TMI Tax Updates - e-Newsletter
September 3, 2024

Case Laws in this Newsletter:

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

Articles

1. ASSETS HELD OUTSIDE INDIA IN CONTRAVENTION OF SECTION 4 OF FOREIGN EXCHANGE MANAGEMENT ACT, 1999

   By: DR.MARIAPPAN GOVINDARAJAN

2. Writ petition is not admissible if an Assessee files an appeal after the limitation period and does not avail the benefit of Amnesty Scheme

   By: Bimal jain

News

1. Gross and Net GST revenue collections for the month of Aug, 2024

2. Transforming Financial Landscapes: Building Resilience for Economic Stability (Keynote Address by Shri Swaminathan J, Deputy Governor, Reserve Bank of India - August 30, 2024 - at the ‘Banking Transformation Summit - Season 2’ organised by CNBC TV 18 in Mumbai)

3. Cabinet approves a 309 Km long new line project: To provide the shortest rail connectivity between two major commercial hubs - Mumbai and Indore

4. APEDA and IRRI South Asia Regional Centre organize workshop for healthier rice-based food innovations

Notifications

Customs

1. 57/2024 - dated 31-8-2024 - Cus (NT)

Sea Cargo Manifest and Transshipment (Third Amendment) Regulations, 2024.

GST - States

2. 02/2024-State Tax (Rate) - dated 6-8-2024 - Himachal Pradesh SGST

Amendment in Notification No. 1/2017-State Tax (Rate), dated the 30th June, 2017

3. 08/2024 – State Tax - dated 14-8-2024 - Jharkhand SGST

Amendment in Notification No. 04/2024-State Tax, dated the 21st March, 2024

4. 04/2024 – State Tax (Rate) - dated 14-8-2024 - Jharkhand SGST

Amendment in Notification No. 12/2017-State Tax (Rate), dated the 29th June, 2017

5. 03/2024 – State Tax (Rate) - dated 14-8-2024 - Jharkhand SGST

Amendment in Notification No. 2/2017-State Tax (Rate), dated the 29th June, 2017

6. 02/2024 – State Tax (Rate) - dated 14-8-2024 - Jharkhand SGST

Amendment in Notification No. 1/2017- State Tax (Rate), dated the 29th June, 2017

Circulars / Instructions / Orders

DGFT

1. Trade Notice No. 16/2024-2025 - dated 31-8-2024

Extension of Interest Equalization Scheme (IES) for Pre and Post shipment Rupee Export Credit for One month beyond August, 2024

Customs

2. 12/2024 - dated 31-8-2024

Implementation of the Sea Cargo Manifest and Transshipment Regulations (SCMTR)

Highlights / Catch Notes

GST

• Tax liability determined via audit findings upheld despite irregular memos; SCN valid.

  Case-Laws - HC : The petitioner challenged the issuance of multiple audit memos determining tax liability beyond the stipulated period u/s 65(4) of the CGST/DGST Act. While the multiple audit memos indicating findings and demanding tax payment were irregular u/s 65(6), the impugned show cause notice (SCN) premised on the audit report findings is within the statutory framework. Any irregularities in issuing audit memos do not impinge the validity of the SCN. Therefore, the petition to quash the SCN at the threshold stage cannot be accepted, and the petition is disposed of.
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• Court Upholds Bank Account Attachment for Unpaid GST, Emphasizes Revenue Protection Over Section 67 Duration Limits.

  Case-Laws - HC : The High Court dismissed the petition challenging the provisional attachment of the petitioner's bank accounts u/s 83(1) of the CGST/DGST Act. The court held that the pre-condition of initiation of proceedings under Chapter XII, XIV or XV was satisfied as proceedings u/s 67 had commenced prior to the attachment order. The contention that the attachment order's validity was limited until the conclusion of Section 67 proceedings was rejected. The court clarified that the only requirement is the commencement of proceedings under the relevant chapters, which was fulfilled. The petitioner's argument that the order should be set aside due to the controversy involving a question of law was also dismissed, as the object of provisional attachment u/s 83(1) is to protect government revenue, irrespective of the nature of the controversy. The court found the attachment order justified to safeguard government revenue based on the estimated GST value allegedly unpaid by the petitioner.
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• GST Registration Cancellation Overturned Due to Inadequate Notice and Lack of Specific Allegations in SCN.

  Case-Laws - HC : The impugned show cause notice (SCN) for cancellation of GST registration was cryptic and failed to clearly outline the reasons, thereby violating principles of natural justice. It did not specify the alleged fraud, statements wilfully misstated, or facts suppressed. A show cause notice must enable the noticee to respond to allegations before any adverse order. The subsequent cancellation order also lacked reasoning, merely referencing the deficient SCN, and retroactively cancelled registration without proposing such action in the SCN. Despite allegations of availing ITC from non-existent firms and wrongful ITC passing, these were absent from the SCN. The petitioner's reply was unavailable due to illness, substantiated by medical proof. Consequently, the cancellation order was passed in violation of natural justice principles and set aside, with directions to restore the petitioner's GST registration forthwith. The petition was allowed.
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• Tax demand unlawfully recovered without hearing petitioner; order quashed, case remanded for due process compliance.

  Case-Laws - HC : The court held that the impugned order and consequential recovery notice were issued in violation of principles of natural justice as the petitioner was not afforded an opportunity to establish their case before the authorities. The tax demand was recovered from the petitioner without due process. Consequently, the court set aside the impugned order and recovery notice. The matter was remitted back to the respondent authority for reconsideration after allowing the petitioner to file a reply and granting a personal hearing. The writ petition was disposed of accordingly.
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• Court Overturns Tax Assessment for Denying Hearing; Orders Reconsideration with 10% Payment Condition.

  Case-Laws - HC : The High Court quashed the orders passed by the respondent assessing officer for violating principles of natural justice by not providing an opportunity of personal hearing to the petitioner, despite the petitioner seeking additional time to file replies to show cause notices. The Court remanded the matters back to the respondent for fresh consideration after setting aside the impugned orders, subject to the petitioner paying 10% of the disputed tax demand for each assessment year within six weeks. The case pertained to discrepancies in Input Tax Credits for multiple assessment years from 2018-19 to 2022-23, wherein show cause notices were issued through an online portal, and the petitioner had filed replies but was denied a personal hearing before passing of final orders.
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• One-day delay in GSTR-3B filing led to tax reversal, court intervenes.

  Case-Laws - HC : One-day delay in filing GSTR-3B for September 2020 led to reversal of ITC. Petitioner filed GSTR-3B on 23.10.2020, one day late. Respondent issued Form GST DRC-01A on 22.03.2024, proposing tax, interest, and payment by 05.04.2024. On non-payment, respondent initiated section 73(1) proceedings and issued impugned show cause notice dated 16.05.2024. GST Council recommended extending GSTR-3B filing deadline for 2017-18 to 2020-21 retrospectively from 01.07.2017. Court held one-day delay deserved consideration and reversal of ITC u/s 73(1) detrimental to petitioner's interest. Show cause notice dated 16.05.2024 set aside, writ petition allowed.
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• Violation of Natural Justice: GST Orders Quashed for Lack of Proper Notice.

  Case-Laws - HC : Impugned orders were passed against petitioner without serving show cause notice or providing opportunity for personal hearing, violating principles of natural justice. Mere uploading of notices on GST Portal under 'View Notice and Orders' and 'View Additional Notices and Orders' tabs cannot be deemed sufficient service. As a small concern, petitioner was unaware of notices on portal until contacted by department. Orders passed ex parte without hearing petitioner are unsustainable and violate Articles 14 and 19(1)(g) of Constitution. Impugned orders set aside and matter remanded to department for fresh consideration after providing opportunity to petitioner.
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• Opportunity for personal hearing denied, order quashed; excess ITC availed on reverse charge inputs & non-reversal on credit notes.

  Case-Laws - HC : Order quashed due to violation of natural justice principles by not granting proper opportunity for personal hearing. Excess input tax credit availed on inputs subject to reverse charge mechanism and non-reversal of credit on reversed credit notes. Matter remanded for reconsideration after granting personal hearing to petitioner within stipulated timeframe. Final orders to be passed in accordance with law after following due process.
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• Anticipatory bail denied as summons under CGST Act Section 70 not equivalent to arrest u/s 69.

  Case-Laws - HC : The High Court rejected the application for grant of anticipatory bail filed by the applicants u/s 438 of the Criminal Procedure Code. The Court held that the application was not maintainable as the summons were issued u/s 70 of the CGST Act, 2017, which deals with the power of the appropriate officer to summon any person to give evidence or produce documents in an inquiry. The Court distinguished this from Section 69, which deals with the power to arrest a delinquent person. The Court relied on the Supreme Court's decision in Choodamani Parmeshwaran Iyer & Anr, which held that provisions of Section 438 cannot be invoked if summons are issued u/s 69. The Court found no significant difference between Sections 69 and 70 and held that the application for anticipatory bail was not maintainable and liable to be rejected.
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• Notification questioned over lack of Council nod; interim reprieve for petitioners, authorities to justify stance.

  Case-Laws - HC : Notification No. 56/2023 prima facie appears ultra vires Section 168A of CGST Act, 2017 due to lack of GST Council recommendation, rendering consequential actions based on it invalid. Court finds examination required regarding force majeure applicability based on 49th GST Council meeting minutes, granting respondent authorities opportunity to present stance and materials. Interim protection granted to petitioners against impugned assessment order dated 26.04.2024 with no coercive action permitted until next date. Respondents directed to file affidavits by 19.08.2024.
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• GST Applies to Transfer of Buildings on Government Land as Service, Not Sale; Taxed at 18% Under Schedule II of CGST Act.

  Case-Laws - AAR : This case deals with the classification of supply and taxability under GST for the handover of building, civil structures, and railway siding constructed by the applicant on government land to a new lessee (OMCL). The key points are: 1) The transfer of building without ownership rights in the underlying land does not constitute a 'sale' under GST. 2) The consideration received by the applicant from OMCL for handing over the constructed assets is not merely a monetary transaction but constitutes a supply of service. 3) The applicant's agreement to refrain from removing the constructed assets against consideration from OMCL is treated as a supply of service under Entry 5(e) of Schedule II of the CGST Act. 4) This service is classifiable as 'Other Miscellaneous Service' (SAC 999792) and taxable at 18% GST rate.
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Income Tax

• Petition dismissed for rectifying wrong ITR format as assessee knew proper filing procedure.

  Case-Laws - HC : The High Court dismissed the petition seeking rectification of mistake in filing the wrong income tax return (ITR) format, as the assessee had full knowledge of filing the incorrect ITR. The Court observed that the assessee had filed the subsequent year's ITR in the correct format after revising it, indicating awareness of the proper procedure. The assessee has the remedy u/s 154 to seek necessary rectifications by filing an application, which the tax authority shall decide based on merits and allow the assessee to file the correct return, if required. No further adjudication by the Court is necessary at this stage.
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• Receivables Interest Imputation Debated: Court Directs TPO to Examine Bills, Adhere to Kusum Healthcare Precedent.

  Case-Laws - HC : The appellant relied on the Delhi High Court's judgment in Kusum Health Care Pvt. Ltd., which held that once working capital adjustment is granted, there is no need to impute interest on outstanding receivables at year-end as it gets subsumed in the working capital adjustment. The Tribunal agreed with this proposition but directed the TPO to examine the bills and ascertain whether interest should be imputed on bills realized after the credit period of 70 days. The High Court modified the order, directing the TPO to look into the entire aspect in light of the Kusum Health Care judgment and pass orders accordingly, without imputing interest on the bills.
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• Mauritian Entity Wins Tax Exemption in Share Sale to Indian Firm; Validates Tax Residency Certificate and Treaty Benefits.

  Case-Laws - HC : Legal dispute concerning the taxability of capital gains arising from the sale of shares by a Mauritian entity to an Indian company. The central issues revolve around the applicability of the India-Mauritius Double Taxation Avoidance Agreement (DTAA), beneficial ownership of shares, substance over form principle, treaty shopping, and grandfathering clause under Article 13(3A) of the DTAA. The court held that the Mauritian entity cannot be considered lacking economic substance or engaged in treaty abuse solely based on its incorporation in Mauritius. Investments routed through Mauritius cannot be presumed illegitimate, and the issuance of a Tax Residency Certificate (TRC) by Mauritius authorities is sacrosanct. The court emphasized that treaty benefits can only be denied in cases of sham transactions, fraud, or entities acting as mere conduits, subject to stringent standards of proof by the Revenue authorities. The court affirmed that the transaction was grandfathered under Article 13(3A) of the DTAA, excluding capital gains from taxation for shares acquired before April 1, 2017. Domestic tax legislation cannot override treaty provisions, and the Revenue cannot impose additional barriers beyond the Limitation of Benefits (LOB) clause in the DTAA. The court rejected the Revenue's arguments regarding beneficial ownership and held that the.
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• Revisional Authority's Order Overturned for Procedural Lapse in Section 263 Review of Income Tax Assessment.

  Case-Laws - HC : The High Court held that the Revisional Authority did not follow the proper procedure prescribed u/s 263 of the Income Tax Act while invoking its revisionary powers. The key points are: The Revisional Authority did not make a specific finding that the benefit claimed by the assessee u/s 37 was wrongly allowed by the Assessing Officer. The order merely stated that it was unclear whether the benefit was allowed after proper inquiry. Section 263 mandates that the Revisional Authority examine the records, provide an opportunity of hearing to the assessee, and make necessary inquiries before passing orders. The Revisional Authority did not arrive at a conclusion that the assessee was not entitled to claim the prior period expenses u/s 37. There was no satisfaction reached by the Revisional Authority that the original assessment order was erroneous and prejudicial to the revenue's interests. The Revisional Authority cannot reopen an assessment in a casual or whimsical manner without satisfying the statutory requirements. The impugned order was issued in contravention of the requirements specified u/s 263, and the Court decided in favor of the assessee.
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• Tax Official's Dismissal Upheld for Misconduct: Unauthorized Absence and Media Statements Against Government Justified Penalty.

  Case-Laws - HC : The High Court upheld the dismissal from service imposed as a penalty on the petitioner, an Additional Commissioner of Income Tax, for his acts of misconduct. The two charges proved were unauthorized absence from duty for a prolonged period from 09.11.1998 to 19.06.2000 and making unauthorized, scandalous statements to the media against the government, damaging its reputation. The court found the punishment proportionate to the gravity of multiple acts of misconduct, including making false allegations against senior officials. The petitioner's past record of suspension and disciplinary proceedings for misconduct further justified the dismissal. The High Court held that dismissal was not a disproportionate penalty, and the state did not use a sledgehammer to crack a nut in this case.
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• Income escaping assessment challenged over jurisdiction of Assessing Officer.

  Case-Laws - HC : Faceless assessment of income escaping assessment challenged due to non-compliance with Section 151A. Notices issued by Joint Assessing Officer (JAO) instead of Faceless Assessing Officer (FAO). Held that JAO lacked jurisdiction to issue impugned notices, particularly in view of Section 151A read with Central Government notification dated 29 March 2022. Following Hexaware Technologies Ltd. case, impugned notices held illegal and invalid as JAO had no jurisdiction. Petition allowed in favor of assessee.
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• Tax Authority Can Rectify Overlooked AMP Expenses; Tribunal Supports Excluding Discounts, Warranty, Packing from AMP.

  Case-Laws - HC : Rectification of a mistake apparent from the record u/s 154 of the Income Tax Act. The assessee had provided specific details and facts regarding the nature of alleged Advertisement, Marketing, and Promotion (AMP) expenses before the Transfer Pricing Officer (TPO) and during the personal hearing before the Dispute Resolution Panel (DRP), which were not considered while passing the order. The High Court held that if an order is passed without considering the materials on record, and subsequently brought to the attention of the Income Tax Authority u/s 154, it is open for the Authority to rectify such a mistake. The DRP, after considering the previously unconsidered materials, concluded that trade discounts, warranty expenses, and packing expenses should be excluded from AMP expenses for transfer pricing comparison. The Appellate Tribunal affirmed the DRP's jurisdiction u/s 154 to rectify the mistake, as it constituted a non-consideration of material on record. The decision was in favor of the assessee.
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• Project cost recovery via tolls, ads & rentals - no notional income. Land lease, no revenue subsidy. Deep discount bonds interest allowed.

  Case-Laws - AT : Notional income rejected as assessee had recovered project cost from toll, advertisement and rental income, hence no designated return earned. Revenue subsidy disallowed as land was leased, not transferred by Noida. Interest u/s 43B on deep discount bonds allowed on accrual basis. Capital subsidy not to be reduced, no recomputation of depreciation. Claim of depreciation u/s 32 and brought forward depreciation remanded to CIT(A) for adjudication as not adjudicated earlier.
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• Penalty Waived for Retired Army Personnel: No Audit Required Due to Bona Fide Belief in Sales Commission Income.

  Case-Laws - AT : Penalty u/s 271B was levied on the assessee for failure to get accounts audited despite turnover exceeding prescribed limit u/s 44AB. The Assessing Officer relied solely on information provided by Mother Dairy regarding assessee's ledger account, without providing opportunity to assessee for rebuttal. The assessee, a retired army personnel and distributor of Mother Dairy, had bona fide belief that no books of accounts were required since income was from commission on sales. Section 273B provides immunity from penalty u/s 271B where assessee establishes reasonable cause or bona fide belief. Considering assessee's bona fide belief and status as retired army personnel and distributor, penalty was held not leviable. Decision favored the assessee.
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• Transfer Pricing Adjustments Ordered Due to Non-Compliance; Annual FAR Analysis Required; Capital Expenditure on Jigs Upheld.

  Case-Laws - AT : Transfer pricing adjustment to international transactions - Non-satisfaction of conditions prescribed u/r 10B(4) for using multiple year data. Assessee required to perform Functional Asset and Risk (FAR) analysis for each year as factors of comparability may differ. Previous years' data cannot be extrapolated without establishing identical comparability factors. TP study report relying on previous two years' data without current year data rightly rejected. Comparables selection in manufacturing segment - Rejection of certain comparables upheld due to differences in product, raw material, related party transactions exceeding 25%, and impact of intangibles on margins. Remitted to TPO to examine export filter objection for one comparable. TP adjustment in ITES segment - Transactions not covered under MAP resolution substantial. Remitted to TPO/AO for FAR analysis of non-UK transactions to determine if pricing factors similar to UK transactions for adopting MAP price. Expenditure on jigs and fixtures treated as capital expenditure, not revenue, as providing long-term enduring benefit. Assessee's policy of writing off over two years upheld. Working capital adjustment - Remitted to TPO to verify and allow similar adjustment as previous years, if granted earlier.
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• Pharma Tax Rulings: Freebies to Doctors, PF/ESI Disallowances, R&D Deductions, Biotechnology Grant, and Interest Income.

  Case-Laws - AT : Various issues related to allowability of expenses, deductions, transfer pricing adjustments, and other income tax matters for a pharmaceutical company. Key points are: Expenses incurred in providing freebies to doctors are disallowed u/s 37(1) retrospectively from 14-12-2009 as per MCI regulations and CBDT circular. Disallowance restricted to 5% of business advancement and sales promotion expenses, and entire doctor sponsorship expenses disallowed. Employee PF/ESI contribution disallowed for late deposits. Deductions u/ss 80-IC and 80-IE allowed for certain incomes like notice pay, scrap sale, service tax refund, miscellaneous income, export benefits, insurance claims, forex gains, cash discounts. Interest income eligible after excluding related expenses. Government biotechnology grant not connected to eligible units, hence disallowed. Administrative expenses allocated based on human resources instead of turnover. Leave encashment provision disallowed u/s 43B, allowed on actual payment. Weighted deduction u/s 35(2AB) allowed for certain R&D expenses like clinical trials, product registration, interest, labor charges, furniture, electrical equipment. Disallowance u/s 14A not added to book profits under 115JB. Transfer pricing adjustments: No adjustment for corporate guarantee fee already offere.
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• Taxpayer's claim for higher cost of shares allowed; lower capital gains.

  Case-Laws - AT : Assessee claimed higher cost of acquisition of shares during assessment proceedings, leading to lower capital gains computation. CIT(A) rejected the claim, relying on Goetze (India) Ltd. judgment. However, Karnataka High Court held that CIT(A) has power to consider fresh claims, even if not made in original/revised return. Matter restored to AO to examine assessee's entitlement to higher cost of acquisition of Rs. 184.09 per share after affording reasonable opportunity. Assessee's appeal allowed for statistical purposes. Relevant legal principles on appellate authorities' jurisdiction to entertain fresh claims and cost of acquisition determination discussed.
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• Penalty for Late TDS Certificates Overturned Due to Time-Barred Order and Justified Delay in Issuance.

  Case-Laws - AT : Penalty u/s 272A(2)(g) was levied for not issuing TDS certificates in Form 16A to deductees on time. The issue pertained to the period of limitation for issuing the penalty notice. It was held that where the Assessing Officer initiates penalty proceedings in the assessment order, that date is the relevant date for reckoning limitation u/s 275(1)(c). In this case, the quantum proceedings were completed in December 2008, and the Assessing Officer initiated penalty proceedings then. Therefore, the last date for passing the penalty order was June 30, 2009. However, the penalty order was passed on September 29, 2009, beyond the prescribed time limit, rendering it barred by limitation. Additionally, on merits, the delay in issuing TDS certificates was linked to the delay in depositing TDS, for which the explanation was accepted. Consequently, the penalty u/s 272A(2)(g) was deleted.
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• Offshore company's revenue excluding service tax/GST taxable under presumptive taxation rules.

  Case-Laws - AT : Non-resident company's receipts taxable u/s 44BB(2) excluding service tax/GST. Relying on Mitchell Drilling International Pty Limited case, service tax being statutory levy should not form part of gross receipts for computation u/s 44BB. Addition of service tax receipts to taxable income deleted. Appellate Tribunal upheld exclusion of service tax from gross receipts for presumptive taxation u/s 44BB.
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Customs

• India Implements Sea Cargo Manifest Regulations for Better Customs Transparency and Efficiency.

  Circulars : The circular notifies the phased implementation of the Sea Cargo Manifest and Transshipment Regulations (SCMTR) across various customs ports in India. SCMTR aims to enhance transparency, predictability of cargo movement, and advance information collection for expeditious risk-based customs clearance. It stipulates obligations, roles, and responsibilities for stakeholders involved in import/export goods movement and specifies changes to manifest declaration formats and timelines. After transitional provisions, the new SCMTR formats will become mandatory as per the scheduled dates for different ports, ranging from September 11, 2024, to December 1, 2024. Stakeholders are advised to start filing in the new format immediately on a parallel basis to ensure smooth cargo clearance. Chief Commissioners are instructed to monitor SCMTR implementation progress, and difficulties, if any, should be reported to the Board.
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• Amendment extends transitional provisions for Sea Cargo Manifest Regulations across Indian Customs Ports until late 2024.

  Notifications : This notification amends the Sea Cargo Manifest and Transshipment Regulations, 2018, extending the transitional provisions for different Customs Ports until varying dates ranging from September 10, 2024, to November 30, 2024. The amendment substitutes the words "till 31st August, 2024" in Regulation 15(2) with a table specifying the dates for different Customs Ports until which the transitional provisions will apply. The table lists the Customs Ports and the corresponding dates, with the latest date being November 30, 2024, for all Customs Ports not explicitly mentioned. The notification aims to provide a staggered implementation timeline for the Regulations across various Customs Ports in India.
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• Dispute Over Classification of Imported Glass; Show Cause Notice Issued Without Considering Petitioner's Responses.

  Case-Laws - HC : Challenge related to classification of imported goods - light green tinted float glass under CTH 70052110 or CTH 70051010. Invocation of extended period of limitation examined. Issuance of notice prior to show cause notice regulated by Pre-Notice Consultation Regulations, 2018. Audit consultative letter received referring to waiver of show cause notice and penalty, indicating proceedings under sub-section (1) of section 28. Petitioner's replies not considered before issuing show cause notice under sub-section (4) of section 28. Petitioner imported light green float glass classifying under CTH 70051010 since 2011, not questioned earlier. Final assessments and appellate orders accepting classification not challenged. No reasons recorded for issuing consultative letter under sub-section (1) and then show cause notice under sub-section (4). Invoking enlarged period of limitation erroneous. Direction to clear goods under CTH 70051010 subject to appellate orders not being reversed.
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• Customs broker's license revoked, deposit forfeited over alleged diamond overvaluation, but denied cross-examination rights.

  Case-Laws - HC : Customs broker's license revocation and forfeiture of security deposit due to alleged overvaluation of imported rough diamonds faced procedural irregularities. CESTAT observed respondent's request for cross-examination of persons whose statements implicated respondent was denied without specific grounds, violating principles of natural justice and Regulation 17(4) of CBLR requiring reasons for denial. CESTAT noted allegations of telephonic conversations lacked evidence of respondent's active role in overvaluation. Department failed to comply with CBLR provisions when cross-examination was requested, forming the sole ground for allowing appeal. Neither proposed questions nor grounds raised this issue, leading to appeal dismissal.
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• Import Classification Overturned Due to Inadequate Testing Standards; Customs Lab Report Deemed Unreliable by Court Decision.

  Case-Laws - AT : The imported goods, calcite powder, were classified by the department as calcium carbonate under CTH 28365000, while the appellant declared it as calcite powder falling under CTH 25369030. The department's claim was based solely on the Customs Laboratory report of Kandla, which opined that the goods were calcium carbonate. However, classification under CTH 28365000 requires conformity with IS standards and parameters, which were not tested. Additionally, Board Circulars 03/2007-Cus and 15/2019-Cus endorsed that the Customs Laboratory, Kandla lacked the facility to test the imported goods. The decision in M/S. ASIAN GRANITO INDIA LIMITED VERSUS C.C. -MUNDRA held that test reports from ill-equipped laboratories cannot be accepted. Consequently, the department's claim of classification change based solely on the Kandla Laboratory report cannot be sustained. The impugned order was set aside, and the appeal was allowed.
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DGFT

• Govt extends interest subsidy scheme for MSME exporters until Sept 2024 under current terms.

  Circulars : The trade notice extends the Interest Equalization Scheme (IES) for Pre and Post shipment Rupee Export Credit for one month beyond August 2024, until September 30, 2024. However, this extension is applicable only for MSME Manufacturing exporters, with the same terms and conditions as the present scheme. The notice refers to guidelines issued by the Reserve Bank of India and relevant RBI notifications on the subject for further reference.
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Corporate Law

• NCLAT Removes Appellant from Case, Lifts Asset Freeze Due to Lack of Accusations in SFIO Report.

  Case-Laws - AT : The NCLAT held that there is sufficient justification for deletion of the Appellant as a party Respondent and removal of restraints on his movable and immovable property. The SFIO Final Report did not name the Appellant as an accused, and there were no specific allegations of wrongdoing against him. No charge of fraud or any other wrongful act was brought against the Appellant in the subsequent charge-sheet. The NCLT erred in observing that the Appellant had not been discharged by the criminal court, as there were no criminal proceedings pending against him. The withdrawal of the lookout circular was an additional proof that the Appellant was no longer a relevant party. While investigations can continue, the inordinately delayed investigation and consequential freeze of assets prejudicially affected the Appellant's rights. To meet the ends of justice, the NCLAT allowed the appeal, removing the Appellant's name from the list of Respondents and vacating the restraint/freeze on his assets.
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IBC

• Appeal Dismissed: NCLAT Confirms Rejection of Refiled Application Under Insolvency and Bankruptcy Code as Unmaintainable.

  Case-Laws - AT : This summary concerns the maintainability of a fresh application u/s 94 of the Insolvency and Bankruptcy Code. The appellant had filed an application u/s 94 in 2020, which was dismissed by the adjudicating authority on 01.02.2024 without granting liberty to file a fresh petition. The appellant claimed liberty to refile based on an order dated 28.02.2024, where the adjudicating authority permitted withdrawal of an IA with liberty to refile u/s 94(1). However, the adjudicating authority did not express any opinion on the maintainability of the fresh application. The NCLAT held that since no liberty was granted in the 01.02.2024 order, the adjudicating authority did not err in examining the maintainability of the fresh application filed on 29.02.2024. Consequently, the NCLAT dismissed the appeals challenging the adjudicating authority's order dated 17.05.2024, which had rejected the fresh application as unmaintainable.
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• Appellate Tribunal Upholds Liquidator's Share Auction; Dismisses Valuation Challenge and Orders Share Transfer.

  Case-Laws - AT : Appellant challenged the auction sale of shares by the Liquidator, claiming undervaluation and lack of proper valuation, as shares were sold only at book value despite higher actual value. The Tribunal held that the pending challenge to the rights issue by Alliance Broadband cannot impact the auction sale of shares on an 'as is where is basis'. The Liquidator's lack of physical possession of shares did not render the auction illegal, as shares became part of the liquidation estate by operation of law. Alliance Broadband was directed to handover original share certificates to the Liquidator, which were subsequently handed over to the successful auction purchaser. The Liquidator indicated in the sale notice about non-possession of physical shares and steps being taken to acquire them. As a shareholder of Alliance Broadband, the Corporate Debtor's shares were rightly auctioned by the Liquidator after liquidation order. The 77,500 shares were not undervalued, valued by an IBBI Registered Valuer, and sold above book value. The pending challenge to the rights issue does not impact the lawful auction sale. The Appellate Tribunal dismissed the appeals, finding no error in the Adjudicating Authority's order rejecting the appellant's application.
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Central Excise

• Department's Delay in Adjudication Leads to Tribunal Overturning Order; 22-Year Inaction on Assessment Finalization.

  Case-Laws - AT : Delayed adjudication of show cause notice without reasonable cause - Delay in finalizing assessments and issuing demand - Classification of goods under appropriate tariff item - Finalization of provisional assessment made earlier u/r 9B - Period of dispute spanning multiple years - Held that there was no justification for the Department to delay issuing show cause notice for nearly one year after Tribunal's order directing conclusion of de novo proceedings within four months. Revenue failed to finalize assessment within normal period, Tribunal intervened directing completion within four months, but proceedings took 14 months violating time frame. Catena of judgments consider delayed adjudication without reasonable cause as ground for setting aside order. Delayed finalization of 14 months against Tribunal's direction of four months is fatal, impugned order set aside, appeal allowed. Once classification issue decided, no action taken for 22 years to finalize assessment as per demand raised u/s 11A, demand raised after 14 years without finalizing provisional assessment.
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VAT

• Court Rules Penalties Require Evidence, Not Assumptions, in Excise Duty Cases; Upholds Fair Valuation Standards.

  Case-Laws - HC : Justification of upholding the penalty imposed u/s 51(7)(b) for goods imported from an excise duty-exempt state on the ground of undervaluation based on MRP provisions under the Central Excise Act. The court held that the invoices were issued by the manufacturer in the excise duty-exempt state, leading to a lower purchase price. Merely because the MRP was higher, it cannot be presumed that the invoices were undervalued. The dealer would further sell the goods to distributors, and a lower sale price does not necessarily imply tax evasion. Imposing a penalty based on such presumption would be an exercise of arbitrary power. Additionally, the court ruled that the power to impose penalties u/s 51(7)(b) should be exercised by the assessing authority after determining the actual valuation, not during roadside checking. The questions were answered in favor of the assessee.
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Case Laws:

• GST

• 2024 (9) TMI 54
  Time Limitation - refund of tax - HELD THAT:- It is the petitioner s case that pursuant to the said notice, an audit was conducted under Section 65 of the CGST Act/the DGST Act much beyond the period as stipulated under Section 65 (4) of the CGST Act /the DGST Act. The petitioner states that it continued to receive the audit memos from time to time indicating that the petitioner was liable to pay certain amounts plus tax and the petitioner has duly discharged the same. The petitioner s grievance regarding the multiple audit memo appears to be justified. In terms of Section 65 (6) of the CGST Act /the DGST Act, the proper officer is required to inform the registered person about the findings of the audit, his rights and obligations and the reasons for such findings. The CGST Act / DGST Act does not provide for issuance of the multiple audit memos determining the liability of a taxpayer. In the present case, it is found that the audit memos not only indicated the findings of the auditors, but also called upon the petitioner to pay the tax as determined, along with the interest and penalties as applicable. The impugned SCN cannot be quashed for the said reason. Although, the impugned SCN may be premised on the findings of the audit report, the same is within the statutory framework. Any irregularities in issuing the audit memos does not impinge the validity of the impugned SCN. It cannot be accepted that the impugned SCN is liable to be set aside at the threshold stage - petition disposed off.

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• 2024 (9) TMI 53
  Provisional attachment of petitioner s bank accounts - liability of GST on sale of liquor - HELD THAT:- The opening sentence of the Section 83 (1) of the CGST Act/DGST Act indicates that an order of provisional attachment under Section 83 (1) of the CGST Act/the DGST Act can be passed after the initiation of any proceedings under Chapter XII, Chapter XIV or Chapter XV of the CGST Act/the DGST Act. In the present case, this pre-condition is clearly satisfied as proceedings under Section 67 of the CGST Act/the DGST Act had been initiated prior to the issuance of the order dated 10.05.2024 provisionally attaching the petitioner s bank account. The contention that since the impugned order only mentions the proceedings under Section 67 of the CGST Act/the DGST Act, the life of the impugned order was confined till the conclusion of the proceedings, is unpersuasive. We find no basis for the said contention. The only requirement under Section 83 (1) of the CGST Act/the DGST Act is that an order of provisional attachment should be issued after the proceedings under Chapter XII, Chapter XIV or Chapter XV of the CGST Act/the SGST Act/the IGST Act, have commenced. As stated above, this condition is fully satisfied. In the present case, the proceedings against the petitioner are continuing and the Show Cause Notice dated 31.07.2024 under Section 74 of the CGST Act/the DGST Act has been issued. The petitioner s contention that the impugned order is liable to be set aside as the controversy involved is centred around the question of law is also unpersuasive. The object of provisional attachment under Section 83 (1) of the CGST Act/the DGST Act as is apparent from the plain language of Section 83 (1) of the CGST Act/the DGST Act is to protect Government revenue. It is not relevant whether the controversy involves a question of law or a question of fact - In the present case, the respondents have conducted a brief exercise of estimating the value of GST, which according to the Commissioner has not been paid by the petitioner. It is also apparent that the impugned order has been passed to protect the Government revenue. There are no merit in the present petition - petition dismissed.

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• 2024 (9) TMI 52
  Violation of principles of natural justice - impugned SCN is cryptic and does not clearly set out the reasons as to why the petitioner s GST registration was proposed to be cancelled - HELD THAT:- The impugned SCN does not set out the details of the nature of the alleged fraud. It also does not indicate the statement which is alleged to be wilfully misstated or any fact, which is alleged to have been suppressed - The purpose of a show cause notice is to enable the noticee to respond to the allegations made against him. It is a fundamental principle of natural justice that a person cannot be condemned unheard. He must have full opportunity to respond to the allegations before any adverse order is passed on the basis of those allegations. In the present case, the impugned SCN fails to meet the requisite standards of a show cause notice. The impugned cancellation order also does not indicate any reason for cancelling the petitioner s GST registration. It merely states that the same is in reference to the impugned SCN. It is also important to note that the petitioner s GST registration was cancelled with retrospective effect from 24.07.2019. However, no such action was proposed in the impugned SCN - It is apparent that the impugned cancellation order has been passed in violation of the principles of natural justice and therefore, is liable to be set aside. The reply furnished by the petitioner is not on record. However, the petitioner has placed screenshots of the portal indicating that he had sent the reply. He states that he was unable to reply to the SCN on account of his illness. The petitioner has also annexed the proof of his medical condition - there are allegations against the petitioner for availing ITC from a non-existing firm and wrongfully passing of the input tax credit. It is also alleged that the petitioner is non-functional. However, none of these allegations find mention in the SCN. The impugned cancellation order is set aside - the petitioner s GST registration is directed to be restored forthwith - petition allowed.

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• 2024 (9) TMI 51
  Violation of provision of Section 16 of the TNGST/CGST Act, 2017 - provision of Section 16 of the TNGST/CGST Act, 2017 - HELD THAT:- Considering the facts that the notices and orders were uploaded in the portal under the Additional Notices Column and therefore, the petitioner had no occasion to view the said column and the impugned order was passed without affording an opportunity to the petitioner to establish his case before the authorities concerned, which is clear violation of principles of natural justice and the entire tax demand was recovered from the petitioner, this Court is inclined to set aside the impugned order dated 29.12.2023 in Ref.No.ZD331223253373R and consequential recovery notice in Roc.369/A1/2024, dated 17.05.2024 issued by the second respondent to the third respondent are set aside. While setting aside the impugned order as well as the recovery notice, this Court remits the matter back to the first respondent for reconsideration. The petitioner is directed to file a reply within a period of two (2) weeks. After receipt of the reply, the authorities concerned shall fix a date for personal hearing by sending a physical notice to the petitioner providing 14 days time and thereafter, pass orders on merits and in accordance with law. This Writ Petition is disposed of.

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• 2024 (9) TMI 50
  Violation of principles of natural justice - non-consideration of the reply filed by the petitioner - opportunity of personal hearing contemplated under Section 75(4) of the CGST Act, was not granted to the petitioner - HELD THAT:- In the present case, a detailed reply was uploaded by the petitioner in the portal on 12.04.2024 and the impugned order came to be passed on 23.04.2024. On perusal of the impugned order, it is mentioned that the dealer has not filed reply for the defects and hence, the defect is confirmed. Without taking into consideration the detailed reply of the petitioner dated 12.04.2024 and without application of mind, the respondent has passed a non-speaking order, which is clear violation of principles of natural justice and the same is not sustainable in law. Hence, this Court is inclined to set aside the impugned order dated 23.04.2024 in Ref.No.ZD330424177038F passed by the respondent and hence, the same is set aside. This Writ Petition is disposed of.

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• 2024 (9) TMI 49
  Dismissal of appeal - appeal was filed beyond the statutory time limit prescribed under the Act and it was barred by limitation - service of SCN - Violation of priniciples of natural justice - HELD THAT:- Considering the facts that all the notices were uploaded in the portal under the view additional notices/orders and therefore, the petitioner had no occasion to view the said column and the impugned order was passed without affording an opportunity to the petitioner to establish his case before the authorities concerned, which is violation of principles of natural justice and the reason assigned for not filing an appeal, in time, appears to be genuine and the petitioner has paid the entire tax amount, the delay of 25 days in filing the appeal is condoned and the respondent is directed to take the appeal on record and pass orders on merits and in accordance with law. This Writ Petition is disposed of.

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• 2024 (9) TMI 48
  Violation of principles of natural justice - Opportunity of personal hearing not provided - Calling for the records relating to the orders passed by the Respondent - discrepancies in Input Tax Credits in respect of the assessment years 2018-19, 2019-20, 2020-21, 2021-22 and 2022-23 - HELD THAT:- It is evident that it is not the case of the Petitioner that the show cause notices uploaded in the Portal were not noticed by the Petitioner. It is also the case of the Petitioner that to the show cause notices issued through Portal, replies were sent to the Respondent. But, again when the Respondent issued reminder notices, dated 11.01.2024, calling for the Petitioner to file additional replies on or before 19.01.2024 and fixing the date of personal hearing on 18.01.2024, it is the case of the Petitioner that the Petitioner sought for time of two weeks for filing additional replies by replies dated 18.01.2024 - it is evident that the impugned orders were passed on 29.01.2024 even before the expiry of the two weeks as sought for by the Petitioner on 01.02.2024. It is settled law that if an Assessing Officer intends to confirm a show cause notice after filing of a reply by way of an assessment order, it is the bounden duty of the Assessing Officer to provide an opportunity of personal hearing before passing an assessment order, but, in the present cases, it is lacking. Hence, this Court is of the view that the impugned orders came to be passed, without affording opportunity of a personal hearing to the Petitioner to establish their case, thereby violating the principles of natural justice. The matters in all these Writ Petitions are remanded back to the Respondent for consideration afresh, by setting aside the impugned orders in all these Writ Petitions on condition that the Petitioner shall pay 10% of the disputed tax demand, for each of the assessment years, within a period of six weeks from the date of receipt of a copy of this order - Petition allowed by way of remand.

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• 2024 (9) TMI 47
  Challenge to assessment order levying tax and penalty - Petitioner paid tax but appealed against penalty only - HELD THAT:- In the present case, though the show cause notice was issued and impugned assessment order was passed by imposing the tax and penalty, the petitioner has paid the tax and the challenge was made only against the penalty imposed by the respondents. However, the 2nd respondent has rejected the appeal filed by the petitioner on the ground that the penalty alone cannot be challenged. Therefore, this writ petition has been filed by the petitioner challenging the impugned order. Since the petitioner has already paid the entire tax amount and filed an appeal only against the penalty imposed by the respondents, it is not proper for the 2nd respondent to reject the said appeal vide intimation dated 07.02.2024. Hence, this Court is inclined to direct the 2nd respondent to take the appeal on record. The intimation dated 07.02.2024 issued by the 2nd respondent is set aside - The 2nd respondent is directed to take the appeal on record and pass appropriate orders on merits and in accordance with law, after providing an sufficient opportunity to the petitioner, as expeditiously as possible. Petition disposed off.

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• 2024 (9) TMI 46
  Validity of demand raised due to one-day delay in filing GSTR-3B for September 2020 - reversal of ITC - HELD THAT:- Admittedly, the petitioner after availing ITC, filed its GSTR 3B for September, 2020, on 23.10.2020, i.e., with a delay of one day. Though the petitioner stated that due to covid-19 situation, the delay had occurred, the respondent refused to accept the same and issued Form GST DRC 01A on 22.03.2024, proposing to levy tax along with applicable interest and directing the petitioner to pay the same by 05.04.2024. On the failure of the petitioner to pay the amount demanded, the respondent initiated section 73(1) proceedings and issued the show cause notice dated 16.05.2024 which is impugned herein. It is seen from the records that the GST Council in its 53rd meeting, recommended to extend the deadline for filing GSTR-3B returns for the financial years 2017-18, 2018-19, 2019-20, and 2020-21 and the said extension applies retrospectively from 01.07.2017. The case of the petitioner, that too, one day delay in filing GSTR 3B, deserves for consideration. However, the respondent refused to condone the delay and also proposed to reverse the ITC under section 73(1) of the GST Act, which in the opinion of this court, is detrimental to the interest of the petitioner and is hence, liable to be set aside. The show cause notice dated 16.05.2024 passed by the respondent is set aside and this writ petition stands allowed.

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• 2024 (9) TMI 45
  Violation of principles of natural justice - impugned orders were merely uploaded to the GST Dashboard under View Notice and Orders and View Additional Notices and Orders tabs in the GST Portal - petitioner was not aware of the notices being uploaded in the GST Portal - HELD THAT:- The impugned orders came to be passed against the petitioner, behind their back, as the respondent-Department has not taken any steps to serve any notices/communications, particularly, show cause notice/notice of personal hearing to the petitioner directly through physical mode of service and made it available only in the GST Portal, hence, the petitioner, was not aware of any such notices, and only when the respondent contacted the petitioner over phone, and intimated about the tax dues pursuant to the order passed during June, 2024, the petitioner became aware; and the petitioner, being a small concern, obviously, there wouldn t have been any occasion for them to view the GST Portal then and there. It is found that, in the instant case, the petitioner has not been heard before passing the impugned orders and this is sufficient to hold that the impugned orders are nothing but ex parte orders, which are unsustainable in the eye of law and the notices/communications, which were merely uploaded to the GST Dashboard under View Notice and Orders and View Additional Notices and Orders tabs in the GST Portal, can no longer be deemed to be a sufficient service. This Court is inclined to set aside the impugned order dated 31.10.2023 and the consequential demand order dated 01.11.2023, as the same suffers from violation of principles of natural justice and any such order came to be passed against an Assessee (petitioner in this case) without providing any opportunity of personal hearing and filing reply is directly hit by Articles 14 and 19 (1) (g) of the Constitution of India - The matter is remanded back to the first respondent for fresh consideration. Petition allowed by way of remand.

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• 2024 (9) TMI 44
  Violation of principles of natural justice - order passed without providing a proper opportunity for a personal hearing - Availment of excess ITC on the inputs on which tax is payable under RCM - non-reversal of the ITC availed on credit notes reversed by them - HELD THAT:- Considering the fact that though the petitioner sought for an adjournment for personal hearing to establish their case, the impugned order came to be passed without providing an opportunity to the petitioner, which is clear violation of principles of natural justice, the impugned order bearing GSTIN.33AACCA4371K1ZR/2017-2018, dated 26.12.2023 passed by the first respondent is set aside. While setting aside the impugned order, this Court remits the matter back to the first respondent for reconsideration. The petitioner is directed to file their reply within a period of two (2) weeks from the date of receipt of a copy of this order. Thereafter, the first respondent is directed to afford opportunity of personal hearing by providing 14 days time and thereafter, pass final orders in accordance with law. Petition disposed off by way of remand.

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• 2024 (9) TMI 43
  Grant of anticipatory bail - summons issued u/s 70 of the CGST Act, 2017 - invocation of provisions of Section 438 of Cr.P.C. - HELD THAT:- It is trite law that when the maintainability of a particular proceeding is challenged before a Court of law apart from the merits of the case the Court at the first sight is under obligation to make an assurance in itself that the matter which is going to be taken up by it is legally maintainable and it is only after ensuring about the maintainability of the said proceedings the Court has to take any further steps in this matter. The factual scenario which reveals from the record is that at this juncture summons under Section 70 of CGST Act, 2017 have been issued against the present applicants. Hon ble Apex Court in the Choodamani Parmeshwaran Iyer Anr case [ 2023 (7) TMI 1008 - SUPREME COURT] pronounces that if the summons are issued under Section 69 of the CGST Act, 2017 to any person for the purpose of recording his statement, the provisions of Section 438 of Cr.P.C. cannot be invoked, but however in the case in hand summons have been issued not under Section 69 of the CGST Act but under Section 70 of the CGST Act. This Court finds hardly any difference between the two. It has been clarified above by quoting the provisions of Section 69 and Section 70 of CGST Act that Section 70 deals with the power of appropriate officer to summon any person to give evidence or to produce documents or any other thing only in any inquiry whereas Section 69 deals with the power of commissioner to authorize any officer of the Central Tax to arrest a delinquent person as explained under Section 69 (1) CGST Act, 2017. This Court is not hesitant to hold that the present application for grant of anticipatory bail moved by the applicants is not maintainable under Section 438 of the Criminal Procedure Code (Section 482 of of Nagrik Suraksha Sahinta, 2023) - the present application for grant of anticipatory bail being not maintainable is liable to be rejected and is hereby rejected.

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• 2024 (9) TMI 42
  Challenge to notification bearing No. 56/2023 dated 28.12.2023 - ultra vires Section 168A of the CGST Act, 2017 on the ground that there is no recommendation of the GST Council which is the mandatory requirement for the purpose of issuance of the said notification, or not - HELD THAT:- It prima facie appears that the notification bearing No.56/2023 is not in consonance with the provisions of 168(A) of the Central GST Act, 2017. If the said notification cannot stand the scrutiny of law, all consequential actions so taken on the basis of such notification would also fail. This Court also finds that an examination would be required as regards the applicability of the force majeure in respect to the notification bearing No. 56/2023 taking into account the contents of the Minutes of the 49th Meeting of the GST Council. However for the purpose of deciding the same, this Court is of the opinion that an opportunity has to be granted to the Respondent Authorities to place on record their stand as well as bringing on record the materials on which they claim the applicability of the force majeure. This Court is of the opinion, that the Petitioners herein are entitled to an interim protection pending the notice. Till the next date, no coercive action shall be taken on the basis of impugned assessment order dated 26.04.2024 - The Respondents are directed to file their affidavits on or before 19.08.2024.

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• 2024 (9) TMI 41
  Classification of supply - Sale of building and covered under clause no.5 to Schedule III of the CGST Act, 2017 or not - handover of Building and Civil Structure, including railway siding, by the applicant to OMCL - HELD THAT:- Sale is a transfer of ownership in immovable property for a money consideration. Further, Building structure and railway siding constructed on land is attached to it and is part of land. Without land, any building or any portion of building structure has no existence, and for transfer of ownership in building some rights in land is essential. Building is in nature of addition to land. After construction of building on land the property has to be sold as land and building. Building cannot be sold without appropriate claim in land. Therefore, for selling building or building structure or any portion/part of it, proportionate share in land is also to be transferred. In the instant case, the applicant has no right or ownership in the land. In view of the above, the interpretation of applicant that handover of Building structure and railway siding, by the applicant to OMCL tantamount sale of building and covered under clause no. 5 of Schedule -III of CGST Act, 2017, is not correct. Further, applicant has received consideration on handover of Building structure and railway siding. The applicant s other interpretation that consideration received from OMCL is merely a transaction in money, is also not correct. Whether the activity of handing over the possession of Building Civil Structures, Railway siding constructed/erected by the applicant on the land belonging to the State Government, to the new lessee (OMCL) on as is where is basis for a monetary consideration vide the said deed dated 28.06.2023 between the applicant and OMCL constitute a supply or not? - HELD THAT:- The applicant has the obligation to remove the buildings/structures and railway siding within the time specified in the lease deed. However, in the event the buildings/structures and railway siding erected/set-up by the applicant are not removed by the applicant, the State Government have the liberty to sell or dispose of the same in such manner as deemed fit without having liability to pay any compensation to the applicant in respect of the said buildings/structures and railway siding. The contractual agreement between the applicant and OMCL for handing over Building and Civil Structure, including railway siding in lieu of consideration, by the applicant implies that the applicant effectively agrees to the obligation to refrain from removing the constructed/erected structures against receipt of consideration of Rs. 20,15,16,990/- for the benefit of OMCL is covered under the scope of supply under Section 7 (1) of the CGST Act and the said contractual agreement of agreeing to the obligation to refrain from an act is treated as a supply of Service as per entry SI. No. 5(e) of the Schedule-II of the CGST Act. It is a service classifiable under other miscellaneous service (SAC 999792) and taxable @18% under SL No. 35 of Notification no. 11/2017 CT (Rate) date 28.06.2017.

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• Income Tax

• 2024 (9) TMI 40
  ITAT rejecting Petitioner s application u/s 254(2) - HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court [ 2024 (3) TMI 1347 - BOMBAY HIGH COURT] which has considered the impugned order as well as the application filed and we find no error in the order passed by the ITAT. We agree with the ITAT that application itself is in effect seeking a review of the ITAT s order However, the petitioner may, if so advised, file an appeal against the order of the Income Tax Appellate Tribunal (ITAT) [ 2022 (9) TMI 588 - ITAT PUNE] . Needless to say, we have not expressed any opinion on the merits of the matter. Special Leave Petition is, accordingly, dismissed.

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• 2024 (9) TMI 39
  Allowable deduction of interest paid on the borrowings - Application of Section 14A and Section 36(1)(iii) - AO disallowed the interest holding that no deduction is to be allowed in respect of expenditure incurred in relation to income which does not form part of the total income under the Income Tax Act - As decided in HC [ 2024 (3) TMI 254 - BOMBAY HIGH COURT] if expenditure is incurred on earning the dividend income, that much of the expenditure which is attributable to the dividend income has to be disallowed and cannot be treated as business expenditure. As the dividend income from the two companies is not taxable and in that scenario the expenditure incurred on interest paid on funds borrowed in respect of investment in shares of two operating companies is hit by Section 14A of the Act inasmuch as the dividend received on such shares does not form part of the total income. HELD THAT:- Permission to appear and argue the matter in person is granted. Heard the learned counsel appearing for the petitioner. We are not inclined to interfere with the impugned judgment passed by the High Court. Hence, the Special Leave Petition is dismissed.

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• 2024 (9) TMI 38
  Deduction qua bad debts u/s 36(1)(vii) denied - as decided by HC [ 2023 (8) TMI 92 - DELHI HIGH COURT] appellant/assessee is entitled to straightaway claim deduction towards irrecoverable bad debts u/s 36(1)(vii) of the Act. There is no dispute that the conditions prescribed u/s 36(2) of the Act stand fulfilled HELD THAT:- We are not inclined to condone the delay in filing the Special Leave Petition. The Special Leave Petition is dismissed on the ground of delay.

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• 2024 (9) TMI 37
  Search and Seizure - Validity of Order passed u/s 132(3) prohibiting petitioners/assessee from removing articles (liquor bottles) in the cupboard at the resident without prior permission of the IT Authorities - As decided by HC 2023 (11) TMI 654 - MADHYA PRADESH HIGH COURT] Revenue has failed to satisfy that this was a case which made it impossible/impracticable for Revenue to seize the liquor found at the premises of petitioners and, therefore, it can be presumed that there were no compelling reasons to invoke Section 132(3) - Delay filling SLP - HELD THAT:- There is gross delay of 200 days in filing this Special Leave Petition. The reasons assigned are neither satisfactory nor sufficient in law to be condoned. The application seeking condonation of delay is dismissed. Consequently, the Special Leave Petition also stands dismissed on the ground of delay.

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• 2024 (9) TMI 36
  Penalty u/s 271(1)(c) - Defective notice - cessation/remission of liability u/s 41(1) - HC [ 2023 (6) TMI 1219 - DELHI HIGH COURT] decided it is necessary for the AO to indicate, broadly, as to the provision/limb under which penalty proceedings are triggered against the assessee. Clearly, this has not happened in the instant case - even in the assessment order, whereby proceedings were triggered, there is no indication whatsoever, as to which limb of Section 271(1)(c) of the Act was triggered. HELD THAT:- Delay condoned. The Special Leave Petition is dismissed.

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• 2024 (9) TMI 35
  Allowable business expenditure/commercial expediency - Disallowance of claim of expenditure on the ground that it was not incurred wholly and exclusively for the purposes of the business - Delay filling SLP - as decided by HC [ 2022 (11) TMI 782 - ORISSA HIGH COURT] considering that the expenditure was in the nature of moneys advanced to the subsidiaries, it cannot be said that there is no intimate connection between the Assessee and the two subsidiaries as far as the business activities are concerned. HELD THAT:- There is gross delay of 526 days in filing the Special Leave Petition. We are not satisfied with the explanation offered for condonation of delay. Hence, the application seeking condonation of delay is dismissed. Consequently, the Special Leave Petition is also dismissed, keeping open the question of law, if any.

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• 2024 (9) TMI 34
  Validity of reopening of assessment - two consecutive notices issued - as decided by High court [ 2023 (11) TMI 1282 - RAJASTHAN HIGH COURT] notices impugned were issued way back on 25.03.2023 and 26.03.2023. The petitioner did not chose to challenge those orders but participated in the proceedings. Notice u/s 143(2) was issued way back on 22.06.2023 followed by notice u/s 142(1) on 21.07.2023, wherein, materials relied upon and the petitioners are also been disclosed to the petitioner. HELD THAT:- As petitioner sought permission to withdraw the special leave petition with liberty to approach the High Court by way of a review petition so as to bring to the notice of the High Court the eighteen cases, which are enumerated in para `D of pages 7-8 of the memorandum of Special Leave Petition, which are pending consideration before the High Court and in which identical issues have been raised. His submission is placed on record. The Special Leave Petition stands dismissed as withdrawn with the aforesaid liberty.

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• 2024 (9) TMI 33
  Delay filling SLP - delay of 424 days - Validity of demand notice while issuing draft Assessment order u/s 144C - Curable defect u/s 292B - in the draft assessment order ACIT has ordered issuance of demand notice and to initiate penalty proceeding u/s 271(1)(c) HC [ 2023 (3) TMI 416 - KARNATAKA HIGH COURT] at demand notice stems out of an order of assessment and it is enforceable. It meets the assessee with civil consequences. The argument on behalf of the Revenue that the demand notice was not enforced is fallacious and noted only to be rejected. We have carefully considered Section 292B - The mistake which the ACIT has done in passing the final order at the stage of draft order is not curable u/s 292B HELD THAT:- As noted from the said application that the matter was entrusted to a panel typist for preparation of the paper book some time in October, 2023, there is no averment as to what happened to subsequent thereto. SPL was filed on 22.07.2024 and for the long period of nine months there is no explanation offered at all for seeking condonation of delay. In the circumstances, we are not inclined to condone the delay of 424 days in filing this Special Leave Petition. The application is hence, dismissed. Consequently, the Special Leave Petition also stands dismissed.

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• 2024 (9) TMI 32
  Miscellaneous application for restoration of the SLP - Special leave petition [ 2020 (12) TMI 1403 - SC ORDER (LB)] as dismissed on the ground of low tax effect. However, the question of law is left open Plea is founded on the Circular dated 28.08.2018 which sets out the circumstances where notwithstanding the low tax effect, the Revenue is required to contest the matter. More specifically the Revenue relies on the Clause (e) of the Circular, which reads as under:- (e) Where addition is based on information received from external sources in the nature of low enforcement agencies such as CBI/ ED/ DRI/ SFIO/ Directorate General of GST Intelligence (DCG). Assessee has however contested the prayer for restoration. The copy of the counter affidavit be furnished to the learned counsel for the petitioner.

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• 2024 (9) TMI 31
  Revision u/s 263 - Tribunal setting aside an order passed by the Commissioner u/s 263 which is a second proceedings initiated under the said provision - addition u/s 68 - delay filling SLP - As decided by HC [ 2022 (11) TMI 1432 - CALCUTTA HIGH COURT] after the first order was passed u/s 263 AO has conducted a de novo reassessment proceedings, issued summons to the directors and the shareholders as well as the assessee and examined the books of accounts, bank statement and the other documents produced to discharge the onus on them about the identity, creditworthiness and genuineness of the transaction and the AO has recorded their statement during the reassessment proceedings where he has questioned an elucidated answer about all these factors. Tribunal has elaborately discussed the factual position and noted as to how the enquiry was conducted by the assessing officer after the first order was passed u/s 263. HELD THAT:- There are no justifiable grounds for condoning the delay of 530 days. The special leave petition is dismissed on the ground of delay.

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• 2024 (9) TMI 30
  Reopening of assessment u/s 147 - change of opinion - Delay in filling SLP - as decided by HC [ 2022 (7) TMI 1338 - ORISSA HIGH COURT] Mere change of opinion on the same materials, set aside the reassessment notice and the consequential assessment order by its judgment - HC [ 2022 (7) TMI 1338 - ORISSA HIGH COURT] quashes the notice issued to the Petitioner u/s 148 and the consequential order of the NAFAC rejecting the objections of the Petitioner to the reopening of the assessment. HELD THAT:- There is a delay of 558 days in filing the Special Leave Petition which has not been satisfactorily explained. Special Leave Petition is dismissed on the ground of limitation.

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• 2024 (9) TMI 29
  Computation of deduction u/s 10A - Income derived from rental income from Infosys BPO Ltd and BSNL Chennai Ltd as profits derived u/s 10A - delay filling SLP - Aa decided by HC [ 2023 (1) TMI 224 - KARNATAKA HIGH COURT] assessee was receiving the amount as rental income and in Hewlett Packard, the amount was received as interest on deposits and the staff loans. Therefore, in our considered view, the conditions such as location of unit in an STPI having been complied with, the benefit of Section 10A of the IT Act must be available to the assessee in this case also. HELD THAT:- Having regard to the inordinate delay of 469 and 465 respectively in filing these special leave petitions, even on merits we are not inclined to entertain the same. The special leave petitions are, accordingly, dismissed on the ground of delay as well as on merits.

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• 2024 (9) TMI 28
  Rectification of mistake - penalty notice passed u/s 221(1) imposing penalty on account of filing wrong return - HELD THAT:- As apparent that the petitioner was having full knowledge of having filed return in the wrong format. More so, as he had also filed return for the AY 2014-15 in the ITR Form 7, which was later on revised by him and ITR was filed under Form No.5 subsequently. Once he has himself corrected his ITR for the subsequent AY 2014-15, there was no occasion for the petitioner not to correct his ITR for AY 2013-14. The petitioner has remedy in terms of Section 154 as above for seeking necessary rectifications. If such an application is moved by the petitioner, the respondent shall decide the same on the basis as above, and allow the petitioner, if required, to file return. No further adjudication is required by this Court at this stage. Petition is accordingly dismissed in aforesaid terms.

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• 2024 (9) TMI 27
  TP Adjustment - DRP Re-characterizing inter-company receivables as unsecured loan - Whether the Ld. Tribunal erred in not appreciating that the Ld. DRP/TPO/AO erred in law on facts and circumstances of the case by notionally treating receivables as separate international transaction, which is admittedly not leveled? HELD THAT: We find that the appellant relied on the judgement of Kusum Health Care Pvt [ 2017 (4) TMI 1254 - DELHI HIGH COURT] - The Tribunal has considered the judgement of the Delhi High Court and stated that they have no quarrel to the proposition laid down by the aforesaid judgement that once working capital adjustment is granted to the assessee, there is no need for further imputation of interest on outstanding receivables at the end of the year as the same gets subsumed in the working capital adjustment. After agreeing with this proposition, the Tribunal has directed the TPO to once again look into the bills submitted by the appellant and directed TPO to ascertain whether interest is to be imputed on bills that have been realised after credit period of 70 days. In our view, the direction given to the TPO to examine the bills is correct, however, the direction for imputing interest on the bills was not necessary and the TPO is required to act keeping in view the judgment of Kusum Health Care [ 2017 (4) TMI 1254 - DELHI HIGH COURT] Accordingly, the impugned order is modified to the extent that the TPO shall look into the entire aspect in light of the judgement of Kusum Health Care (Supra) and pass orders accordingly.

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• 2024 (9) TMI 26
  Accrual of income in India - Capital gains tax payable by the Mauritian entity in regard to the sale of shares to the petitioner therein - investments originating from Mauritius - Beneficial ownership of shares - Treaty Benefits under India-Mauritius DTAA - whether sale of shares was not covered by Article 13 (3A) of the DTAA ? - determination of shareholding pattern and the role of key individuals - Validity of order of the AAR as concluded that the Applicant was controlled by Tiger Global Management LLC (TGM LLC), USA, through a web of entities based in Cayman Islands and Mauritius. The AAR observed that the real control of the company did not lie within Mauritius, but with TGM LLC, USA. Beneficial Ownership of Shares - HELD THAT:- The finding in the impugned order that TGM LLC is the holding or parent company of the petitioner is wholly erroneous. The petitioners have consistently taken the unvacillating position with respect to the shareholding position of the writ petitioners and of TGM LLC being the investment manager of the petitioner and not the holding or parent company. None of the funds invested in the petitioner originated from TGM LLC, there has been no equity participation or investments made by TGM LLC in the writ petitioners or any evidence put forth with respect to any monies being repatriated to TGM LLC from the writ petitioners. As a result, we find that the AAR erred when it concluded that TGM LLC is the parent or holding company and has incorrectly observed that the said contention was uncontroverted by the petitioners. This incorrect and misconceived finding of fact by the AAR has thus sullied the impugned order and rendered it riddled with manifest and patent errors. The facts as they emanate from the record categorically establish that the petitioner cannot be said to be an entity lacking in economic substance. The petitioners were intended to operate as pooling vehicles for investments, held a Category 1 GBL, had aggregated funds from more than 500 investors located across 30 jurisdictions worldwide and had TGM LLC as its investment manager. The entire stockholding in Flipkart Singapore was acquired between October 2011 to April 2015 and the share transfer in question was undertaken on 18 August 2018. The petitioner is stated to have incurred expenditure amounting to USD 1,063,709 roughly translating to MUR 36,436,182 as against the threshold of MUR 1,500,000 as prescribed in Article 27A and additionally had its total liabilities and shareholders equity at USD 1,764,819,299 with its net increase in shareholders equity resulting from operations being pegged at USD 267,633,593. Therefore, and in view of the aforenoted facts the petitioner cannot be said to be lacking in economic substance or that it was domiciled in Mauritius with a sole view of engaging in treaty abuse. Income and Source of Funds - A parent or a holding company would have a legitimate right to exercise oversight and broad supervision over the affairs of its subsidiaries which could conceivably take the form of seats on the BoD, appointment of key managerial personnel, auditing of affairs of the subsidiary and so on. Subsidiaries are also recognised in law to have a distinct and independent legal persona which is liable to be ignored only in the event of apparent fraud, being interposed with a view to camouflage sham transactions or of being created to perpetuate an illegality and of being a mere puppet and lacking in economic substance. Merely because a parent entity may exercise shareholder influence over its subsidiary that would not lead to an assumption that the subsidiary in question was operating as a mere puppet or that it was wholly subservient to the parent entity. In light of the aforesaid, it is clear that merely because two of the members of the Board of the petitioner, namely, Mr. Charles P. Coleman and Mr. Steven Boyd are connected with the TG Group does not in itself render credence to the argument that the writ petitioners are mere puppets. An overall conspectus of the board resolutions reveals that the decisions were undertaken by the BoD of the petitioner collectively. Furthermore, though Mr. Charles P. Coleman was authorised to permit expenditures exceeding USD 250 million, the power thus conferred was a decision taken by the Board as a whole and any such decisions were necessarily required to be countersigned by the Group C Mauritian based directors. Moreover, the members of the BoD were also signatories to the Constitution document. In view of the aforesaid facts, the BoD of the writ petitioners cannot be said to be deprived of decision-making powers or reduced to a subservient status. Treaty Benefits under India-Mauritius DTAA - The mere factum of an entity being situated in Mauritius and of investments in Mauritius being routed through that nation cannot result in a default adverse inference or raise a presumption of illegality or of such an entity being a colourable device, nor are Mauritian entities required to satisfy any separate standard of legitimacy or stricter standard of proof. Thus Mauritius is one of the more favourable jurisdictions for FII s seeking to invest in India as a result of its proximity to India as well as the wide array of agreements that it had entered into with various nations across the globe. Liberalized exchange controls, favourable investment climates and the prevailing socio-political stability appears to have additionally favoured facilitation of Mauritius as a gateway for investments flowing into the Asian and African continent and accordingly lead to Mauritius becoming the preferred destination for various investors wishing to route investments towards South East Asian economies and with India subsequent to the liberalization measures adopted in 1991 seeing almost fifty percent of the FDI volume in India originating from Mauritius in the year 2012. Accordingly, and bearing in mind the observations rendered in Azadi Bachao Andolan [ 2003 (10) TMI 5 - SUPREME COURT] , Vodafone [ 2012 (1) TMI 52 - SUPREME COURT] and the facts and data available on the record, we are of the view that it would be wholly erroneous to presume that investments originating from Mauritius are inherently suspect or that fiscal residence of an entity in Mauritius would require viewing such entities through a tainted prism. The establishment of investment vehicles in tax friendly jurisdictions cannot be considered to be an anomaly or give rise to a presumption of being situate in those destinations for the purpose of evading tax or engaging in treaty abuse. The decision of Azadi Bachao Andolan acknowledged how nations seek to compete with each other by highlighting treaty benefits that could be obtained by investors from its treaty networks, because of which there was nothing inherently objectionable about treaty shopping but that any concerns surrounding the practice of treaty shopping is best left for the consideration of the executive which may examine the political and economic implications of any measures taken by it to combat treaty shopping, particularly in light of the changing world order requiring nations to adopt measures to attract capital and technological inflows. In a similar vein the decision of Vodafone [ 2012 (1) TMI 52 - SUPREME COURT] noted that there has been a steady increase in multinational corporations seeking to invest in markets and businesses across the globe, which would thus lend credence to the position that establishment of offshore companies could be motivated by bona fide commercial purposes. Accordingly, the decisions of the Supreme Court accepted the changed world order necessitating cross-border movement of capital and investments and those in turn resulting in the creation of trans-national corporations, the incorporation of entities in different jurisdictions and thus facilitating investments in diverse parts of the world which inevitably led to entities seeking to reside in jurisdictions with established treaty networks. The creation of new investment pathways ought not be halted by skepticism or mistrust except on the basis of well-established parameters. The principles of substance over form must be considered to be the prevailing norm and the Revenue entitled to doubt the bona fides of a transaction only in those situations where it be found that the transaction involves a sham device intended to achieve illegal objectives or formulated based on illegal motives. In light of the decisions rendered in Azadi Bachao Andolan and Vodafone, treaty shopping in itself cannot be rendered abhorrent unless it were categorically established that the device was incorporated with a view to evade tax and in a manner contrary to the intent of the Contracting States to the treaty. Therefore, it is only in those situations where no other conclusion can be drawn other than the entity being a conduit or lacking in commercial substance and intending to perpetuate fraud that the Revenue would be justified in doubting the nature and character of that transaction. The issuance of a TRC by the competent authority must be considered to be sacrosanct and due weightage must be accorded to the same as it constitutes certification of the TRC holding entity being a bona fide entity having beneficial ownership domiciled in a Contracting State to pursue a legitimate business purpose in a Contracting State. The Revenue would thus not be justified in doubting the presumption of validity attached to the TRC as it would inevitably result in an erosion of faith and trust reposed by Contracting States in each other. Piercing the corporate veil - The circumstances under which the Revenue could pierce the corporate veil of a TRC holding entity is restricted to extremely narrow circumstances of tax fraud, sham transactions, camouflaging of illegal activities and the complete absence of economic substance and the establishment of those charges would have to meet stringent and onerous standards of proof and the Revenue being required to base such conclusions on cogent and convincing evidence and not suspicion alone. It is only when the Revenue is able to meet such a threshold that it can disregard the presumption of validity which would be attracted the moment the TRC is produced and LOB conditions are fulfilled. Treaties are entered into by Contracting States in exercise of their sovereign powers and based on economic and political considerations. In view of the same, such reciprocal arrangements cannot be subjected to aspersions cast on its validity. It would accordingly be erroneous for courts to manufacture grounds of disqualification from treaty benefits over and above those as formulated by the Contracting States. Section 90 of the Act itself formulates the legislative intent to lend primacy to treaty enactments. Courts have accordingly taken the consistent stand that treaty benefits ought not be overridden by provisions and that the sanctity which attaches to a treaty restrains parties from attempting to subvert the same by way of unilateral amendments. There cannot be an assumption of treaty shopping and treaty abuse merely because a subsidiary or any related entity is established in a tax friendly jurisdiction. Action 6 of BEPS Action Plan, which paved the way for adoption of LOB clauses and PPT test in treaties as well as the principles emanating from the OECD Commentary on Article 29 reveals that treaties incorporate disentitlement provisions to deprive persons who were not intended to fall under the ambit of the treaty availing those benefits in an indirect manner. In that light and bearing in mind decisions rendered by foreign Courts in Cadbury Schweppes and Burlington, it would be erroneous to characterise legitimate business activities undertaken by entities as constituting treaty shopping, merely because it was situated in a favourable tax jurisdiction. Therefore, both Indian and International authorities have taken the consistent position that treaty benefits may be denied only in those cases where the transaction is a sham, where fraud is sought to be committed or where entities are incorporated as mere conduits and in a manner contrary to the schema of the treaty itself. The incorporation of LOB provisions in a taxation convention will result in those provisions being determinative of allegations of treaty abuse and purported illegitimate claims of treaty benefits. The right of the Revenue to cast aspersions on the validity or legitimacy of a transaction would be constrained by the requirements of exacting and compelling standards of proof with the onus placed squarely in the domain of the Revenue to establish that a transaction in question would be disentitled to the benefits of a treaty being a sham, a colourable device and imputed with illegality and giving rise to the conclusion that Contracting States never intended for such transactions being accorded treaty benefits. Contracting States did not intend for domestic taxation authorities to deploy their own subjective standards in view of the enactment of LOB provisions which had also adopted ascertainable standards to defenestrate presumptions of treaty abuse. It is the finding of this Court that taking any view to the contrary would amount to privileging domestic legislation over and above the enactments in the treaty provisions adopted by Contracting States and would amount to holding that jurisdiction inheres in taxing authorities to question the validity of transaction on parameters alien to the negotiated terms of the treaty. Furthermore, the LOB clause in the India-Mauritius DTAA came to be included when Chapter X-A had already come to exist and Article 27A accordingly chose to grandfather all transactions relating to alienation of shares acquired prior to 01 April 2017. This further lends credence to the position that the Contracting States formulated LOB provisions bearing in mind the enactments in the domestic legislation because of which the Revenue is not entitled to erect additional barriers towards the receipt of treaty benefits by parties. We find that LOB provisions and the TRC comprehensively and adequately addresses concerns in relation to potential treaty abuse and it would be impermissible for the Revenue to manufacture additional roadblocks or standards that parties would be required to meet in order to avail of DTAA benefits, subject to caveats of illegality, fraud and the transaction being in contravention of the underlying object and purpose of the treaty. The provision of Article 13 (3A) embodies the intent of the Contracting States to ring-fence all such transactions which had been consummated prior to 01 April 2017. Article 13 (3B) restricted its scope to prescribing separate tax rates for the period between 01 April 2017 till 31 March 2019 but no such tax rate was prescribed for capital gains arising from sale of shares acquired prior to 01 April 2017 which categorically demonstrates the intent of the parties to the India-Mauritius DTAA to exclude capital gains emanating from shares acquired prior to 01 April 2017 from the ambit of taxation. Therefore, the grandfathering clause in Article 13 (3A) would exclude the transaction undertaken by the writ petitioners from the ambit of capital gains tax. Domestic tax legislation cannot be interpreted in a manner which brings it in direct conflict with a treaty provision or with an overriding effect over the provisions contained in a DTAA since the same would in effect amount to accepting the right of the Legislature of one of the Contracting States to unilaterally amend or override the provisions of a treaty and would result in the elevation of a domestic subordinate legislation over that of the provisions embodied in a treaty entered into between sovereign nations. The argument that the transaction undertaken by the petitioners would not be grandfathered in light of Rule 10U is sans merit, as is the claim that sub-rule (2) takes away from the preceding provision of clause (d) of sub-rule (1), since the term without prejudice is intended to mean that sub-rule (2) would operate in contingencies not contemplated by sub-rule (1)(d) of Rule 10U. The imputation of beneficial ownership of TGM LLC over the writ petitioners is manifestly erroneous in light of the principles governing attributability of beneficial ownership. Notwithstanding that on facts it has been established that TGM LLC is not the parent or holding company of the petitioner, it is apparent in would be incorrect to ascribe beneficial ownership if a conduit was entitled to avail of income itself and was not contractually obligated to forward that income to any other entity. The concept of beneficial ownership would get attracted if it be established that the holder of income had no control over the income and merely holds the same till such time it be instructed to deploy that income to another entity or if the income is controlled or regulated by a third party with the holder having no real or substantive control over that income. Tested on those precepts, it is apparent that TGM LLC cannot be said to be the beneficial owner of shares since no evidence has been rendered to suggest that the writ petitioners are under a contractual or legal obligation to transmit revenue to TGM LLC or that the revenue obtained from transfer of shareholding was as a result of actions undertaken by the writ petitioners at the behest of TGM LLC. As a result, and in the absence of any material or evidence underlying the claims made with respect to beneficial ownership, we are of the view that such submissions are based on mere surmises and conjectures. We consequently and for all the aforesaid reasons come to the firm conclusion that the impugned order of the AAR suffers from manifest and patent illegalities. The impugned order takes a wholly untenable and unsustainable view with respect to the transaction in question. Its conclusion, therefore, that the transaction was aimed at tax avoidance is rendered arbitrary and cannot be sustained. The transaction, in our considered opinion, stands duly grandfathered by virtue of Article 13 (3A) of the DTAA. We affirm the view canvassed by the writ petitioners of the impugned transaction not being designed for avoidance of tax. The petitioners shall be entitled to all consequential reliefs.

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• 2024 (9) TMI 25
  Revision u/s 263 - amount claimed under the head prior period expenses, which, according to the respondents ought to have been disallowed under the provisions of Section 37 but was not disallowed in the original assessment proceedings u/s 143 (3) - HELD THAT:- There is no specific finding by the Revisional Authority that the benefit claimed by the assessee u/s 37 of the Income Tax Act was wrongly allowed by the AO. Rather, the impugned order categorically holds that it is not clear as to whether assessee was permitted the benefit after making the proper enquiry. The powers u/s 263 are to be invoked for reopening an assessment already concluded. Therefore, such powers cannot be invoked without proper enquiry and a satisfaction arrived at by the Revisional Authority that such powers u/s 263 are required to be invoked in any given case. Any power under any fiscal statute which empowers an Authority to reopen concluded assessment cannot be invoked without proper application of mind. Section 263 specifically provides that the Authority will call for and examine the record of the proceedings and upon giving the assessee an opportunity of being heard and after making or causing any such enquiry to be made as it deems necessary, pass such orders as the circumstances of the case may justify. Therefore, it is the mandate of the statute that the Revisional Authority will call for and examine the proceedings of the case and besides giving an opportunity to the assessee of being heard, he may make necessary enquiries or cause any such enquiries to be made, and thereafter pass orders as deemed fit and proper only after his satisfaction. From the impugned order it is apparent that the Revisional Authority has reopened the assessment by setting aside the assessment order passed earlier and directing the AO to cause proper and detailed enquiry and thereafter, make the assessment a fresh. Such power to reopen or order for fresh assessments cannot be de hors the prescription of the statute. Reopening of assessments already concluded cannot be ordered in a casual or whimsical manner. That apart, the prescription in a fiscal statute has to be rigorously followed and any power exercised under any such fiscal statute cannot be exercised by the authority prescribed therein without satisfying the requirement of the prescriptions in the statute. Revisional Authority in the impugned order did not come to a specific conclusion as to whether the benefit was claimed by the assessee u/s 37. A plain reading of the impugn order reveals that the matter requires examination. A finding that the assessee is not entitled to claim the benefits of a prior period has not been arrived at by the Revisional Authority while passing the impugned order. There is no finding as to whether the records were called for and examined by the Revisional Authority. Revisional Authority merely concluded that it could not be confirmed accurately as to whether the assessee had not claimed the deduction in the earlier years. The assesse would not be disentitle to claim any benefit which may have accrued to the assessee for the earlier period at a later stage when any enforceable demand is made, unless the same is specifically prohibited in the statue as had been held in CIT vs. Nathmal Tolaram [ 1972 (5) TMI 1 - GAUHATI HIGH COURT] Under such circumstances, if any benefit had accrued to the assessee for the earlier period which by oversight or other bonafide reasons was not claimed by the assessee, then the assessee cannot be precluded from claiming such a benefit in the later assessments unless the same is specifically prohibited under the provisions of the Act. There was no satisfaction reached by the Revisional Authority that there was an error in the assessment order passed earlier by the AO and that erroneous order is also prejudicial to the interests of revenue. This Court is of the considered opinion that the impugned order was issued in total contravention of the requirements specified u/s 263 - Decided in favour of assessee.

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• 2024 (9) TMI 24
  Misconduct of duty by Additional Commissioner of Income Tax - Penalty of dismissal from service imposed by the Disciplinary Authority on the petitioner for his acts of misconduct - whether sledgehammer has been used by the State in this case to crack a nut? - In the year 1976, petitioner was appointed as Income Tax Officer, Group A in Junior Time Scale after he successfully qualified the All India Civil Services Examination. Over a period of time, petitioner earned promotions and became Deputy Commissioner of Income Tax, posted at Bombay. On account of his ill health and medical treatment at AIIMS, New Delhi, the petitioner was transferred to Delhi at his request on compassionate grounds as Officer on Special Duty till 20.11.1989, after which he was posted as Deputy Commissioner (Exemptions) at Delhi with charge over 74 trusts within his jurisdiction. Petitioner received letter from ACIT, calling him upon to furnish the CBI details of various properties belonging to one Romesh Sharma, a henchman of Dawood Ibrahim. Petitioner issued summons u/s 131 of the Income Tax Act and also wrote a letter to the Recovery Officer to attach the helicopter of Romesh Sharma so as to ensure that the same was not used by the political parties. The said Romesh Sharma had voluntarily disclosed his assets worth Rs. 51,00,000/- under the Voluntary Disclosure Scheme, though the said assets did not belong to him. Being a patient of acute angina and depression, the petitioner was finding it difficult to work so he submitted leave application on 12.10.1998, which leave was sanctioned and was extended later. By way of order petitioner was suspended from service in contemplation of departmental enquiry on the allegations of misconduct unbecoming of a government servant - Memo of Charge was served on the petitioner, alleging that while posted as Additional Commissioner of Income Tax he remained unauthorisedly absent from duty during the period from 09.11.1998 till the date of suspension (19.06.2000) and performed other acts of insubordination related thereto, reflecting lack of devotion to duty; and further alleging that he gave statements to the press and electronic media irresponsibly without authority and recklessly on sensitive issues even on matters of government policies, constituting acts of indiscipline unacceptable from any government servant. HELD THAT:- Two charges of misconduct stand admittedly proved against the petitioner viz, unauthorised absence for the period from 09.11.1998 to 19.06.2000 (the date of his suspension from service) and his unauthorised scandalous communications with media which created avoidable controversies with potential of generating cynicism against the government. What is to be considered by us is as to whether any reasonable employer would have imposed the punishment of dismissal from service on the petitioner for his said acts of misconduct? - The unauthorised absence of the petitioner from duties was not for a period of a day or two or a week or so. The absence was for much prolonged period from 09.11.1998 to 19.06.2000. Even according to his own pleadings, the petitioner availed leave for a fairly long period, till 06.11.1998 with next two days being suffixes and admittedly he could not cope up with work pressure. If he was ill, nothing prevented him from seeking further leave. Rather, in response to letter dated 04.02.1999 of the respondents, calling him upon to explain his unauthorised absence and for a failure to hand over charge, the petitioner stated that on 16.02.1999 he had been advised medical rest for backache and that he had applied for medical leave for the period from 20.10.1998 and had sought extension thereof till 14.02.1999. It would also be significant to note that the petitioner in the said letter, seeking extension of medical leave till 14.02.1999, ante-dated the letter to 01.12.1998, and dispatched the same on 12.01.1999 as reflected from the postal record of PO, Vasant Kunj. The petitioner also claimed in the said letter that he had sought extension of leave up to 04.12.1998 by way of earlier letter. But no such earlier letter had ever reached the respondents. Not only this, neither the medical certificate nor the leave application in prescribed format was sent by the petitioner ever. The said unauthorised absence of the petitioner across such prolonged period of time has to be also seen in the light of high profile nature of his duties. It would also be very significant to note that during the said period of unauthorised absence, reason whereof is sought to be explained by the petitioner as backache, it is not that the petitioner was bedridden and was unable to submit leave application; as mentioned above, even during this period of unauthorised absence, petitioner was engaged in tirade against the government through his interactions with media and was making obnoxious and scurrilous statements against the government. And all these factors have to be kept in mind while testing as to whether any reasonable employer would or would not have imposed the punishment of dismissal from service on account of such acts of misconduct. Coming to the second article of charge proved against the petitioner, the petitioner despite being a government servant engaged himself in slanderous campaign against the government and made scandalous statements to the media, which statements owing to his high position in the taxation machinery enjoyed high acceptability by media and public as credible information, thereby damaging the reputation of the government in the eyes of public. Some such scandalising statements made by the petitioner to the media were that he had personal knowledge about disclosure of concealed income under the VDIS by several test cricketers including a disclosure of hidden income of Rs.16 crores by a test captain; that the said disclosures are sufficient reason for initiating investigation against all cricketers who played for India over last 10 years and in this regard someone should file Public Interest Litigation (though he was not authorised to deal with VDIS declarations and information provided by him was wrong or misleading); that the Chief Minister was leading a personal campaign against him to protect the interests of Romesh Sharma and in that regard, he had written to the Chief Election Commissioner; that there were other allegations, casting aspersions on the motive and conduct of the then Chief Minister of Delhi and Chief Commissioner Income Tax, behind his transfer; that there were corruption related transfers in the government and payment of huge dowry to government servants owing to their potential to earn money illegally; that the Chief Minister of Delhi was siding with the tax evaders; that there was nexus between the film industry and criminal mafia which led to attack on film star Rajesh Roshan; that Income Tax Department had unearthed Rs. 10,000 crores invested by mafia in the film industry, out of which only Rs. 100 crores was declared by the film producers in their income tax returns; that kidnappings, extortions and murders were being committed with the knowledge of Government of India and Maharashtra Government; that one Secretary was caught in a hotel room with the keep of mafia king Dawood Ibrahim and the Home Secretary had approached Dawood to harm the actress Manisha Koirala to benefit some other heroine and tape recorded conversations was available with CBI; that in Jain Hawala case, the CBI had deliberately not taken appropriate action and had not placed full facts before the Supreme Court; that the CBI deliberately concealed from Supreme Court statements of the politicians whereby they had accepted on oath under the Income Tax Act having received money from Jain Brothers; that there were many loopholes in VDIS of CBDT, which were abused by certain foreign agencies or some underworld people; and that there were acts of criminal misconduct on the part of Revenue Secretary in the matters related to VDIS. Those scandalous statements were made by the petitioner through interviews to various popular media entities including the Hindustan Times, the Times of India, the Zee TV, the DD (Metro), the Zee News, the Business Today, the Economic Times and the CNBC etc. Going by the described acts of misconduct committed by the petitioner, we are unable to believe that no reasonable employer would have dismissed him from service by way of penalty. We are unable to find the punishment of dismissal imposed on the petitioner as the one that could shock conscience of any court. We are of the considered view that no lesser punishment than dismissal from service would be commensurate to the gravity of the multiple acts of misconduct described above. Even if there were no restraints on this court exercising judicial review of punishment order, we would not find any other punishment proportionate to the acts of misconduct committed by the petitioner. A person castigating their employer through a constant tirade of false and scandalous allegations does not deserve to continue in the employment of the said employer. So far as consideration of past service record of the petitioner is concerned (on which learned counsel for petitioner laid strong emphasis), suffice it to record that petitioner s own pleadings cited above and also the extracted statements of imputations reflecting repeated suspensions for his other acts of misconduct would fail to help his cause here. As reflected from the above extract earlier also the petitioner was suspended from 06.06.1990 to 21.10.1994 and disciplinary proceedings for major penalty were initiated against him, which proceedings culminated into a lenient penalty of censure. Certainly, it is not a case which could be dealt with paring knife; use of battle axe was most appropriate. We do not find it a case of the State using sledgehammer to crack a nut - We are unable to find any infirmity in the impugned order, so the same is upheld and the petition is dismissed.

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• 2024 (9) TMI 23
  Validity of Faceless assessment of income escaping assessment - Challenge to notice u/s 148 as non-compliance with Section 151A of the Act - notices issued by JAO instead of FAO - HELD THAT:- JAO would not have jurisdiction to issue the impugned notices more particularly in view of the clear provisions of Section 151A read with notification dated 29 March, 2022 issued by the Central Government. As fairly conceded on behalf of the revenue, the challenge in the proceedings would stand covered by the decision of this Court in Hexaware Technologies Ltd. ( 2024 (5) TMI 302 - BOMBAY HIGH COURT] . The impugned notices would be required to be held to be illegal and invalid as and there is no dispute that the JAO had no jurisdiction to issue the impugned notice. We, accordingly, allow this petition in favour of assessee.

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• 2024 (9) TMI 22
  Denial of deduction u/s 80P - Delay in filing income tax returns - condone the delay of 11 days in filing the return of income - HELD THAT:- By virtue of the Circular dated 26.07.2023, the petitioner would be entitled to the benefit of Section 8P of the I.T. Act. So also, the reasons assigned in the impugned order for the purpose of refusing to condone the delay are clearly illegal and arbitrary, warranting interference of this Court. Under these circumstances, adopting a justice oriented approach and by accepting the reasons assigned by the petitioner, which clearly constitute bonafide reasons, unavoidable circumstances and sufficient cause for filing I.T. returns within the prescribed period, we are of the view that the impugned order at Annexure-G dated 04.07.2024 deserves to be quashed and the application for condonation of delay deserves to be allowed.

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• 2024 (9) TMI 21
  Rectification u/s 154 - rectify the mistake apparent from the record on the ground assessee has placed on record specific details and facts pertaining to the nature of alleged AMP expenses before TPO as well as during personal hearing before the DRP, which was not taken into consideration while passing the order. HELD THAT:- It is not disputed that the assessee though had not filed any objection or explanation before the TPO while raising objections to the draft order u/s 144 (c) had placed before the DRP, the necessary and specific details pertaining to the nature of alleged AMP expenses, selling expenses such as trade and other discount on sales, sales discounts, warranty expenses and packing expenses, which should be excluded in the determination of AMP expenses. If an order is passed without taking note of the materials on record and subsequently, if it is brought to the notice of the Income Tax Authority u/s 154 of the Act, it would be open for the Income-Tax Authority to rectify such mistake apparent from the record. While considering the application u/s 154 of the Act, if the material which was not considered while passing original order are considered, the Authority would be at liberty to arrive at just conclusion on consideration of such material. In the instant case also, the authority i.e., DRP on consideration of material which were not considered earlier has come to the conclusion that it is a case to exclude trade discounts as well as discount warranty expenses and packing expenses from the ambit of advertisement and marketing and promotion expenses for the purpose of transfer pricing comparison. Appellate Tribunal, on examination of entire material has come to the conclusion that it is a case of non-consideration of material on record, which would constitute a mistake apparent from the record and has held that the DRP was justified in assuming jurisdiction u/s 154 of the Act. Decided against the Revenue.

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• 2024 (9) TMI 20
  Notional income on account of designated returns - whether no income as arisen or accrued to the Appellant? - HELD THAT:- The issue stands covered by the order of the Co-ordinate Bench of ITAT in assessee s own case [ 2023 (8) TMI 1510 - ITAT DELHI] from AY 2006-07 to A.Y. 2011-12 held as the assessee had already recovered the entire cost of the project on actual basis from collection of tolls, advertisement and rental income and, therefore, the assessee cannot collect the toll. In this light, it can be safely concluded that the assessee did not earn 20% designated return on the cost of the project. Thus, addition on account of designated return does not have any legs to stand and deserves to be deleted. Revenue subsidy - The issue stands covered by the order of the Co-ordinate Bench of ITAT in assessee s own case [ 2023 (8) TMI 1510 - ITAT DELHI] from A.Y. 2006-07 to A.Y. 2011-12 as extracted the relevant articles of lease of land by Noida elsewhere. The very basis of the enhancement by the ld. CIT(A) that the lands were transferred to the assessee by Noida is fallacious and completely in disregard to the relevant articles mentioned elsewhere. The lands were given on lease and, therefore, there is no question of ownership being transferred to the assessee and, therefore, there is no question of any addition on this account. Interest u/s 43B - HELD THAT:- Issue stands covered by the order of the Co-ordinate Bench of ITAT in assessee s own case [ 2023 (8) TMI 1510 - ITAT DELHI] from A.Y. 2006-07 to A.Y. 2011-12 provisions of section 43B(e) of the Act apply only to loans/borrowings from any financial institutions. It does not apply to the deep discount bonds issued to the public. In our considered opinion, the amount over and above the face value which is payable on maturity is nothing but the interest amount which accrues to the assessee every year and recognized by the assessee in its books of account. Therefore, the interest payable on deep discount bonds is to be allowed on accrual basis and not on payment basis. AO is directed to delete the same. Capital Subsidy/Set off of Capital Subsidy - HELD THAT:- Issue stands covered by the order of the Co-ordinate Bench of ITAT in assessee s own case [ 2023 (8) TMI 1510 - ITAT DELHI] A.Y. 2006-07 to A.Y. 2011-12 no capital subsidy to be reduced and there is no basis for re-computing the depreciation. Claim of depreciation u/s 32/Brought forward depreciation - We find that this issue has not been adjudicated by the CIT(A). Since, the primary adjudication has not been done by the first appellate authorities, hence we deem it fit to remand the issue to the ld. CIT(A) for adjudication.

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• 2024 (9) TMI 19
  Denial of grant of approval u/s. 80G(5) - delay in filing the application - HELD THAT:- The appellant trust commenced its actual activities on 26.02.1981 and in view of the above construction of clause (iii) of proviso to section 80G(5) the appellant trust is entitled to file the application for regular approval prior to six months of expiry of the provisional approval, i.e., on or before 03.10.2022. Therefore, it cannot be said that the application filed by the appellant trust for grant of regular approval is barred by limitation prescribed under the proviso to section 80G(5). Therefore, the ld. CIT(Exemptions) is not justified in denying the grant of approval u/s. 80G(5) to the appellant trust on the ground of delay in submission of Form No.10AB. As regards the compliance to the notices by the CIT(Exemptions), we find that in the instant case the hearing notices were sent through ITBA portal by the CIT(A). In our considered opinion, it is not a valid method and manner of service of notice as specified under the provisions of section 282(1) of the Act. Therefore, it is crystal clear that the notices were not served upon the appellant. To fortify our view, we would like to make a reference to a decision rendered in the case of Munjal BCU Centre of Innovation and Entrepreneurship [ 2024 (3) TMI 479 - PUNJAB HARYANA HIGH COURT] wherein the Hon ble High Court after making reference to provisions of 282(1) held that service of notice through ITBA portal is not valid service and remanded the matter to AO for denovo disposal of case

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• 2024 (9) TMI 18
  Levy of penalty u/s. 271B - assessee failed to get his accounts audited despite the fact that the volume of assessee s turnover was covered by the provisions of section 44AB - HELD THAT:- AO has solely relied upon the information provided by Mother Dairy, i.e., ledger account alleged to have been pertained to the assessee. It is also observed that the AO has not provided this information collected at the fag end of the assessment to the assessee for his rebuttal. As further interesting to note that the information has been collected by the AO at the fag end of the proceedings and the same has been utilized by the AO without confronting it to the assessee. The fact remains that the source of income of the assessee as enumerated by the AO in assessment order is by way income from commission from the sale of milk and other products, which is not contradicted or disputed by the AO, even after enquiries. Therefore, whether penalty in such a case would be leviable, is a question which requires adjudication by the Bench. Having regard to the facts of the case that the assessee was distributor of Mother Dairy, retired army personnel, under the bona fide belief that no books of accounts are required to be maintained since only source of earning income was commission as fixed by Mother Diary on sales of milk and other products, and there is no need of any audit of accounts appears to be bona fide belief of the assessee. We are of the view that penalty is not leviable. Section 273B has categorically provided immunity from penalty u/s. 271B to those assessees who establish, having regard to the facts, that there was a bona fide belief or a reasonable cause with respect to violation of provisions of section 271B. There are catena of decisions, where in the context of section 271B, Hon ble Courts have held that penalty is not leviable where there is a reasonable cause or where assessee establishes its bonafides . Therefore, the penalty levied in this case is legally not tenable. Decided in favour of assessee.

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• 2024 (9) TMI 17
  TP adjustment to the international transactions - Non-Satisfaction of conditions - HELD THAT:- Hon ble Delhi High Court has held in the case of Chryscapital Investment Advisers(India)(Pvt.) Limited. [ 2015 (4) TMI 949 - DELHI HIGH COURT] that while determining the comparability of transactions, multiple year data can only be included in the manner provided in rule 10 B(4) and as a general rule, it is not open to the assessee to rely upon previous year s data. It is a well settled principle that the assessee is required to perform Functional Asset and Risk (FAR) analysis for each year and it is quite possible that the FAR analysis can be different for each of the years. If so, the principle applicable to one particular year cannot be extrapolated automatically and made applicable to other years. To do so, it is necessary to first establish that the facts and attendant factors have remained the same so that the factors of comparability are the same. The assessee has not done any such analysis and established that the factors of comparability for the years as selected by it were identical to the facts and factors of the current year. The reliance of the assessee on previous two years data and not using any current year data was not in accordance with the provisions of law and, therefore, the TP study report of the assessee was rightly rejected. The ground taken by the assessee is dismissed. TP adjustment in manufacturing segment - Comparable selection - HELD THAT:- Coventry Coil-O-Matic (Haryana) Ltd.(CCHL) is found to be engaged in manufacture of altogether different product and raw material utilized by it was also different. CCHL was manufacturing Auto Suspension Springs and Coil Springs while the assessee was manufacturing tubular products. The raw materials of CCHL was steel wires whereas the assessee s raw materials were copper coated steel strips and sheets. As the product as well as the raw material of CCHL was different from that of the assessee, the two companies were not functionally comparable. Hence, CCHL was correctly rejected by the TPO as a comparable. Frontier Springs Ltd.(FSL) - When the assessee has requested for application of export filter while choosing the comparable; by the same logic import filter also has to be applied to the comparable. And when we consider the import filter, this company can t be considered as functionally comparable to the assessee. Gabriel India Ltd.(GIL) - The raw materials utilized by GIL were tubes, bright bars, shock fluid, non-ferrous metals and steel strips. In addition components such as Pressed Parts, Die Castings, Rubber Parts, Sintered Parts and Forgings etc. were also utilized. Shock absorber is altogether different type of spring which can t be compared with the products being manufactured by the assessee. The other products manufactured by GIL are also found different from the products manufactured by the assessee as there is no similarity in the product profile. Considering the difference in the product profile of the two companies the rejection of GIL as a comparable is upheld. Jamna Auto Industries Ltd.(JAIL) - In the case of Jamna Auto Industries Ltd., the manufacturing product was Spring Spring Leaves and the raw material consumed was spring steel flats. Further, all the raw material of JAIL was indigenously acquired and there was no import of any raw material. Considering this difference in the product and in mode of acquisition of raw materials viz. the import filter, this company couldn t have been considered as a comparable. Hence, rejection of JAIL as a comparable by the TPO is upheld. FCC Rico Ltd.(FCC) - As found from the above chart that the related party transaction of FCC in respect of purchase of raw materials during the year was 37.17%. It is also seen from the order of the Ld. CIT(A) that he had rejected the comparable, where the related party transaction was in excess of 25%. As the related party transaction in this case also exceeds 25%, it is directed that FCC should also be excluded from the set of comparable. Setco Automotive Ltd - Presence of any intangible doesn t make a company ineligible to be considered as a comparable. One has to find out as to how the intangible is effecting the margin of the comparable company. The assessee has not brought out anything on record to demonstrate that the intangible had an impact on the margin of this comparable company. Rather the TPO had analyzed the intangibles owned by Setco Automotive Ltd. and stated that intangible assets owned by this company was not in the nature of those that could affect the margin by enabling the entity to earn the higher margins; which has not been controverted by the assesse. Therefore, the objection of the assessee to this comparable is rejected and the order of the CIT(A) in this regard is upheld. ANG Industries Ltd. - As found from the accounts that the export sales of this company was Rs. 65.24 crores against domestic sales of Rs. 48.22 crores during the Financial Year 2006-07. On the other hand the export to turnover ratio of the assessee company was only 4.72%. As this issue of export filter was neither raised before nor examined by the lower authorities the matter is set aside to the TPO to examine the objection of the assessee on the ground of export filter in respect of this comparable. TP adjustment in ITES segment - assessee company was providing back office support service to its AEs - ALP of the service was determined by the TPO and an adjustment was made - HELD THAT:- In the present case, transactions covered under MAP resolution is only the 41.16%. Thus, the facts of the two cases are found to be distinctly different as the transaction not covered under MAP in that case was a miniscule 4% whereas such transactions in this case is substantial 58.48%. Further, this issue can be decided after undertaking FAR analysis of non-UK transactions in order to find out whether there is any distinction in the factors influencing the price between UK and non UK transactions. The assessee has not brought on record any similarities of factors that influenced the price between UK and non-UK transactions. Therefore, we are of the considered opinion that the matter may be restored to the file of the TPO/AO for analysis of factors influencing the price between UK and non-UK AE transactions for ITES segment. If it is found that the factors influencing the price are similar between UK and non-UK transactions, the price adopted for UK transactions may also be adopted for non-UK transactions. In this regard we are guided by decision of Dell International Services India (Pvt.) Ltd. [ 2016 (9) TMI 403 - ITAT BANGALORE] wherein it was held that if after taking a FAR analysis of non-US transactions, it is found that factors influencing the price were similar between US and non-US AE transactions, same price fixed under MAP can be adopted for all the transactions. Nature of expenses - expenditure of Jigs and Fixtures - HELD THAT:- It is found that the assessee company is not treating the jigs and fixtures as revenue expenditure in its books of accounts. The company had a policy of writing off of the expense over a period of two years since long term enduring benefit was derived from jigs and fixtures. Undoubtedly, the jigs and fixtures are not in the nature of repairs and maintenance, so as to claim it as a revenue expenditure. They are utilized in the manufacturing process and the assessee has admitted that long term enduring benefit of at least two years is derived from them. The facts of the case Ucal Machine Tools (P.) Ltd. [ 2016 (7) TMI 907 - ITAT CHENNAI] relied upon by the assessee are found to be different. In that case, the issue involved was expenditure on tools such as screw drivers, spanners which are purchased along with the machineries and their replacement was claimed as revenue expenditure. In the present case, the assessee itself is not treating the expenditure in respect of jigs and fixtures as revenue expenditure, rather it is writing off the same in the accounts over two years period. The decision of the Ld. CIT(A) to treat the expenditure on jigs and fixtures as capital expenditure and allow depreciation on the brought forward WDV is upheld. Therefore, this ground is dismissed. Working Capital adjustment - HELD THAT:- The matter is set aside to the file of the TPO to verify whether any working capital adjustment was granted while determining the ALP of the international transactions in the A.Y. 2009-10 and 2010-11, as claimed by the assessee. If yes, a similar adjustment may be allowed in the current year as well. The ground is allowed for statistical purpose.

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• 2024 (9) TMI 16
  Doctor Sponsorship Expenses - Legitimate business expenditure incurred for sponsorship expenses of medical practitioners/doctors - assessee, a public company, engaged in the business of manufacturing and marketing of pharmaceutical products - HELD THAT:- The prohibition imposed by the MCI regulation and further by the CBDT circular is applicable on the pharmaceutical and allied health industries and the expenses incurred in providing the freebies to the doctors cannot by allowed as deduction under section 37(1) of the Act. Whether the CBDT Circular 05/2012 dated 01-08-2012 shall be applicable prospectively or retrospectively i.e. whether applicable from the date on which circular was published (01-08-2012) or from the date on which MCI regulation was published (14-12-2009)? - Hon ble Supreme court in case of M/s Apex Laboratories (P.) Ltd. [ 2022 (2) TMI 1114 - SUPREME COURT ] held that The CBDT circular being clarificatory in nature, was in effect from the date of implementation of Regulation 6.8 of the 2002 Regulations, i.e., from 14-12-2009. Hence, it is settled position now that CBDT circular prohibiting allowance/ deduction of expenses incurred by the pharmaceuticals industries in nature of freebie to doctor is applicable retrospectively from 14-12-2009. Any expense incurred by the pharmaceutical company in the nature of freebie to doctor is required to be disallowed by virtue of the Hon ble SC in the case discussed above. As such there is no requirement that the incurred by the pharmaceutical company under particular head should be exclusively for doctors. Hence, we are not in agreement with finding of the CIT(A). AO in the absence of detailed bifurcation has estimated the amount pertaining to freebies to doctors at @ 10% of the gross expenses on ad-hoc basis. As such, in the absence of any detail working provided by the assessee, the AO left with no option but to estimate the amount pertaining to freebies to doctors. Indeed, the AO even for making estimates, should adopt some reasonable criteria but the AO in its finding failed to point out the basis of such estimation. Therefore, in the absence of any working provided by the assessee and in the absence of any basis to be adopted for making such estimation by the AO, we in the interest of justice and fair play, restrict the disallowance at 5% of the gross amount claimed by the assessee under the head Business Advancement Sales Promotion. Expenses claimed under the head Doctors Sponsorship , both the AO and CIT(A) agree that expenses incurred under the impugned head are in nature of freebie to doctors - CIT(A) divided the amount incurred before and after the date of issue of CBDT circular bearing No. 05/2012 dated 1-8-2012. The learned CIT(A) accordingly held that the expenses incurred before 1st August 2012 shall not be subject to the disallowance. As such, the learned CIT(A) held the applicability of the impugned circular with prospective effect. On the other hand, as taken the view that the impugned circular is clarificatory in nature and applicable with retrospective effect from 1st April 2009. Hence, we hereby set aside the finding of CIT(A) and held that entire amount of expenses incurred during the year under the head Doctors Sponsorship shall be disallowed. Thus, in view of the above discussion, the grounds of appeal raised by the assessee and Revenue are hereby partly allowed. Disallowance of employee s contribution to PF/ESI made by AO on account of late deposits - HELD THAT:- We note that the learned AR before us submitted that the issue on hand has been covered against the assessee by the judgment of G.S.R.T.C [ 2014 (1) TMI 502 - GUJARAT HIGH COURT ] Therefore, following the binding decision of the Hon ble Jurisdictional High Court, we hereby confirm the finding of the learned CIT(A). Hence, the ground of appeal of the assessee is hereby dismissed. Reducing the eligible profit u/s 80IC of Baddi Unit - We hold that the assessee is eligible for deduction under section 80-IC of the Act with respect to the income being Notice Pay Sale of scrap. Service Tax Refund - As not disputed by the revenue that the assessee, at the time of making payment to custom clearing agent, debited the profit and loss and account along with the amount of service tax. Thus, the profit of the eligible unit got reduced by the amount of service tax. Therefore, when such services tax is refunded to the assessee, the same will reduce the expense of eligible unit. The assessee instead of reducing the expense has shown such receipt separately. Thus, it is just a manner of representation - No infirmity in the order of the CIT(A). Thus, we hold that the assessee is eligible for deduction u/s 80-IC with respect to the income being service tax discussed above in the given facts and circumstances. Miscellaneous income - As relying on assessee own case [ 2019 (5) TMI 1932 - ITAT AHMEDABAD ] we hold that the assessee is eligible for deduction u/s 80-IC of the Act with respect to the income being Miscellaneous Income. Export benefit Insurance Income - As relying on assessee own case [ 2019 (5) TMI 1932 - ITAT AHMEDABAD ] assessee is eligible for deduction u/s 80-IC of the Act with respect to the income being Export Benefits Insurance claim Forex Gain, Cash discount - Tribunal in the own case of the assessee for AY 2012-13 [ 2022 (3) TMI 340 - ITAT AHMEDABAD ] where the issue has been decided in favour of the assessee to hold that the assessee is eligible for deduction under section 80-IC of the Act with respect to the income being Forex Gain. Interest Income - We direct the AO to exclude the net interest income i.e. excluding the expenses incurred in earning such interest income. Hence the ground of appeal of the assessee in this regard is partly allowed. Government grant in the Baddi unit from the Department of Biotechnology under the scheme of Biotechnology Industry Partnership Program - The assessee on one hand has not allocated the expenditure incurred on R D activity to eligible units by treating the same as separate activity and at the same time, it is claiming the receipt of grant for conducting futuristic research in biotechnology as part of manufacturing unit. In our considered opinion the assessee cannot take a different stand for expenses incurred and grant received for research activity. Therefore, we hereby confirm the finding of the learned CIT(A) by holding that the receipt of government grant for biotechnology research is not connected to the activity of units eligible for deduction under section 80-IC of the Act. Hence, the assessee is not eligible for a deduction under section 80-IC of the Act on account of receipt of the government grant. Allocating the administrative expenses to Baddi and Sikkim Unit eligible for deduction u/s 80-IC and 80-IE - HELD THAT:- As decided in own case [ 2019 (5) TMI 1932 - ITAT AHMEDABAD ] it is because the turnover of any undertaking is very much volatile and keep on changing depending upon the market forces, competition, Government policies, etc. There can be a situation that the turnover of one undertaking is very high in a particular year but in the subsequent year the turnover may go done or vice versa which will affect the pattern and consistency in the allocation of the administrative expenses and distort the presentation of the financial statements for different years. Therefore we are of the considered view that the basis of the allocation of administrative expenses based on the turnover is not advisable.Generally, the human resources working in any of the undertakings of the assessee does not frequently change as the market forces do not regulate it, unlike the sales. Therefore, we are of the view that the allocation of the administrative expenses should be done based on the human resources engaged in the different undertaking of the assessee. Decided in favour of assessee. Disallowance of claim representing the provision for leave encashment - AO found that the provision of section 43B clearly specifies that the amount payable to employees on account of leave encashment will be allowed on payment basis only - HELD THAT:- As decided in own case [ 2022 (3) TMI 340 - ITAT AHMEDABAD ] there are certain expenses which are allowed on payment basis in pursuance to the provisions of section 43B of the Act irrespective of the year of incurrence. One of such expenditure is leave encashment. Admittedly, the assessee has not made the payment of the leave encashment and therefore the same can t be allowed as deduction. However, the assessee is at liberty to claim the deduction of such expense in the year of payment. Thus the ground of appeal of the assessee is dismissed. Disallowance of weighted deduction u/s 35(2AB) - AO disallowed the claim of the weighted deduction on such expenditure whereas the learned CIT(A) deleted disallowances of deduction on certain items of the expenditure and at the same time, confirmed the disallowance on certain items - HELD THAT:- Issue squarely covered in favour of the assessee by the order of this Tribunal in the own case of the assessee [ 2012 (7) TMI 273 - ITAT AHMEDABAD ] we do not find any infirmity in the order of the learned CIT(A) with respect to the claim of deduction on salary to Dr. C Dutt, Building repairs and Municipal tax. Claim of weighted deduction on the expenditure of clinical trials studies and on product/ patent registration etc. allowed. We hereby set aside the finding CIT(A) with respect to the claim of weighted deduction on the expenditure of interest on loan, labour job works charges, furniture and fixture and electrical equipment and direct the AO to allow the claim of the assessee. Addition in book profit by the amount of disallowance made u/s 14A - HELD THAT:- We note that the Special Bench in the case of ACIT vs. Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ] has held that the disallowance made u/s 14A r.w.r. 8D cannot be the subject matter of disallowance while determining the net profit u/s 115JB of the Act. Upward adjustment in TP on account of corporate guarantee, capital infusion, interest on loan - HELD THAT:- The assessee company has extended corporate guarantee to its AE. Such guarantee was not utilized by the AE. Therefore, we are of the considered opinion that no inherent risk arises to the assessee company or financial services utilized by the AE from the assessee company. However, the assessee has suo-moto offered guarantee commission on the corporate guarantee to the one AE namely Zao Torrent Pharma Russia @ 1.5% of the guaranteed amount. In the present case the assessee has already offered ALP commission @ 1.5% of the guaranteed value extended to the AE namely Zao Torrent Pharma Russia. Therefore, in our considered opinion no further adjustment is required to be made. AO with respect to guarantee furnished to Torrent Pharma GmbH has calculated @ 0.205% as guarantee fees against the NIL offered by the assessee. Therefore, we are of the view that the same cannot be determined at 0.50% based on the order of the ITAT discussed above in the earlier year. As such, we hold that the guarantee fee charged by the revenue is at the ALP. Hence the ground of appeal of the assessee is partly allowed. Interest on loan to AE - The reasonable rate of interest shall be LIBOR + 2%, we hereby hold that suo-moto notional interest offered by the assessee at LIBOR + 400 basis is at ALP and no further adjustment is required to be made. Hence, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the upward adjustment made on account of benchmarking of loan to AE. Thus, the ground of the appeal filed by the assessee is hereby allowed. Capital Infusion - As respectfully following the order of the Tribunal in the own case of the assessee for AY 2012-13 [ 2022 (3) TMI 340 - ITAT AHMEDABAD ] we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him on account of capital infusion. Hence, the ground of appeal of the assessee with respect to capital infusion is hereby allowed whereas the ground of revenue s appeal in this regard hereby dismissed. Disallowance of deduction u/s 80-IE in Sikkim Unit on other incomes - similar disallowances have been made by the AO with regard to Baddi Unit of the assessee eligible under section 80-IC of the Act. The provision of section 80-IC and 80-IE of the Act are perimetria. Both the sections deal with the deduction against the profit and gains derived by the undertaking from eligible business i.e. manufacturing of articles or things - AO also disallowed the deduction u/s 80-IE on same reasoning used for disallowing the deduction claimed u/s 80-IC - In the case of disputes u/s 80-IC, CIT(A) in identical manner has allowed deduction on certain income and simultaneously sustained the disallowances of deduction on certain item of incomes. Against the order of the CIT(A) with respect to deduction under section 80-IC both the assessee and Revenue were in appeal before us. The issue for the deduction u/s 80-IC relating to different items of income has been adjudicated, therefore the findings given in the above-mentioned paragraph shall also be applicable to the issue in hand. Similarly, the assessee s ground for deduction under section 80-IC of the Act with respect to insurance income has been allowed whereas interest income and government grant have been dismissed as shown in the above said paragraphs. Hence, the assessee s grounds of appeal for the same u/s 80IE of the Act are hereby partially allowed. Exclusion of excise refund from the computation of book profit under section 115JB - As decided in the case of Ambuja Cement Limited [ 2022 (11) TMI 1420 - ITAT MUMBAI ] we uphold the plea of the assessee and direct the AO to exclude the sales tax incentive subsidy for computing book profit u/s 115 JB. Additional ground of appeal - no R D expenses either for discovery or product development or capital expenses shall be allocated to the eligible units - HELD THAT:- R D expenditure incurred by the assessee constitute an independent unit not having any link to the units eligible for deduction under section 80IC or 80IE of the Act. Therefore,no expenses of R D unit be it discovery stage, product development stage or capital expensescan be allocated to the units eligible for deduction under section 80IC or 80IE of Act while computing the profit eligible for deduction u/s 80IC or 80IE of Act. Hence the ground of appeal raised by the assessee in additional ground of appeal regarding allocation of R D expense is hereby allowed. Depreciation on computer software @ 60% - HELD THAT:- As decided in Computer Age Management Services (P.) Ltd. [ 2019 (7) TMI 1153 - MADRAS HIGH COURT ] case of the Revenue is that software are licences and that they are intangible assets and would fall under Part B of New Appendix I, which deals with knowhow, patents, copyrights, trademarks, licenses, francises or any other business or commercial rights of similar nature. We find that Part B of New Appendix I is a general entry whereas Entry 5 of Part A of New Appendix I is a specific entry read with Note 7. In the instant case, the Tribunal, in our considered view, rightly held that the assessee is eligible to claim depreciation at 60%. Disallowance of depreciation made on capital investment subsidy by treating the costof capital assets - HELD THAT:- Once the year in which impugned capital subsidy was received it has been held that such receipt shall not be adjusted against the cost of the block assets then the disallowances of depreciation in subsequent year based on same cannot be sustained. Hence, the ground of appeal raised by the Revenue is hereby dismissed. Depreciation with respect to pallets, trolleys, and mobile racks allowed. Deduction claimed by the assessee u/s 80G and 80GGB allowed - As decided own case [ 2019 (5) TMI 1932 - ITAT AHMEDABAD ] donation paid by the assessee has no connection with the unit eligible for deduction u/s 80IC - The scheme of the Act provides to claim the deduction u/s 80G after claiming all the deduction provided under chapter VI-A of the Income Tax Act. Therefore the assessee can claim the deduction on account of such donation only against the Gross Total Income after claiming all other deduction. The donation paid by the assessee cannot be claimed as an expense in the profit and loss account as the same has not been incurred wholly and exclusively for the purpose of the business as provided u/s 37(1) - Thus even if the assessee claimed the donation as an expense in the profit and loss account, then it has to be disallowed while computing the income under the head business and profession. Thus the only option available to the assessee to claim the deduction on account of such donation is only under the provisions specified u/s 80G which can be claimed - Decided against revenue. TP adjustment on account of Liason Services by restricting it to 2% is not sustainable - AO is directed lo delete the addition made on the basis of this adjustment. TP adjustment on account of Dossier licensing fee is hereby dismissed - The profit sharing ratio has already been accepted by the revenue in the earlier years. There is no change in the facts and circumstances for the year under consideration viz a viz the earlier years. It is the same agreement based on which the income has been shared between the assessee and the AE in the year under consideration. As such the agreement was entered dated 18-02-2003 which was still in force in the year under consideration without any modification. Therefore we are of the view that, the principles of consistency should be adopted. Custodian Fees - TPO has determined the ALP of the custodian fees paid by the assessee to its AE at Rs. NIL. CIT-A has held that the custodian fees paid by the assessee are at ALP. The basis of the ld. CIT-A was this that the assessee has paid custodian fee to another company which was much more than the amount in dispute and the same was also accepted by the Revenue. CIT-A also observed that all the economic benefits were transferred to the assessee and there was no of sharing the income for the marketing of assessee s product. In our considered view, the ld. CIT-A has given the reason and detailed finding which has not been controverted by the learned DR. Addition made on account on unutilized MODVAT/CENVAT u/s 145A - As decided in own case [ 2022 (3) TMI 340 - ITAT AHMEDABAD ] no justification for the AO to add unutilized MODVAT credit to the closing stock. The ld. CIT(A) has not committed any error in allowing claim of the assessee on this issue, which we uphold, and this ground of Revenue s appeal is dismissed.

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• 2024 (9) TMI 15
  Entitlement to adopt higher value of cost of acquisition - Entertaining fresh claims before appellate authorities - assessee had submitted that while arriving at the value of capital gains, the cost of acquisition of shares was taken at lower value in the return of income which led to the capital gains on higher side - assessee submitted revised computation of capital gain during the course of assessment proceedings HELD THAT:- It is admitted position that assessee had claimed higher cost of acquisition of shares during the course of assessment proceedings (cost of acquisition claimed in the return of income was Rs. 128.39/- as against Rs. 184.09/- claimed in the revised computation filed before the AO). Similar claim was made before the CIT(A). CIT(A) rejected the claim by placing reliance on the judgment of Goetze (India) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] As in case of Karnataka State Co-operative Federation Ltd. [ 2021 (3) TMI 694 - KARNATAKA HIGH COURT] after considering the judgment of Goetze (India) Ltd., [ 2006 (3) TMI 75 - SUPREME COURT] held that when assessee makes a fresh claim before the appellate authority, even if the same is not claimed in the original return of income or in the revised return of income, the CIT(A) is empowered to consider the fresh claim of the assessee. The Hon ble High Court categorically held that the appellate powers of a CIT(A) are not impinged / restricted when a fresh claim is made before him. We restore the matter to the AO. AO is directed to examine whether assesee is entitled to higher cost of acquisition of Rs. 184.09 per share. The assessee shall place the necessary evidence in support of his case and shall not seek unnecessary adjournment in the matter. The AO is directed to afford reasonable opportunity of hearing to the assessee - Appeal filed by the assessee is allowed for statistical purposes.

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• 2024 (9) TMI 14
  Levy of penalty u/s 272A(2)(g) - Period of limitation to issue penalty notice - not issuing the TDS certificate in Form 16A to the deductees in time - whether the limitation would have to be reckoned from 2.6.2015 (being the date of reference made by ld. ACIT to JCIT) or from 30.11.2015 (being the date of issuance of show cause notice by JCIT to the assessee)? - HELD THAT:- This issue is no longer res integra in view of the decision of Sunil Dandriyal [ 2023 (11) TMI 1283 - ITAT DELHI] wherein held where the AO has initiated the penalty proceedings in his/her assessment order, the said date is to be taken as the relevant date as far as the section 275(1)(c) is concerned - quantum proceedings were completed by the AO on 17th/18th December, 2008, and the AO initiated the penalty proceedings in December, 2008, thus, the last date by which the penalty order could have been passed is 30th June, 2009. The six months from the end of the month from which action of imposition of penalty was initiated would expire on 30th June, 2009. In this case, admittedly, the penalty order(s) were passed on 29th September, 2009, and therefore, the ITAT rightly concluded that the order(s) were barred by limitation. Consequently, we answer the question of law against the Revenue and in favour of the Assessee by holding that, in the facts and circumstances of the present appeals, the ITAT was correct in law in deleting the penalty imposed by the ACIT, under section 271D on the ground that the penalty order(s) dated 29th September, 2009, was passed beyond the time period prescribed by Section 275(1)(c). In view of the aforesaid observations and respectfully following the judicial precedent relied upon hereinabove, we hold that the penalty order passed on 27.5.2016 is barred by limitation and hence quashed. Even on merits, the issue is covered by the decision of Dhir Global Industries (P) Ltd. [ 2008 (7) TMI 6 - HIGH COURT DELHI ] wherein it was held as examined Form 16-A, which is a form in which the TDS certificate is to be issued in terms of rule 31(1)(b) of the Income-tax Rules, 1962. It is apparent from an examination of the said form that the TDS certificate can only be issued after the TDS amount is deposited with the Central Government in the bank. The details of the challan through which the deposit has been made are also required to be filed in the said certificate. Therefore, it cannot be said that the issuance of the TDS certificate is independent to the making of the TDS deposit. Once the explanation of delay in making the deposit has been accepted, there is no reason as to why the same cannot be used for the purposes of delay in the issuance of the TDS certificate. These appeals are dismissed. Hence the penalty levied u/s 272A(2)(g) is hereby deleted. Accordingly, the grounds raised by the assessee are allowed.

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• 2024 (9) TMI 13
  Revenues taxable u/s 44BB(2) - including service-tax/GST receipts in the receipts taxable - whether service tax is includable in the gross revenue for computing profits under presumptive provisions of section 44BB or not? - assessee is a non-resident company. HELD THAT:- As decided in own case in the assessee s own case for the AY 2012-13 [ 2021 (11) TMI 1201 - ITAT DELHI] it is seen that the issue of excludability of service tax in the gross receipts is squarely covered by the judgment of Mitchell Drilling International Pty Limited [ 2015 (10) TMI 259 - DELHI HIGH COURT] wherein has held that service tax being statutory levy should not form part of gross receipts as per provisions of section 44BB. Thus we hold that the service tax receipts do not form part of receipts for computation of income in the section 44BB. Thus addition is hereby deleted.

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• Customs

• 2024 (9) TMI 12
  Penalty imposed on petitioner - HELD THAT:- This special leave petition is disposed off by reserving liberty to the petitioner herein to file an appeal before the appellate authority within a period of one month from today. If such an appeal is filed within the aforesaid date, the issue of limitation shall not arise. Application disposed off.

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• 2024 (9) TMI 11
  Challenge to SCN - Classification of imported goods - light green tinted float glass - to be classified under CTH 70052110 or CTH 70051010? - invocation of extended period of limitation - HELD THAT:- The issuance of a notice prior to the show cause notice is regulated by the Pre-Notice Consultation Regulations, 2018 (the Pre- Notice Regulations). Significantly, the definition of notice in Regulation 2(c) thereof is restricted to a show cause notice under subsection (1) of section 28. The petitioner received an audit consultative letter dated 01.05.2022 in respect of 35 bills of entry. While the said letter does not make express reference to the Pre-Notice Regulations, it makes express reference in paragraph 4 to waiver of show cause notice and penalty if payment is made pursuant to the audit consultative letter. This is a clear indication that the audit consultative letter was issued under sub-section (1) of section 28 because such waiver is provided in sub-section (2) of section 28 only in respect of proceedings under sub-section (1). The short-levy was computed at Rs. 1,14,03,577/- in this document. Although the petitioner replied thereto on 11.05.2022 and asserted that the classification was valid for reasons set out therein, such reply and the subsequent letter dated 06.03.2023 were not taken into account while issuing the impugned show cause notice under sub-section (4) of section 28. This aspect assumes significance while examining the validity of the impugned show cause notice. Section 28 of the Customs Act enables recovery inter alia of duty not levied or not paid or short-levied or short-paid. As per subsection (1), recovery proceedings may be initiated by issuing a show cause notice within two years from the relevant date. Sub-section (4) empowers the proper officer to initiate recovery proceedings within five years from the relevant date where inter alia non-levy, nonpayment, short-levy or short payment is on account of collusion, any wilful mis-statement or suppression of facts. The petitioner has imported light green float glass by classifying the same under CTH 70051010 since about 2011. The respondents did not question such classification by undertaking verification, and consequential reclassification under section 17 of the Customs Act. Earlier final assessments accepting the self-classification were not challenged. As discussed earlier, even appellate orders dated 20.07.2022 and 29.12.2022 accepting the petitioner s classification have not been challenged. While the impugned show cause notice refers to the audit consultative letter, it does not refer to the two replies thereto and wrongly records that no reply was received. No reasons were recorded for issuing the audit consultative letter under sub-section (1) of section 28 and, thereafter, issuing a show cause notice under sub-section (4) thereof - When the facts and circumstances are considered cumulatively, invoking the enlarged period of limitation is erroneous and qualifies as an additional reason to interfere with the show cause notice. Petition is disposed of by directing the respondents to clear goods labelled as Light Green Float Glass (tinted non-wired type) under CTH 70051010 subject to being satisfied that the consignments actually contain light green float glass (tinted non-wired type). Such direction is, however, subject to the appellate orders accepting the classification under CTH 70051010 in respect of the above goods not being reversed in further appeal.

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• 2024 (9) TMI 10
  Revocation of Customs Broker License - forefeiture of security deposit - levy of penalty - Overvaluation of cargo of rough diamonds imported from Hongkong and Dubai - denial of cross-examination without specific grounds and lack of reasons - vaiolation of principles of natural justice - HELD THAT:- The CESTAT has observed that respondent had specifically prayed for cross-examination of certain persons whose statements were relied upon in the Show Cause Notice to implicate respondent. The cross-examination was denied without any specific grounds. The CESTAT has also observed that under Sub Regulation (4) of Regulation 17 of the CBLR, the customs broker shall be entitled to cross-examination of the persons whose statements were used as grounds for forming the basis of the inquiry proceedings and in case, the inquiry officer declined to permit cross-examination of such persons, then he is required to record the reasons in writing for denial. The CESTAT has come to a finding that no reasons have been recorded. The CESTAT has also noted that there are allegations that certain persons were in telephonic touch with respondent but the contents of the conversation have not been brought on record for a specific finding that appellant had active role in alleged over valuation of the imported consignment. There are no reason to interfere because when action is being taken under the provisions of the CBLR, the department was duty bound to comply with the provisions of the CBLR when the broker prays for cross-examination of those persons on whose statements reliance has been placed to implicate the broker - this is the only ground on which the appeal has been allowed and it is found that neither in the proposed questions of law nor in the grounds of appeal, this issue has even been raised. Appeal dismissed.

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• 2024 (9) TMI 9
  Classification of imported goods - Calcium Carbonate - classifiable under CTH 28365000 as claimed by the revenue or as calcite powder falling under CTH 25369030 as declared by the appellant - HELD THAT:- It is found that the department s claim of classification of the imported goods i.e. calcite powder as calcium carbonate under CTH 28365000 is based on Customs Laboratory report of Kandla which only opined that the goods is calcium carbonate. Firstly even if goods are calcium carbonate only because of this it is not classifiable under CTH 28365000. In order to classify under the said tariff item, the goods should be in confirmation to IS standard and must meet with the parameters provided in the IS specification. However, in the present case no such test was done. Secondly, as per Board Circular No. 03/2007-Cus dated 16.11.2017 and Board Circular No. 15/2019-Cus dated 07.06.2019. The board itself has endorsed that the Customs Laboratory, Kandla did not have the facility to test the imported goods in question. Therefore, in such case any report given by the said laboratory which is not equipped with the facility of testing such product, the test report cannot be accepted as correct and on that basis classification cannot be decided. In the decision of M/S. ASIAN GRANITO INDIA LIMITED VERSUS C.C. -MUNDRA [ 2020 (8) TMI 615 - CESTAT AHMEDABAD ], it can be seen that since laboratory were not equipped at the relevant time, it was held that the test report of such laboratory cannot be accepted. The department s claim of change of classification also will not sustain. Thus, the finding the claim of the revenue to classify the calcite powder imported by the appellant being based only on Chemical Examiner Report of Customs Laboratory, Kandla which is not equipped for testing the goods in question has no legs to stand. The impugned order is set aside - appeal is allowed.

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• Corporate Laws

• 2024 (9) TMI 8
  Deletion of the Appellant as party - Whether there is sufficient justification for deletion of the Appellant as party Respondent in C.P. 3638 of 2018 and for removal of restraints on him with respect to his moveable and immoveable property? - HELD THAT:- It is an undisputed fact that the SFIO Final Report had removed the Appellant from the list of persons who constituted the coterie governing IL FS and its Group Companies. It is also undisputed that the Appellant is not named as an accused therein. Apart from there being no generic findings against the Appellant in the SFIO Final Report, there are no specific imputations either of wrong-doing or illegality on the part of the Appellant. There is also no dispute that in pursuance of the Final Report, charge-sheet was filed and prosecution proceedings commenced thereafter. However, no charge of fraud or any other wrongful act has been brought out against the Appellant. Clearly the Appellant had not been identified as an accused in the same charge-sheet. The NCLT clearly committed an error in observing at para 23 of the impugned order dated 10.04.2024 that the Appellant has not been discharged so far from the matter by the criminal court also. Since it is a matter of fact and record that there are no criminal proceedings pending against the Appellant, there was no question arising of discharge from such non-existing proceedings. It is the contention of the Ld. Sr. Counsel for the Appellant that the NCLT had erroneously denied discharge on ground that the Appellant had made withdrawal of lookout circular as the only basis of his discharge - Withdrawal of lookout circular was only one other additional demonstrable proof that the Appellant was no longer a material or relevant party for impleadment. The mere ground of delay in conduct of any investigation by itself cannot constitute sufficient ground for any investigation to be brought to an abrupt end. The investigation process is nevertheless expected to proceed with reasonable and optimal dispatch and should not be inordinately stretched and prolonged at the cost of fair play in action. In the interest of justice and equity, it is imperative to ensure that the delay does not violate or infringe the right of any party to be treated fairly, justly and reasonably. The latitude of time given to the Respondent to complete the investigations cannot continue endlessly, an observation which was made by the NCLT itself more than two years back. Further, prima-facie, there is force in the contention of the Appellant that such inordinately delayed investigation and consequential freeze of assets has prejudicially affected the rights and interests of the Appellant causing agony to a senior citizen, more so, when no adverse findings specifically against the Appellant has come on record so far. This Bench is of the considered view that to meet the ends of justice, while the enquiry may continue, the name of the Appellant from the list of party Respondents in CP 3638 of 2018 could be removed and restraint/freeze of assets also be vacated - Appeal allowed.

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• Insolvency & Bankruptcy

• 2024 (9) TMI 7
  Maintainability of the fresh application under Section 94 of the Insolvency and Bankruptcy Code - HELD THAT:- There is no dispute between the parties regarding sequence of the events. The fact that Appellant filed the application under Section 94 in the year 2020 i.e. 24.09.2020 is undisputed. Punjab National Bank has also filed an Affidavit in this Appeal where it has been pleaded that the Appellant has been misusing the Interim Moratorium under Section 96 of the IBC for the last four years due to which Bank was unable to initiate any recovery proceeding under the SARFAESI or RDBFI Act for the recovery of the dues. The facts clearly indicate that while dismissing the application on 01.02.2024 by the Adjudicating Authority, no liberty was granted to file a fresh petition. While dismissing the application in noncompliance, Adjudicating Authority has not granted any liberty to file any fresh petition for the reasons which have been given. Reliance of the Appellant on the order dated 28.02.2024 claiming that clear liberty was granted to file fresh petition need to be noticed. The liberty to re-file was granted on the request made by the Appellant himself that he wanted to withdraw the petition with liberty to re-file under Section 94 of the Code as per law. The Appellant was permitted to withdraw IA No.519 of 2024 with liberty to re-file under Section 94(1) of the Code. Adjudicating Authority in order dated 28.02.2024 has not expressed any opinion as to whether application which is to be re-filed by the Appellant under Section 94(1) shall be maintainable or not. The Adjudicating Authority did not commit any error in dwelling on the question as to whether the application which is filed on 29.02.2024 being Company Petition is maintainable or not. As noted above, no liberty to file fresh petition was granted when order was passed on 01.02.2024. There are no error in the impugned order dated 17.05.2024 passed by the Adjudicating Authority which has been challenged in these two Appeals - both the Appeals are dismissed.

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• 2024 (9) TMI 6
  Auction sale of the shares - Appellant has right to challenge the auction of shares or not - submission which has been much pressed by the Appellant is that shares, which have been sold, have been sold undervalued, without proper valuation by the Liquidator and the shares have been sold only on the book value of the shares, whereas value of shares were much more - HELD THAT:- Challenge to right issue, issued by the Alliance Broadband is pending before the Adjudicating Authority, the challenge to right issue can have no effect on the auction sale of the shares, which shares were sold on as is where is basis . The submission of the Appellant that physical shares were not in possession of the Liquidator, hence, Liquidator ought not to have put the shares for auction. The Liquidator has also filed an Application seeking a direction to the Alliance Broadband to handover physical shares. The shares have become part of the liquidation estate as per operation of law. It is relevant to notice that Adjudicating Authority has already in paragraph 10 of the order passed on 12.01.2024 has directed Alliance Broadband to handover the Certificate in original to the Liquidator within a week. It has been pleaded on behalf of the Respondent that Alliance Broadband has already handed over the physical Certificate in original to the Liquidator, which in turn has been handed over to the Successful Auction Purchaser - there are no substance in the submission of the Appellant that auction sale is illegal on this ground. The Liquidator has already indicated in the sale notice that physical shares are not with the Liquidator and steps are being taken to acquire the physical shares. The Corporate Debtor being shareholder of the Alliance Broadband, which shares were put on auction sale by the Liquidator, consequent to the liquidation order, thus, no exception can be taken to the process adopted by the Liquidator in putting the shares for auction. The sale of 77,500 shares, held by the Corporate Debtor of the Alliance Broadband, which are sold through auction, were not undervalued and the same was done after valuation by the IBBI Registered Valuer and the shares were sold on much more than the book value of the shares. The challenge to right issue as filed by the Appellant in IA No. 847 of 2021, which is pending consideration, has no consequence on the auction sale held on 14.02.2023 - there are no error committed by the Adjudicating Authority in order dated 12.01.2024 rejecting IA No.334 (KB) 2023 filed by the Appellant. There are no merit in the Appeal(s) filed by the Appellant(s) - appeal dismissed.

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• Service Tax

• 2024 (9) TMI 5
  Liability of service tax - Sale of space or time for advertisement service - Classification of service of Technical testing and analysis service and Commercial or industrial construction service - Renting of immovable property service - exemption from service tax - extended Extended period of limitation - penalty. Liability of service tax - sale of space or time for advertisement service - appellant submits that they themselves had not rendered any advertisement service, but had entered into agreements for providing advertisement rights to different advertisement agencies and accordingly the liability to pay Service Tax is on the advertisement agencies only - HELD THAT:- The appellant has provided advertisement rights to different advertising agencies namely, M/s. SELVEL Advertising Pvt. Ltd., M/s. Accord Advertising Pvt. Ltd.etc. for display of hoardings and kiosks. It is observed that this service is liable to service tax under the category of Sale of Space or Time for Advertisement . Classification of service - technical testing and analysis service - appellant submits that they are a statutory agency and the service charges rendered by them are not exigible to Service Tax - HELD THAT:- The appellant has also engaged in providing technical testing and analysis service by way of testing of concrete cube, testing of coarse aggregate and fine aggregates, testing of reinforcing bars, testing of bricks, testing of pH value of water, testing of strength of soil, non-destructive testing of civil engineering materials, etc., on the samples supplied by various agencies. For the above testing, HRBC receiving testing charges. It is observed that this service rendered by the appellant is appropriately classifiable under the category of Technical Testing and Analysis Service Liability of service tax - appellant submitted that as this service is provided to Kolkata Metro Railways, they are not liable to pay service tax on the renting of immovable property service - HELD THAT:- The appellant have rented out the fourth and fifth floors of HRBC Bhawan, St. Georges Gate Road, Kolkata 700 021 to KMRCL. It is observed that this service provided to Kolkata Metro Railways is appropriately classifiable under the category of Renting of immovable property service . Classification of service tax - commercial or industrial construction service - appellant contend that the liability to pay Service Tax will fall on M/s. U.I.C. Infrastructure India Pvt.Ltd. - HELD THAT:- The appellant had undertaken commercial or industrial construction service for Kolkata Metro Rail Corporation Ltd. (KMRCL). It is observed that the building constructed by the appellant is not for Metro Railways. One building is to be used for the Office of the General consultant of Kolkata Metro Rail Corporation Ltd and in case of the 2nd building, the lower stories will be used for shopping, the one or two upper stories may be utilized for residential purposes depending on actual requirement. Thus, this service is appropriately classifiable and liable to service tax under the category of Commercial or Industrial Construction service . Exemption from service tax - HELD THAT:- There is no specific exemption available to the appellant for the above said services rendered by them to their clients on receipt of consideration. Accordingly, we do not agree with the submission made by the appellant that all the services rendered by them are not liable to Service Tax. Thus, the appellant is liable to pay service tax on the above said taxable services rendered by them. Extended period of limitation - penalty - HELD THAT:- The appellant being a statutory organization established by the Government, there is no mens rea on their part or intention to evade payment of Service Tax. It is also observed that the department has not brought in any evidence to substantiate the allegation that suppression of facts with intent to evade payment of tax on the part of the appellant. Accordingly, extended period of limitation cannot be invoked in this case to demand Service Tax - Accordingly, the demand, if any, is to be restricted to the normal period of limitation only. Since suppression of facts with intention to evade payment of tax is not established, no penalty imposable on the appellant. The demand confirmed in the impugned order by invoking the extended period of limitation set aside and the demand confirmed in the impugned order for the normal period of limitation upheld - For the purpose of quantifying the demand for the normal period of limitation, the matter is remanded back to the adjudicating authority. No penalty imposable on the appellant. Appeal allowed in part and part matter on remand.

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• Central Excise

• 2024 (9) TMI 4
  CENVAT credit on various items such as HR coils, HR Sheets, M.S. Angles, M.S. Channels and MS plates which are in turn utilised in the manufacture of capital goods meant for construction of new plywood manufacturing unit during the period 13.09.2008 to October 2009 - HELD THAT:- The issue is no longer res integra, as far as the period prior to 07.07.2009 is concerned. It is covered by the judgment of this Tribunal rendered in the case of M/S. BMM ISPAT LIMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE, BELGAUM [ 2024 (4) TMI 671 - CESTAT BANGALORE] wherein this Tribunal had elaborately discussed the ratios rendered in the case of M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE [ 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT] and M/S. THIRU AROORAN SUGARS, M/S. DALMIA CEMENTS (BHARAT) LTD. VERSUS CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE [ 2017 (7) TMI 524 - MADRAS HIGH COURT] and also decision of Larger Bench of this Tribunal in the case of M/S. MANGLAM CEMENT LTD. VERSUS C.C.E., JAIPUR-I [ 2018 (3) TMI 1547 - CESTAT NEW DELHI] , wherein it is held that CENVAT credit on various inputs such as MS Angles, MS Channels, MS beams, MS joists, MS plates, etc., used in the fabrication of various machineries, support structure, platforms for machineries and equipment, etc., used in the factory, is admissible. For the period from 07.07.2009 to October 2009 the definition of input under Rule 2(k). The Explanation 2 has been inserted to the said definition vide Notification No.16/2009CE(NT) dated 07.07.2009. Consequently, the items viz., HR coils, HR Sheets, M.S. Angles, M.S. Channels and MS plates, etc., has been specifically excluded from the scope of the definition of inputs . Thus, for the period prior to 07.07.2009, the appellants are eligible to avail CENVAT credit on the inputs viz., HR coils, HR Sheets, M.S. Angles, M.S. Channels and MS plates, etc., and accordingly, demand confirmed is not sustainable; for the period 07.07.2009 to October 2009, in principle CENVAT credit on the inputs viz., HR coils, HR Sheets, M.S. Angles, M.S. Channels and MS plates, etc., are not admissible - the impugned order is modified and the appeal is remanded to the original adjudicating authority to recalculate the demand for the period after 7.7.2009, if any, payable. However, no penalty is imposable on the appellants. Appeal disposed off.

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• 2024 (9) TMI 3
  Delayed adjudication of SCN without a reasonable cause - Delay in finalization of assessments and issuance of demand - Classification of goods - Sodium Carboxy Methyl Cellulose - to be classified under TI 68 or under Tariff Item 15 - finalisation of provisional assessment made earlier under Rule 9B - period of dispute is for the period 28.02.1892 to 27.02.1986 - HELD THAT:- There is absolutely no justification for the Department to wait for nearly one year after the Tribunal s Final Order to start the proceedings belated by issuing the show cause notice on 04.04.2008 against the express direction of the Tribunal to conclude the Denovo proceedings itself within 4 months from the date of receipt of the Order dated 18.04.2007. From the Final Order dated 18.4.2007 of the Tribunal it gets clarified that the time frame of 4 months given was not only for issue of SCN, but also to complete the entire proceedings for determination of duty payable as a consequence to such finalization. Since for the second time the Revenue has failed to adhere to the time frame to finalize the assessment, as mandated by the Tribunal, it is held that the confirmed demand is legally not sustainable. The Revenue failed to finalize the assessment within the normal period. Then Tribunal intervened and saved the Revenue by directing them to complete the de-novo proceedings within Four months. Thus, a lenient view was taken by the Tribunal, which in the normal course could have set aside the impugned order confirming the demand which was made without actual finalization of the assessment. This lenient view came with a caveat that the process of determination has to be completed within four months. Finally, the proceedings were completed in about 14 months, violating the time frame condition specified by the Tribunal. There is catena of judgments of Hon ble Supreme Court, High Courts where delayed adjudication of SCN without a reasonable cause has been considered as a ground for setting aside the Order passed pursuant to the said SCN. In the present case there was clear direction in 14.10.1986 Order of the Assistant Commissioner for finalizing the assessment which should have been finalized within reasonable period of six months, at best. Even if the SCN was to be issued in time for finalizing, it should have been issued within some reasonable period. Admittedly, both these actions were not done and in fact appears to have been done by issuing show cause notice on 04.04.2008 and passing the OIO on 22.10.2008. The delayed finalization of the assessment taking 14 months to do so, as against the direction to finalise within 4 months period given by the Tribunal vide its Final Order No. 462/2007 dated 18.04.2007 is fatal to the present proceedings and we set aside the impugned order and hence we allow the appeal - Once the classification issue was decided vide OIO dated 14.10.1986 with clear Order, no further action was taken for the next 22 years to finalize the assessment as per the demand made under Section 11A and that the assessee [appellant] is required to pay the differential duty,. The demand which was raised after 14 years [vide letter dated 19.09.2000] was also without finalizing the provisional assessment. Appeal allowed.

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• 2024 (9) TMI 2
  Denial of CENVAT Credit - appellant referred extensively to the letter dated 19.01.2017 submitted by the Assistant Commissioner in response to the letter submitted by the appellant for furnishing a certificate relating to CENVAT credit in terms of the order dated 22.05.2012 passed by the Commissioner - HELD THAT:- It clearly transpires from the letter dated 19.01.2017 sent by the Assistant Commissioner to the appellant that from the records, including the original invoices supplied by the appellant, the appellant had paid duty to the extent of Rs. 2,32,46,986/-. The Principal Commissioner, however, without adverting to this letter has recorded a finding that the appellant failed to submit documents despite repeated opportunities having been granted to the appellant. This finding recorded by the Principal Commissioner is perverse as the letter dated 19.01.2017 was on the record. This letter should have been considered by the Principal Commissioner before recording any finding on the admissibility of CENVAT credit - The appellant has not challenged the the order passed by the Principal Commissioner on merits. The portion of the finding recorded by the Principal Commissioner in the impugned order that the appellant is not entitled for CENVAT credit deserves to be set aside and is set aside. The appellant is held entitled to CENVAT credit in terms of the letter dated 19.01.2017 sent by the Assistant Commissioner to the appellant. Appeal disposed off.

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• CST, VAT & Sales Tax

• 2024 (9) TMI 1
  Justification of upholding the penalty imposed u/s 51 (7)(b) for the goods being imported to Chandigarh from Himachal Pradesh on the ground of undervaluation merely on the basis of provisions for levy of excise duty on MRP basis under Central Excise Act - justification in upholding the penalty levied on road side checking under Section 51 (7)(b) even though the determination of actual valuation of goods is within the domain of the assessing authority. Whether on the facts and in the circumstances of the case, the learned Tribunal was justified in upholding the penalty imposed under Section 51 (7)(b) for the goods being imported to Chandigarh from Himachal Pradesh on the ground of undervaluation merely on the basis of provisions for levy of excise duty on MRP basis under Central Excise Act? - HELD THAT:- It is found that the invoices have been issued by the manufacturer, who is placed in Himachal Pradesh where the excise duty is exempted. In the circumstances, the valuation of goods i.e. purchase price for any person would be comparatively much lower than that of other places where excise duty is payable. It is also not a case of the State authorities that the invoices were different for the appellant in comparison to other distributors. Once there is no finding in this regard, a presumption cannot be drawn that the invoices were under valued merely because MRP rate mentioned on the product was on a much higher side. So far as the dealer is concerned, namely the appellants, they would further sell the goods to various distributors. If the sale price is comparatively low, the case of tax evasion would arise - to presume that there is an evasion of tax at the level of the person who is a dealer going to further sell the goods to a distributor, is a farfetched presumption. The action of the respondents imposing penalty on such a presumption would be an exercise of arbitrary power - the question is answered in favour of the appellants. Whether on the facts and in the circumstances of the case, the learned Tribunal was justified in upholding the penalty levied on road side checking under Section 51 (7)(b) even though the determination of actual valuation of goods is within the domain of the assessing authority? - HELD THAT:- The Division Bench of this Court in Xcell Automation [ 2006 (11) TMI 582 - PUNJAB AND HARYANA HIGH COURT] , has also answered the aforesaid question in favour of the assessee. The invocation of jurisdiction on allegations of attempt of tax evasion is without sufficient reasons and the order is totally laconic - the relates to the penalty imposed by invoking Section 51 (7) (a) and (b) of the Act of 2005. However, such power of imposing penalty was not required to be invoked at the stage of road side checking and the power can only be exercised by the assessing authority who shall reach to the conclusion that there has been an attempt to evade tax after actual valuation of the goods. The questions answered in favour of the assessee.

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