by the Hon ble Supreme Court in M/s Larsen Toubro Ltd. [ 2015 (8) TMI 749 - SUPREME COURT] that the distinction between the separate enumerations and the composite enumeration within works contract service lies on the absence of supply of material insofar as the former is concerned. It is seen from the sample contracts that respondent herein was also responsible for supply of material on which tax has been claimed to have been discharged; in the absence of any controverting of this submission, or contrary evidence, the taxable service within which the respondent was sought to be fitted would not apply. On examination of fitment within the claimed enumeration of works contract service , it is found that the respondent was involved in the shifting of the existing water pipelines belonging to Delhi Jal Board which, by implication, ultimately is rendering of services to that agency which the grounds of appeal admits to being eligible for exclusion from tax. In terms of the decision of the Hon ble High Court of Madras in M/s Indian Hume Pipes Co Ltd, [ 2015 (9) TMI 479 - MADRAS HIGH COURT] the laying of pipelines as an adjunct of civil structure would alone bring the activity within the ambit of section 65 (105) (zzd) of Finance Act, 1994 and from the nature of the work undertaken, it is apparent that the activity contracted out by the respondent does not relate to civil work for facilitating the network of Delhi Metro Rail Corporation. The exclusion of the alleged taxable service sought to be fastened on them from any contract other than service simpliciter erases the distinction of commercial outcome suggested by the reviewing authority. In any case, even if Delhi Metro Rail Corporation were to be the final recipient of the service rendered by the respondent, the decision of the Hon ble High Court of Calcutta in M/s Afcons Infrastructure Ltd. categorising them as railway forecloses taxability even if the dispute pertains to laying of water pipelines. Appeal dismissed.
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2022 (9) TMI 852
Levy of Service tax - Mailing list compilation and Mailing services - educational institution or not - HELD THAT:- The appellants are a premier institution and are engaged in providing education in the field of management and business. For the purpose of admission into the IIMs, IIM Ahmedabad conducted the CAT (common admission test) of candidates in the year 2009. A large number of candidates took the exam and some candidates were selected by IIMs for the purpose of admission to IIM. A larger number of candidates who took the CAT exam also applied to various other institutes and those institutes sought to use the CAT s scores for the purpose of admission into their schools. To access the CAT scores for themselves, the said Non-IIM Institutes entered into a Memorandum of Understanding with IIM Ahmedabad, the appellant. It is seen that the appellants are not compiling any list or providing list of names addresses etc. The appellants are merely providing scores in respect of names of candidates supplied by the clients (Non-IIM Institutes). Moreover, the activity of Mailing list compilation and mailing is done for or on behalf of the client. There are no reason to hold that the activity done by the appellant is covered under the head of Mailing list compilation and Mailing service - appeal allowed.
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2022 (9) TMI 844
Applicability of time limitation prescribed under section 11B of the Central Excise Act - deposit amount - exemption under Notification no. 25/2012-ST - difference of opinion - matter referred to learned 3rd Member. HELD THAT:- The Third Member has expressed his opinion as follows:- The limitation prescribed under section 11B of the Excise Act would not be applicable if an amount is paid under a mistaken notion as it was not required to be paid towards any duty/tax. In terms of the opinion expressed by the Learned Third Member, this appeal stands allowed in favour of the appellant assessee.
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Central Excise
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2022 (9) TMI 851
CENVAT Credit - capital goods - MS Plates used in fabrication of Plant and Machinery - period October, 2009 to March, 2010 - HELD THAT:- It is held that the Larger Bench ruling of this Tribunal has been set aside and reversed by the Hon ble Chhattisgarh High Court in the appeal by M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE [ 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT] , wherein, it has been held that Cenvat credit of service tax on inputs like MS Angles/ beams/ bars/ plates, etc., which go into fabrication of structures embedded to earth are to be treated as inputs used in relation to the final products, as inputs or capital goods. The appellant have rightly taken Cenvat credit on the inputs, capital goods and input services in question - Appeal dismissed - decided against Revenue.
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2022 (9) TMI 850
Reversal of CENVAT Credit on inputs and input services - erection and commissioning services - input services used for setting up of factory - dumpers used for transportation of ore from captive mines to the plant - falling under Chapter 87 and thus, excluded from the definition of the term capital goods under Rule 2(a)(A) of CCR or not - welding electrodes and MS Rolla Deck Sheet used for fabrication-erection and for repairs of machinery. CENVAT Credit - input services used for setting up of the factory - HELD THAT:- This issue is already settled in favour of the appellant by a co-ordinate bench of this Tribunal in BHARATHI CEMENT CORPORATION PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX AND (VICE-VERSA) [ 2017 (7) TMI 679 - CESTAT HYDERABAD] , where it was held that the services, in question, used for setting up of factory have to be treated as input service and would be eligible for Cenvat credit, as the factory has been setup for manufacture of final products which are liable to Central Excise duty. Therefore denial of Cenvat credit, in question, is contrary to the provisions of Rule 2(l) of Cenvat Credit Rules, 2004. CENVAT credit on dumpers - HELD THAT:- These are part of the material handling system, as such dumpers are used by the appellant for transfering the raw material (limestone) from the pit head to the crusher. The issue stands covered in favour of the appellant by Precedent order of this Tribunal in M/S. ADITYA CEMENT VERSUS CCE, JAIPUR-II [ 2016 (9) TMI 1127 - CESTAT NEW DELHI] , where it was held that dumpers are material handling equipments used for transportation of limestone from mining area to the crusher which is further used for the manufacture of cement; therefore, the dumpers are to be treated as used in or in relation to the manufacture of final products and thus, qualifies as an input . Availment of cenvat credit - Capital goods - welding electrodes - welding machine - MS rolla dalk profile sheet - HELD THAT:- The CENVAT credit on these items is allowable as inputs under Rule 2(k) as without the use of welding electrodes and welding machine no fabrication and repair and maintenance of plant and machinery is possible. In absence of such inputs, production of dutiable output is not possible. Thus, there is indirect use of these items in the manufacture of dutiable output. Similarly, the profile sheets are also required for use in fabrication of plant and machinery, for setting up of the factory. Thus the credit is available. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (9) TMI 849
Initiation of Recovery proceedings - transfer of goods, plant, and machinery (immoveable property) - bonafide purchaser - Section 34 of the U.P. Trade Tax Act - HELD THAT:- Section 34 of the Act shall be applicable only in a case where there is a transfer of immovable property belonging to the original assesee, during the pendency of any proceedings under the Act with the intention of defrauding any such tax or other dues. As per proviso to Section 34, nothing in Section 34 shall impair the rights of a transferee in good faith and for consideration. Thus, the power of Section 34 can be exercised only in a case where the transfer of immoveable property belonging to the original assessee is made during the pendency of any proceedings under the Act and such transfer is found to be with the intention to defraud any such tax and other dues. In the present case, the transfer of goods, plant, and machinery (may be treated as immoveable property) had taken place on 12.12.1985 and 01.01.1986 for a sale consideration of Rs. 12,12,000/. On that day, no assessment proceedings and/or any proceedings under the Act and/or recovery proceedings were pending. As observed hereinabove, the assessment proceedings were concluded in the year 1984 and the same was reopened in the year 1988. The recovery certificate was issued against the original assessee on 15.04.1990. Thus, at the time of transfer of immoveable property of the assessee which was for value/consideration, no proceedings under the Act were pending, Section 34 of the Act shall not be applicable. No error has been committed by the High Court in dismissing the revision applications confirming the orders passed by the Trade Tax Tribunal setting aside the endorsement of recovery certificate issued in favour of original assessee against the purchaser - Appeal dismissed.
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2022 (9) TMI 848
Levy of penalty under section 10-A of the Central Sales Tax Act, 1956 - Condition precedent for imposition of penalty - applicability of Concessional rate - failure on the part of Department to establish any means rea on the part of the applicant - malafide intention on the part of the applicant by using 'C' forms for purchase of goods or not - HELD THAT:- Admittedly, Section 10-A of the Act, 1956 was invoked upon the Assessing Authority finding violation of Section 10(b)(c) or (d) of the Act, 1956. Incidentally, clause (b), (c) and (d) pertain to falsely representing and purchasing any class of goods that goods of such class are covered by the certificate of registration; not being a registered dealer but falsely representing when purchasing goods in the course of inter-State trade or commerce that he is a registered dealer; or after purchasing any goods for any of the purposes specified in clause (b) or clause (c) or clause (d)] of sub-section (3) or sub-section (6)] of section 8 fails, without reasonable excuse, to make use of the goods for any such purpose. Admittedly, there is also a specific finding by the second appellate authority in the order dated 18.07.2013 of their being bonafide belief on the part of the revisionist and there being no ill intention on the part of the revisionist and no such ill intention having been proved by the department. Needless to mention that it is open to the authorities concerned to proceed against the revisionist in accordance with law in case any misuse of Form 'C' comes to the notice of the authority concerned or for default under any other clause of Section 10 of the Act, 1956. The order dated 18.07.2013 is set-aside so far as it remands back the matter to the authority concerned, leaving it open to the authorities concerned to proceed against the revisionist in accordance with law, in case any misuse of Form 'C' comes to the notice of the authority concerned or for default under any other clause of Section 10 of the Act, 1956 - The revision is partly allowed.
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2022 (9) TMI 847
Validity of assessment order - principal objection is that the VATO could not have re-assessed the income for the 1st Quarter of 2015-16 via the order dated 05.10.2018, in view of Rule 36B(7) of the DVAT Rules, 2005, since an objection qua the same period was pending before the OHA - Section 9(2) of the Central Sales Tax Act, 1956 read with Section 32 of the DVAT Act, 2004 - HELD THAT:- Once an assessment has taken place under the CST Act, it is almost axiomatic that the respondent/revenue has taken a position concerning the transactions in issue i.e., that they are inter-state sale transactions. Consequently, the concerned officer s jurisdiction to impose tax qua such transactions under DVAT Act stood ousted by virtue of Section 7 of the very same Act. The impugned orders cannot be sustained. The same are, accordingly, quashed - Appeal dismissed.
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Indian Laws
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2022 (9) TMI 846
Dishonor of Cheque - vicarious liability can be fastened on the partner of the firm or not - role of the respondent as a partner in the firm is sufficient or not - who is the person liable to be proceeded against under the provisions of subsection (1) of Section 141 for being incharge of and responsible to the company at the time the offence was committed? - Section 141 and 138 of the NI Act - HELD THAT:- The time when the offence under Section 138 can be said to have been committed by the company. It is common place that an offence means an aggregate of facts or omissions which are punishable by law and, therefore, can consist of several parts, each part being committed at different time and place involving different persons. The provisions of Section 138 would require a series of acts of commission and omission to happen before the offence of, what may be loosely called dishonour of cheque can be constituted for the purpose of prosecution and punishment. Who is liable? - Vicarious liability - HELD THAT:- The principles discernible from the aforesaid decision of this Court in the case of Ashutosh Ashok Parasrampuriya [ 2021 (10) TMI 431 - SUPREME COURT ] is that the High Court should not interfere under Section 482 of the Code at the instance of an accused unless it comes across some unimpeachable and incontrovertible evidence to indicate that the Director/partner of a firm could not have been concerned with the issuance of cheques. This Court clarified that in a given case despite the presence of basic averments, the High Court may conclude that no case is made out against the particular Director/ partner provided the Director/partner is able to adduce some unimpeachable and incontrovertible evidence beyond suspicion and doubt. In the case on hand, it is found that the clear and specific averments not only in the complaint but also in the statutory notice issued to the respondent. There are specific averments that the cheque was issued with the consent of the respondent herein and within her knowledge. This was sufficient to put the respondent herein to trial for the alleged offence. It is said so because the case of the respondent that at the time of issuance of the cheque or at the time of the commission of the offence, she was in no manner concerned with the firm or she was not incharge or responsible for daytoday affairs of the firm cannot be on the basis of mere bald assertion in this regard. The same is not sufficient. It is not in dispute, that no reply was given by the respondent to the statutory notice served upon her by the appellant. In the proceedings of the present type, it is essential for the person to whom statutory notice is issued under Section 138 of the NI Act to give an appropriate reply. The person concerned is expected to clarify his or her stance. If the person concerned has some unimpeachable and incontrovertible material to establish that he or she has no role to play in the affairs of the company/firm, then such material should be highlighted in the reply to the notice as a foundation. If any such foundation is laid, the picture would be more clear before the eyes of the complainant. The complainant would come to know as to why the person to whom he has issued notice says that he is not responsible for the dishonour of the cheque - The object of notice before the filing of the complaint is not just to give a chance to the drawer of the cheque to rectify his omission to make his stance clear so far as his liability under Section 138 of the NI Act is concerned. When in view of the basic averment process is issued the complaint must proceed against the Directors or partners as the case may be. But, if any Director or Partner wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he is really not concerned with the issuance of the cheque, he must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his contention - Quashing of a complaint is a serious matter. Complaint cannot be quashed for the asking. For quashing of a complaint, it must be shown that no offence is made out at all against the Director or Partner. Appeal allowed.
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2022 (9) TMI 845
Reopening of award by the Facilitation Council - Sub-section (3) of Section 18 of MSMED Act - HELD THAT:- In the case on hand, the claim of respondent no.1 was rejected by the Facilitation Council by the decision dated 17.02.2009. Since the claim stood rejected, it was like an award and respondent no.1 ought to have initiated other proceedings to challenge the award. Instead, he chose to put repeated pressure on the Facilitation Council to review its earlier decision. Unmindful of the fact that they have no such power, the Facilitation Council reopened its earlier decision and passed the award. The High Court completely overlooked the inherent lack of jurisdiction on the part of the Facilitation Council to pass the award dated 27.01.2016. What is worse is the fact that the illegality committed by the Facilitation Council in the year 2016 has now received a stamp of approval, by the High Court remanding the matter back to the Facilitation Council. The High Court has failed to examine the powers conferred upon the Facilitation Council. The High Court has also omitted to take note of the fact that MSMED Act was not intended to provide a gateway for hopelessly time barred claims. The appeal is allowed and the impugned order of the High Court is set aside.
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