TMI Tax Updates - e-Newsletter
September 7, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Securities / SEBI Insolvency & Bankruptcy PMLA Service Tax Central Excise Indian Laws

Articles

1. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

2. Penalty not leviable due to expiry of E-way bill when there is no intention to evade payment of tax

   By: Bimal jain

News

1. 78th Meeting of Network Planning Group under PM GatiShakti evaluates 18 road projects

2. India-Middle East-Europe Economic Corridor initiative to add to India’s maritime security: Union Minister of Commerce & Industry Shri Piyush Goyal

Notifications

Customs

1. 59/2024 - dated 5-9-2024 - Cus (NT)

Appointment of Common Adjudicating Authority

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/DDHS/DDHS-PoD-1/P/CIR/2024/117 - dated 6-9-2024

Modification in the timeline for submission of status regarding payment obligations to the stock exchanges by entities that have listed commercial paper

GST - States

2. Trade Circular No. 22T of 2024 - dated 29-8-2024

Clarification regarding GST rates & classification (goods) based on the recommendations of the GST Council in its 53rd meeting held on 22nd June, 2024, at New Delhi

3. Trade Circular No. 23T of 2024 - dated 29-8-2024

Clarifications regarding applicability of GST on certain services

FEMA

4. 16 - dated 6-9-2024

Liberalised Remittance Scheme (LRS) for Resident Individuals-Discontinuation of Reporting of monthly return

Highlights / Catch Notes

GST

• GST registration cancellation notice lacked valid reasons, court quashes order for violating natural justice.

  Case-Laws - HC : The court held that the show cause notice issued to the petitioner for cancellation of GST registration lacked specific reasons for alleged fraud, willful misstatement or suppression of facts. Consequently, the order canceling the petitioner's GST registration was set aside due to violation of principles of natural justice. The court directed the authority to provide all documents referred to in the show cause notice to the petitioner within ten days to protect the petitioner's interests, disposing of the petition.
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• Eligibility of ITC for 'Rotary Parking System' Denied; Classified as Immovable Property Under CGST/TNGST Act 2017.

  Case-Laws - AAAR : The case pertains to the admissibility of Input Tax Credit (ITC) on the 'Rotary Parking System' falling under HSN code 8428 and the blocking of credit u/s 17(5) of the CGST/TNGST Act, 2017. The appellant renders 'Renting of Immovable Property Service' and proposes to install a 'Rotary Car Parking System' within the premises, not inside the building, to provide parking facilities to tenants and customers. The exclusion clause 'other than plant and machinery' in Section 17(5)(c) and (d) conveys that ITC on 'plant and machinery' is not blocked, but the 'Rotary Parking System' is considered a 'civil structure' excluded from the definition of 'plant and machinery'. The service of 'Renting of Immovable Property' includes common areas and facilities, making the 'Rotary Parking System' part of the immovable property being rented out. Therefore, the input tax credit on the purchase of the 'Rotary Parking System' becomes ineligible u/s 17(5)(d) of the CGST/TNGST Acts, 2017, as it amounts to construction of an immovable property.
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• Traders' GST registration restored if pending returns filed, tax dues paid in 45 days.

  Case-Laws - HC : Cancellation of GST registration due to failure to file monthly returns for six consecutive months. Court followed Suguna Cutpiece judgment, directing restoration of registration subject to conditions: filing pending returns, paying tax dues with interest, and late fees within 45 days. Restoration contingent upon fulfilling stipulated conditions. Consistent approach maintained to ensure uniformity in judgments.
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• Tax Turmoil: GST Notification Challenged as Ultra Vires.

  Case-Laws - HC : The notification bearing No. 56/2023 is ultra vires Section 168A of the CGST Act, 2017 as it lacks the mandatory recommendation of the GST Council. Consequently, actions based on such notification are invalid. The petitioner is entitled to reliefs proposed in the Financial Bill 2024. Examination is required regarding applicability of force majeure for extending time limit u/s 73(9) considering the 49th GST Council meeting minutes. Respondent authorities should present their stance and materials claiming force majeure applicability. Interim protection granted to petitioner against impugned assessment order dated 24.04.2024, with no coercive action permitted until the next hearing date.
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• Dealer Entitled to GST Refund When Input Tax Exceeds Output; Court Lowers Interest on Refund from 9% to 6.

  Case-Laws - HC : The High Court held that u/s 54 of the Goods and Services Tax Act, 2017, when the input tax credit paid is higher than the output tax, the dealer is entitled to seek a refund of the excess amount. The Court rejected the Revenue's argument that the dealer voluntarily paid excess tax, as the legislative intent is to provide a refund when the input tax credit exceeds the output tax. In the present case, the dealer was entitled to a refund as the output tax was only 5%, while the input tax credit was 18%. Regarding the interest rate, the Court modified the 9% rate awarded by the writ Court to 6%, payable by the Revenue from the date of expiry of sixty days from the Original Authority's order u/s 54(5). The writ appeals filed by the Revenue were dismissed.
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Income Tax

• Upholding AO's statutory power, Court validates assessment u/s 144 despite CBDT instructions.

  Case-Laws - HC : The High Court upheld the validity of the Assessing Officer's jurisdiction to frame the assessment order u/s 144. Even if the case was not liable for compulsory scrutiny per CBDT guidelines, it fell within Section 143(2) allowing the AO to issue notice and proceed with assessment u/s 144 if income had escaped assessment. The AO's power u/s 143(2) is statutory and cannot be curtailed by CBDT instructions, as that would require the AO to dispose of a case in a manner not prescribed by statute. The ITAT order upholding the assessment u/s 144 was found to have no illegality or infirmity.
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• Validity of Income Tax Order: Can Legal Question be Raised Directly in High Court without ITAT Pleading?

  Case-Laws - HC : Validity of order passed u/s 153C read with Section 143(3) - whether question of law can directly be raised before High Court without being averred or pleaded before Income Tax Appellate Tribunal (ITAT)? Held that as per K. Lubna & Ors. Versus Beevi & Ors. [2020 (1) TMI 1209 - Supreme Court], parties cannot be restrained from raising a question of law even at the last stage of adjudication. In the present case, Revenue raised substantial questions of law which were not decided by ITAT due to lack of averment or arguments before ITAT. Therefore, Court remanded the appeal back to ITAT with direction to decide afresh after giving opportunity of hearing to parties and pass a speaking and well-reasoned order on merits within two months.
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• Statutory time limit cannot be imposed through CBDT circular for compounding tax offenses.

  Case-Laws - HC : No time limit prescribed u/s 279(2) of Income Tax Act for filing compounding application. CBDT circular fixing 36-month limitation period held contrary to the Act and impermissible. Judgment in Jayshree's case applied, holding CBDT cannot issue circular contrary to the object of statutory provisions. Once an offence is compoundable under the Act, right cannot be taken away by prescribing time limit through circular. Impugned order rejecting compounding application set aside.
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• Taxman's prudence on valuation report & jurisdiction prevails.

  Case-Laws - AT : Relevance of the valuation report received after assessment, the application of mind by the PCIT in invoking Section 263 revision jurisdiction, the treatment of valuation issues u/s 154 rectification, and the jurisdiction of the PCIT (Central), Nagpur in revision proceedings. It holds that there is no time limit for furnishing the valuation officer's report, and the PCIT had duly applied their mind before invoking Section 263. Valuation issues would not attract Section 154 rectification as per the Supreme Court's ruling. The PCIT (Central), Nagpur had jurisdiction in the revision proceedings, as the assessee failed to prove otherwise. The ITAT rejected all the assessee's arguments and decided against them.
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• Tax Revision Upheld: PCIT Validly Corrects AO's Oversight on Cash Transactions and Penalties, Enforcing Revenue Protection.

  Case-Laws - AT : Validity of an ex-parte revisionary order passed by the Principal Commissioner of Income Tax (PCIT) u/s 263 of the Income Tax Act. The key points are: The PCIT passed the revisionary order after considering the assessee's submissions, refuting allegations of violating principles of natural justice. The order was within the statutory time limit of two years from the end of the relevant financial year. The PCIT had revisionary jurisdiction as the Assessing Officer's (AO) order was erroneous and prejudicial to revenue interests by not examining cash transactions exceeding Rs. 20,000, attracting disallowance u/s 40A(3). The AO's order was cryptic, lacking examination of issues mandated for scrutiny under CASS. The PCIT correctly pointed out the AO's mistakes in not disallowing expenses u/s 40A(3) and not initiating penalty proceedings u/ss 269SS, 269T, and 271D for cash loan repayments. The PCIT directed the AO to pass a fresh assessment order, including consequential penalties, without transgressing jurisdiction u/s 263.
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• Tax Tribunal: Refunds Must Prioritize Interest Payment, Balance Applied to Tax; Aligns with Section 140A(1) Principles.

  Case-Laws - AT : The Income Tax Appellate Tribunal held that the refund granted to the assessee should be first adjusted against the correct amount of interest due, and the remaining portion should be adjusted against the balance tax. This principle should be applied while granting refunds, similar to the principle applied while collecting tax u/s 140A(1). The Tribunal observed that there is no specific provision u/s 244A regarding the adjustment of refunds for computing interest payable to the assessee. However, it would be just and fair to apply the same principle as in tax collection. Relying on consistent decisions of coordinate Benches, the Tribunal directed the Assessing Officer to compute the interest u/s 244A as claimed by the assessee in the detailed working, by first adjusting the interest component and then the taxes. The assessee's appeal was allowed.
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• Tribunal Upholds Deduction for Prepaid Charges, Deletes Excess Interest; Bad Debt Provision Disallowance Stands.

  Case-Laws - AT : Disallowance for prepaid finance charges was deleted as the Tribunal in the assessee's own case for the previous year had allowed deduction for finance charges including prepaid finance charges in the year of payment itself. Excess interest spread income earned on assignment of receivables was deleted following the Tribunal's decision in the assessee's own case for a different year. Regarding provision for bad and doubtful debts u/s 36(1)(viia)(d), the deduction cannot exceed 5% of total income, and the differential amount disallowed by the AO was confirmed. The alternative claim regarding reversal of provision for standard assets and diminution in value of investments was remanded back to the AO for fresh adjudication as facts were not examined. The Appellate Tribunal's decision was cited.
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• Tribunal Allows Full Deduction of Brokerage Expenses u/s 57(iii) for Income from Other Sources.

  Case-Laws - AT : The assessee claimed deduction of brokerage expenses u/s 57(iii) against income from other sources. The Assessing Officer disallowed part of the expenses in proportion to the principal and interest received from the builder. The Tribunal held that section 57(iii) allows deduction of expenses wholly and exclusively incurred for earning such income, without enabling the Assessing Officer to estimate and disallow a portion. The expenditure was incurred to recover the entire amount, including principal and interest, from the builder through brokers. The interest component was offered as income, and the related expenses were wholly deductible. The Tribunal allowed the ground, stating that the expenditure had a direct connection with earning the income and was incurred for that purpose, as required u/s 57(iii) read with judicial precedents. The implication is narrower than section 37(1) for business expenses but requires a nexus between the expenditure and income earning.
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• Taxpayer Eligible for Section 54F Deduction on Jointly Used Residential Property Despite Spouse's Sole Registration.

  Case-Laws - AT : Long-term capital gains deduction u/s 54F can be claimed for investment in a residential property not solely owned by the assessee. The assessing officer's sole objection that the land on which capital gains were utilized for construction is not in the assessee's name but her husband's name is invalid. A purposive interpretation favoring the deduction should be preferred over a literal construction. Section 54F is a beneficial provision and should be interpreted liberally in favor of the taxpayer. The deduction should not be denied on hyper-technical grounds. The term 'assessee' must be given a wide interpretation to include legal heirs. Registration of the property in the assessee's name is not mandatory for claiming the deduction u/s 54. The terms 'own', 'ownership', and 'owned' have a wide connotation, and possession with the right to use and enjoy the property's usufructs constitutes ownership. Therefore, the assessee is eligible for deduction u/s 54F for investment in a residential house in her husband's name.
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• Healthcare tech firm's expenses for identifying acquisition targets treated as revenue, not capital. No exempt income, so Section 14A disallowance inapplicable.

  Case-Laws - AT : Expenses incurred for professional charges paid to identify potential acquisition targets in healthcare technology sector deemed revenue expenditure, not capital expenditure. Disallowance u/s 14A not applicable if no exempt income received. Appeal by assessee allowed, relying on precedent of On Mobile Global Ltd. case. Genuineness of transactions for services rendered not disputed. Appellate Tribunal's ruling favoring assessee's stance on nature of expenses and inapplicability of Section 14A disallowance.
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• Validity of Tax Additions Under Scrutiny: Lack of Incriminating Material and Unjustified Loan Additions Challenged.

  Case-Laws - AT : Validity of additions made u/s 153A, 69C, 68, and 69A of the Income Tax Act. It discusses the lack of incriminating material or documents found during the search to justify additions based on the Department Valuation Officer's report. The summary cites relevant case laws, including Narula Educational Trust, Abhisar Buildwell P. Ltd., B.G.Shirke Construction Technology Pvt Ltd., and Dialust, to support the arguments. It also addresses the issue of additions made based on the departmental valuation report, highlighting the lack of proper inquiry by the Assessing Officer. Additionally, it covers the addition u/s 68 towards unsecured loans, stating that the addition was unjustified as the assessee proved the genuineness of the transactions. The summary provides a concise overview of the critical legal issues and arguments presented in the case.
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• Tribunal Rules Charitable Trust Can't Deduct 30% on Rentals, Must Show Fund Details for Accumulation Deduction.

  Case-Laws - AT : Allowance of standard deduction u/s 24(a), deduction for actual repairs, and deduction of accumulated income u/s 11(2) in the case of a charitable trust claiming exemption u/s 11. The Tribunal held that standard deduction of rental income at 30% u/s 24A cannot be allowed while computing income eligible for exemption u/s 11. Regarding actual repairs, the AO was directed to allow deduction for actual repairs and maintenance expenditure incurred before arriving at income available for accumulation u/s 11(2) or taxable income. Concerning accumulation u/s 11(2), the assessee failed to provide details on availability of funds for specified investments u/s 11(5), and the Tribunal rejected the ground for accumulation deduction. The summary covers the critical issues using relevant legal terminology in a concise manner.
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• House sale profit invested in new home within time limit, exceeding sale amount.

  Case-Laws - AT : Assessee utilized long-term capital gain from sale of immovable property for purchase of new residential property within permissible time period. Purchase consideration for new house exceeded sale consideration received on transfer of immovable property. Appellate Tribunal directed Assessing Officer to recompute taxable total income by allowing deduction u/s 54 for investment in new residential house property against capital gains from sale of immovable property, despite assessee's failure to file return of income initially.
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• Gold Ornaments Robbery Loss Deductible for Business.

  Case-Laws - AT : Loss due to robbery of gold ornaments is allowable as a deduction if it arises from carrying on business and is incidental to it. The CIT(A) erred in restricting the loss based on newspaper reports instead of the books of account. The loss from embezzlement, theft, or robbery is deductible if it has a proximate connection to the business. The assessee submitted police reports, FIR, and newspaper clippings as evidence of the robbery. The revenue's argument that no quantitative details were provided in the FIR is not acceptable. The assessee's appeal is allowed, and the loss suffered due to robbery is allowed as a deduction.
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• Income Tax Deductions: Industrial Profits, Export Gains, and Expenditure Allowances Examined in Recent Ruling.

  Case-Laws - AT : This case deals with various issues related to deductions and allowances under the Income Tax Act. The key points are: Deduction u/s 80IB for profits from an industrial unit was allowed based on separate profit and loss account filed. Deduction u/s 80HHC for export profits was allowed, as the retrospective amendment disallowing deduction for DEPB license sale was struck down. Disallowance of commission paid was set aside for lack of evidence. Expenditure on repairs and replacements of plant and machinery was held allowable as revenue expenditure u/s 31. Service charges paid to a group company were held allowable. Community development expenses were treated as business expenditure. Entrance fees paid to clubs for employee welfare were held allowable. Short-term capital loss on sale of investments was directed to be re-examined for allowability. Expenditure on aircraft maintenance and depreciation during trial run was allowed. Deduction u/s 80HHC was remanded for computation based on book profits. Market value for transfer pricing u/s 80IA was accepted. Disallowance of repair expenses on an estimated basis was set aside. Write-back of provision was held non-taxable as already offered earlier.
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• Tax Tribunal Rules in Favor of Land Buyer; Dismisses Additional Tax Based on Stamp Duty Valuation Discrepancy.

  Case-Laws - AT : The assessee purchased agricultural land whose stamp duty valuation was lower than the actual purchase consideration. The authorities sought to invoke section 56(2)(x) to tax the difference between stamp duty value and purchase consideration. However, the assessee consistently maintained that the land was purchased for agricultural purposes, and the stamp duty valuation treated it as non-agricultural residential land. The Tribunal held that since the assessee disputed the stamp duty valuation, the Assessing Officer should have referred the valuation to the Departmental Valuation Officer (DVO) as per section 50C(2). The DVO determined the fair market value (FMV) to be only marginally higher than the purchase consideration, within the 10% range. As there was no material difference between FMV and purchase consideration, no addition u/s 56(2)(x) was warranted. The Tribunal directed the Assessing Officer to delete the addition, allowing the assessee's appeal.
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• Income Tax Tribunal Modifies Disallowances: TDS on Freight, Travel, and Interest Adjustments Explained.

  Case-Laws - AT : Various disallowances and additions made by the Assessing Officer (AO) and the Income Tax Appellate Tribunal's (ITAT) decisions on the same. The key points are: 1) Disallowance u/s 40(a)(ia) for non-deduction of TDS on ocean freight charges was deleted, as per CBDT circular, neither Section 194C nor 195 is applicable to such payments. 2) Disallowance of entire traveling expenses was restricted to 25% as no proof of business purpose was provided. 3) Addition u/s 41(1) for outstanding sundry creditors was deleted as the amount was offered to tax in the subsequent year, avoiding double taxation. 4) Disallowance of motor car expenses and depreciation was restricted to 10% for personal use, following judicial precedents. 5) Disallowance of excess interest payment u/s 40A(2)(b) was deleted, relying on the Gujarat High Court decision.
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• Unexplained Cash Deposits Validated; Land Sale Agreement and Audited Books Support Assessee's Claims, Additions Deleted.

  Case-Laws - AT : Unexplained cash deposits in bank account were found genuine based on evidence of sale of land agreement, disclosure in audited books, and statements from involved parties clarifying no actual cash transaction took place due to fund transfer within same bank branch. Addition made by Assessing Officer on presumption basis was decided in favor of assessee. Interest paid on funds invested in immovable properties and shares of other companies was allowed as deduction, treating them as productive assets related to assessee's business, following coordinate bench decision. Unaccounted sales receipts were explained by voluntary disclosure during search and annexure showing receipts already considered for gross profit, leading to deletion of addition as sale receipts stood explained. Contradictory observations by authorities regarding treatment of same receipts were rectified in assessee's favor.
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• Trust's timely 80G registration application within extended deadline wrongly denied.

  Case-Laws - AT : Trust filed application for final approval u/s 80G(5) on 02.08.2023, before the extended due date of 30.06.2024 prescribed by CBDT Circular No. 7/2024. Denying registration solely on ground of non-filing before 30.09.2023 is incorrect as the deadline was extended. ITAT allowed the appeal for statistical purposes, recognizing the trust's timely application within the extended timeline for filing Form 10A/10AB for recognition u/ss 12A/80G.
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• Trust running Kalyana Mandapam eligible for tax exemption as surplus utilized for charitable purposes.

  Case-Laws - AT : Corpus donations received by the trust for running Kalyana Mandapam were voluntary in nature and could not be treated as rental receipts. Although the activity generated surplus, the surplus was utilized for furthering other charitable purposes mentioned in the trust deed. The trust confined its activities within the boundaries set by the trust deed and did not drift from its objects. Therefore, the trust's claim for exemption u/s 11 could not be denied merely because the Kalyana Mandapam activity resulted in surplus funds. The Appellate Tribunal directed the Assessing Officer to grant exemption u/s 11 and recompute the income for all years.
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• Tax Tribunal Overturns Trust's Retrospective Registration Cancellation; Violations Apply Prospectively from April 2022.

  Case-Laws - AT : The assessee trust's registration u/s 12AA was cancelled retrospectively by the CIT(E) u/s 12AB(4)(b)(i) on grounds of commercial activities, diversion of funds to related parties, and violation of Section 13(3). The key points are: The ITAT held the retrospective cancellation was incorrect as the specified violations u/s 12AB(4) were introduced prospectively from 01.04.2022 and cannot apply to earlier years. The revenue cannot re-agitate issues like commercial activities which were already decided in the assessee's favor. Cancellation cannot operate retrospectively in absence of specific provision. The CIT(E) initiated proceedings based on a reference from the AO, but no fresh reference was made after registration was granted on 23.09.2021 as mandated by amended Section 12AB(4). The show cause notice did not cover the specified violations invoked in the final order, violating principles of natural justice. Cancellation of registration solely on grounds of specified violations for prior years is incorrect.
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• Short-term capital gains on property sale, cash payments disallowed, unexplained cash credits treated as income.

  Case-Laws - AT : Transfer of property deemed as short-term capital gain due to holding period less than 36 months, disallowing deduction u/s 54F. Additions for difference in commission payment and closing balances of parties deleted as TDS deducted and reasons for difference found reasonable. Cash freight payment disallowed u/s 40A(3). Additions for sales tax payment, penalty, and difference in sales tax turnover upheld. Cash deposits treated as unexplained credits u/s 68 due to lack of evidence regarding source and creditworthiness of parties. Partly allowed assessee's appeal.
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• Cash credits mismatch during demonetization period - Unable to justify receipts, debt recoveries.

  Case-Laws - AT : Unexplained cash credit addition u/s 68 during demonetization period - assessee unable to substantiate contentions regarding cash receipts from sales and debt recoveries with corroborative evidence. Mismatch in closing and opening cash balances noted, assessee failed to disprove before authorities. While books not rejected, verification required regarding closing cash balance as on 31.03.2016, matching with 01.04.2016 opening balance, verification of sales bills/books, impact of cash collected from debtors on returned income. Matter remitted to Assessing Officer for fresh adjudication after verification and providing reasonable opportunity of hearing to assessee.
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Customs

• EOUs get more time for automation process amid clearance delays.

  Circulars : This circular pertains to the implementation of automation in the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022, specifically for Export Oriented Units (EOUs). Due to representations from EOUs regarding difficulties faced in registration, generation of IIN details, and submission of bond details, leading to delays in clearance of goods, the Board has decided to implement the automation from 17.09.2024 onwards, instead of the earlier notified date of 01.09.2024. Field formations are advised to issue suitable public notices and address any difficulties arising during implementation.
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• Customs Notice Guidance: Brokers Not Routinely Implicated Unless Abetment Proven.

  Circulars : This instruction clarifies that Customs Brokers should not be routinely implicated as co-noticees in cases involving interpretative disputes, unless their abetment in the offence is established by the investigating authority. The element of abetment must be clearly elaborated in the Show Cause Notice issued under the Customs Act, 1962. Proceedings against Customs Brokers should be initiated as per the Customs Brokers Licensing Regulations, 2018, ensuring compliance with prescribed procedures and timelines. The instruction aims to prevent unnecessary implication of Customs Brokers in interpretative disputes and emphasizes the need to establish their abetment before initiating action against them.
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• Court Upholds Detention Order, Emphasizes Limited Judicial Review Under COFEPOSA; Adequate Grounds and Evidence Found.

  Case-Laws - HC : The order deals with the scope of judicial review in a detention order passed under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA). It cites relevant Supreme Court precedents clarifying that the court's role is limited to scrutinizing whether the detaining authority applied its mind and had sufficient grounds for preventive detention, without substituting its own satisfaction. The detenu is entitled to copies of documents relied upon for detention but not all documents mentioned. The detaining authority must consider the detenu's representation expeditiously. Typographical errors in the consideration order do not vitiate the decision unless prejudicial. In the present case, substantial materials like statements under the Customs Act, seizure of gold, currencies implicating the detenu justified the detention order under COFEPOSA. The court found no merit in the writ petition and dismissed it.
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• Petition Dismissed for Concealment; Petitioner Fined Rs. 5 Lakhs for Suppressing Facts in Foreign Exchange Case.

  Case-Laws - HC : The petitioner approached the High Court challenging three orders passed by the adjudicating authority, appellate authority, and revisionary authority regarding non-realization of foreign exchange on exported goods for which drawback was sanctioned. The High Court found the petitioner's attempt to hide the truth and suppress material facts from the authorities, as well as the Court. The petition was dismissed with a cost of Rs. 5 lakhs to be paid to the Commissioner of Customs, Mumbai, within two weeks, failing which the respondents could recover the amount with 18% interest along with the amount recoverable under the original order. The Court held that any party approaching it should come with clean hands, and the petitioner's hands were muddied in this case.
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• Customs Appraiser's Conviction Overturned Due to Insufficient Evidence in Fraudulent Refund Conspiracy Case.

  Case-Laws - HC : Conviction u/ss 420, 467, 468, 120B of the IPC and Section 5(2) and 5(1)(d) of the Prevention of Corruption Act, 1988. Petitioner worked as Appraiser in Customs office. Criminal conspiracy involving substitution of original writ petitions with fake ones for cheating and fraudulently misappropriating amounts entrusted as public servant, allowing accused to obtain refund orders. Evidence showed petition filed in ghost entity's name to claim refund. Accused admitted filing refund application, not writ petition. Fictitious documents used for refund claims. Appellant found guilty of criminal conspiracy with accused for fraudulently claiming refund by substituting original writ petition with fake one, sentenced to 7 years RI under IPC and 3 years under Prevention of Corruption Act concurrently. Co-accused acquitted. Evidence similar to other cases against appellant. Prosecution failed to prove conspiracy or appellant's active role in substituting writ petition and assisting in obtaining refund. Appellant's conviction and sentence set aside by High Court, appeal allowed.
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• Temporary Price Spike Due to Industrial Explosion Accepted for Import Valuation.

  Case-Laws - AT : The case pertains to the valuation of imported goods, specifically 1,2-Benzisothiazolin-3-ONE 85% (BIT PASTE 85%) originating from China. The appellant challenged the rejection of the declared transaction cost and the redetermination of assessable value u/s 17(5) of the Customs Act, 1962, as well as the enhancement of the assessable value based on contemporaneous import prices. The appellant submitted relevant bill of entries and literature indicating an explosion in Xiangshui Industrial Park, Yancheng, Jiangsu, which caused a temporary spike in prices from August 2019 to April 2020, before cooling down. The Appellate Tribunal found the appellant's explanation reasonable and set aside the impugned order, allowing the appeal.
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• Tribunal Rules Imported Goods as New, Not Second-Hand; Dismisses Customs Duty and Penalties for Misdeclaration.

  Case-Laws - AT : The case pertains to the valuation and classification of imported goods as old and used second-hand goods or unused new goods. The key points are: The Chartered Engineer's report was inconclusive and did not conclusively establish that the imported goods were old and used. The appellant provided evidence that the goods were new but supplied from old stock, which may appear old but cannot be classified as second-hand goods requiring authorization for import. The Tribunal held that the goods cannot be considered second-hand and there was no violation of the import policy warranting confiscation. Regarding valuation, the Tribunal found no evidence that the transaction value was influenced by other considerations. The value redetermined by the adjudicating authority based solely on the Chartered Engineer's report was arbitrary and unsupported, hence rejected. The differential customs duty and interest demands were set aside. The penalties imposed for alleged misdeclaration and undervaluation were also set aside as the allegations were not substantiated. The Tribunal allowed the appeal and set aside the impugned order.
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• Electric Power Steering ECU Classified as Motor Vehicle Part, Not Electrical Control Device.

  Case-Laws - AT : Classification of an Electric Power Steering (EPS) Electronic Control Unit (ECU) and its parts under the Customs Tariff Headings. It was held that the EPS-ECU acts as the brain of the power steering system, receiving inputs from speed and torque sensors to determine the assistance required for steering. It regulates the voltage provided to the motor from the battery but does not control electrical quantities directly. The EPS-ECU is a part of the power steering system, not an instrument or apparatus, and is not designed for electricity distribution or control. Therefore, the EPS-ECU and its sub-assembly were correctly classified under CTH 8708 94 00 as parts of motor vehicles. Consequently, the parts of the EPS-ECU do not fall under CTH 8543 90 00. The appeal against the impugned order was dismissed by the Appellate Tribunal.
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DGFT

• US grants tariff-free sugar export quota to India for 2025.

  Circulars : This public notice from the Ministry of Commerce & Industry, Department of Commerce, Government of India, allocates 8606 Metric Tonnes Raw Value (MTRV) of raw cane sugar for export to the USA under the Tariff Rate Quota (TRQ) scheme for the US fiscal year 2025. The export of sugar to the USA and EU under TRQ is 'Free' subject to conditions notified. The Certificate of Origin will be issued by the Additional Director General of Foreign Trade, Mumbai, on the recommendation of APEDA. APEDA will operate the quota as the implementing agency. The reporting requirements as per previous notifications will be followed.
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• Expanded Import of Raw & Calcined Pet Coke for Multiple Industries, Not Just Aluminium.

  Notifications : This notification amends the import policy condition for Raw Pet Coke (RPC) and Calcined Pet Coke (CPC) under Chapter 27 of the ITC (HS) 2022, Schedule-I (Import Policy). The revised policy condition permits the import of RPC and CPC to cater to the domestic needs of not only the aluminium industry but also other industries, for processes permitted under relevant regulations and statutes. Previously, the import was restricted solely for the aluminium industry's domestic requirements. The amendment broadens the scope of RPC and CPC imports to serve various industrial sectors within the country.
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• Govt allows 1-year extension for Odisha to complete Red Sanders log exports amid environmental compliance.

  Notifications : This notification issued by the Directorate General of Foreign Trade, Ministry of Commerce & Industry, Government of India, extends the time period for the Forest, Environment & Climate Change Department, Government of Odisha, to finalize modalities and complete exports of Red Sanders Heart Wood in log form. The extension granted is for 12 months from the date of this notification. All other provisions related to the export of Red Sanders wood remain unchanged. The notification invokes relevant sections of the Foreign Trade (Development & Regulation) Act 1992 and the Foreign Trade Policy 2023.
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• Amendments to SCOMET items list for 2024 by Indian govt.

  Notifications : The notification amends Appendix 3 (SCOMET items) to Schedule 2 of the ITC (HS) Classification of Export and Import Items, 2018, as an annual SCOMET update for 2024. Exercising powers under the Foreign Trade (Development and Regulation) Act, 1992 and Foreign Trade Policy 2023, the Central Government has made amendments to the SCOMET items list. The updated Appendix 3 will be uploaded on the DGFT web portal. The notification comes into effect 30 days after issuance to provide a transition period for the industry. It supersedes previous notifications related to SCOMET updates.
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FEMA

• RBI Updates LRS Reporting: Daily Transaction Data Required from Banks, Monthly Reports Eliminated Effective September 2024.

  Circulars : The Reserve Bank of India (RBI) has discontinued the requirement for Authorized Dealer Category-I (AD Category-I) banks to submit a monthly return on the Liberalised Remittance Scheme (LRS) for resident individuals. Previously, AD Category-I banks were mandated to furnish information on the number of applications received and total amount remitted under LRS on a monthly basis. However, from September 2024 onwards, AD Category-I banks will no longer need to submit the LRS monthly return (Return code: R089). Instead, they will be required to upload only transaction-wise information under LRS daily return (CIMS return code: R010) at the close of the next working day. In case no data is to be furnished, AD Category-I banks shall upload a 'NIL' report. The relevant circulars issued earlier regarding the LRS monthly return have been withdrawn with immediate effect.
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Corporate Law

• Petition Dismissed: Court Upholds Three-Month AGM Extension; No Evidence of Ulterior Motives or Stakeholder Harm Found.

  Case-Laws - HC : The court dismissed the petition challenging the order granting a three-month extension to hold the Annual General Meeting. The respondent No. 1 did not spell out 'special reasons' for allowing the extension as mandated by Section 96 of the Act. However, the reasons were outlined in the request letter by respondent No. 2. The court held that the sufficiency of reasons cannot be assessed by respondent No. 1 unless evidence of ulterior motives or detriment to stakeholders is presented. The petitioners failed to demonstrate exceptional grounds for rejecting the extension. Issues regarding mismanagement should have been addressed by approaching the Tribunal u/s 241 for oppression or removal of directors. The Act does not require shareholders to be heard before granting an extension.
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• Tribunal Orders Restoration of Struck-Off Company for Non-Compliance, Directs Actions for Late Payments and Violations.

  Case-Laws - Tri : Statutory provisions regarding restoration of a company's name on the Register of Companies maintained by the Registrar of Companies (ROC) u/s 252(1) and 252(3) of the Companies Act, 2013 were analyzed. An appeal u/s 252(1) can be filed by any aggrieved person if the company is dissolved by the ROC u/s 248(1), with a limitation period of 3 years. However, an application u/s 252(3) can only be filed by certain persons if the company's name is struck off u/s 248(2), with a longer limitation period of 20 years. In this case, the ROC struck off the company u/s 248(1)(d) for non-compliance with Section 10A(1) regarding filing a declaration of subscription within 180 days of incorporation. The Tribunal allowed the appeal, directing the ROC to restore the company's name on the Register of Companies, change its status to "active," and take further action regarding late payment of subscription u/s 10A and any other violations detected after revival.
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Indian Laws

• Order Upholds Stamp Duty on NCLT Order in Madhya Pradesh; Quashes Duty on Movable Properties; Remands Penalty Reassessment.

  Case-Laws - HC : The order dealt with maintainability of petition, liability to pay stamp duty on NCLT order, applicability of res judicata principle, interpretation of fiscal laws, whether NCLT order is an instrument under Stamp Act, date of receipt of instrument in Madhya Pradesh for stamp duty chargeability, applicability of stamp duty cap notification, stamp duty on movable properties, chargeability of upkar and janpad cess, and penalty calculation. It held NCLT order as chargeable instrument received on 29-6-2017 in MP, upheld 5% stamp duty on immovable properties, 10% upkar cess on stamp duty, 1% janpad cess on property value, quashed stamp duty on movables, and remanded penalty reassessment excluding upkar and janpad cess. The key legal aspects pertaining to stamp duty chargeability, relevant date, applicable rates/notifications, and cesses were addressed comprehensively.
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• Bank customer's offense compounded after conviction; penalties waived post-settlement.

  Case-Laws - HC : Court upholds its previous judgment allowing compounding of offense u/s 147 of the Act, even after conviction. Petitioner and complainant Bank reached settlement, with petitioner paying full compensation. Court quashes conviction, acquits petitioner, and orders release of any deposited amount, relying on Supreme Court precedent permitting compounding post-conviction. Petition disposed.
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IBC

• Delayed creditors' claims kept alive for 6 months as per approved resolution plan's clause binding all stakeholders.

  Case-Laws - AT : Appellants filed claims after the cut-off date for submission of claims in the insolvency resolution process. The approved resolution plan kept such delayed claims alive for six months, requiring the successful resolution applicant (SRA) to address them as per clause 18.4(v). The Adjudicating Authority correctly rejected the appellants' application, observing that their delayed claims must be considered and settled by the SRA in line with clause 18.4(v), which binds all stakeholders, including the appellants and the SRA. The appellate tribunal found no error in the Adjudicating Authority's order and disposed of the appeal.
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• State subsidy for struggling company goes to resolution fund, not directly to govt.

  Case-Laws - AT : The NCLT had directed the release of an industrial promotion subsidy claim amount to the Corporate Debtor, which was sanctioned prior to the commencement of CIRP. The NCLAT held that after CIRP initiation, all amounts payable to the Corporate Debtor must be paid to the Corporate Debtor's account, and disbursement should occur as per the approved Resolution Plan by the CoC. The NCLAT set aside the direction to pay the subsidy amount directly to the government authorities and instead ordered that the unpaid subsidy amount be paid to the Corporate Debtor within the time allowed by the Adjudicating Authority.
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PMLA

• Petition for Discharge Dismissed: Shareholder Must Face Money Laundering Charges Under PMLA Due to Sufficient Evidence.

  Case-Laws - HC : Petition u/s 227 of Criminal Procedure Code for discharge dismissed. Allegations in complaint constitute offence of money laundering u/s 3 of PMLA. Prosecution of shareholders permissible if evidence links them to commission of crime. Section 3 covers indirect attempts, assistance or involvement in money laundering. Mere concealment, possession or use sufficient for prosecution. Direct link unnecessary, indirect involvement and connecting link suffice. Discharge u/s 227 in PMLA cases differs from general criminal cases. Material evidence against petitioner regarding consent as major shareholder for borrowing, offering collateral security to be proved at trial. Section 70 of PMLA on presumption of culpable mental state to be read with Section 3. Shareholder liability principle under general law inapplicable to PMLA. Petitioner, holding 86% shares, to prove lack of knowledge of money laundering during trial. Complaint contains material evidence for prosecution, petitioner to prove innocence at trial. No infirmity in impugned order, revision dismissed.
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SEBI

• Listed firms' commercial papers: Faster reporting of payment obligations.

  Circulars : The circular modifies the timeline for issuers of listed commercial paper to submit a certificate confirming fulfillment of payment obligations to stock exchanges. Previously, the timeline was within two days of payment becoming due as per the NCS Master Circular. To align with Regulation 57 of LODR Regulations for non-convertible securities, the timeline is amended to within one working day of payment becoming due. This change aims to protect investor interests and regulate the securities market under SEBI's powers.
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• Fraudulent Scheme Unveiled: Promoter and Executives Divert Funds, Mislead Board, Trigger Market Penalties and Shareholder Losses.

  Case-Laws - Board : A public listed company (RHFL) was involved in siphoning off funds by structuring them as 'loans' to creditworthy conduit borrowers, resulting in disproportionate lending and moving funds to non-descript, financially weak privately held companies connected with the Reliance ADA group. Adequate disclosures were not made to public shareholders, violating securities laws. The fraud involved a complete breakdown of governance orchestrated by the promoter (Noticee No. 2 - Anil Ambani) and aided by key managerial personnel (KMPs). The KMPs (Noticees 3-5) played an active role, defying board directives and making false disclosures. Most borrower accounts turned NPAs, leading to RHFL defaulting on payments and resolution under RBI framework, severely impacting public shareholders. The order established a fraudulent scheme to siphon funds through sham 'loans' to conduit borrowers linked to Noticee No. 2. Directions were issued restraining Noticees from accessing securities market, associating with listed companies/intermediaries, and imposing penalties for violating securities laws and damaging market integrity.
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Service Tax

• Service Tax Dispute on Software Sales Remanded for Fresh Consideration Due to Overlooked Arguments and Misinterpretation.

  Case-Laws - AT : The appellant, a large account reseller authorized by Microsoft, received IT services from Microsoft for which payments were made. The department alleged that Microsoft sold the software to the appellant, raising a service tax demand under the reverse charge mechanism. However, the agreement between Microsoft and the appellant does not indicate transfer of title, ownership, or right to use the software to the appellant. The appellant facilitates procurement, invoicing, and payment collection, but no consideration is paid for sale or right to use. Microsoft's invoices are issued to customers, not the appellant. The document relied upon by the department is for FEMA compliance and does not establish transfer of right to use IT services to the appellant. The adjudicating authority failed to consider the appellant's pleas and relied on Microsoft's licensing guide without examining whether the licenses were used by the appellant. Issues like service tax adjustment, credit availed, etc., require fresh consideration by the adjudicating authority based on the findings. The matter is remanded for de novo consideration by the adjudicating authority.
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• Telecom Service Tax Case: Tribunal Rules on Consideration, Exemptions, Cenvat Credits, and Extended Limitation Issues.

  Case-Laws - AT : Key aspects of the telecommunication service provided by the appellants and the related service tax implications. It discusses whether the services were provided with or without consideration, the applicability of the exemption under Explanation 3 to Rule 6(1) of the Cenvat Credit Rules (CCR), the point of taxation, the disallowance of Cenvat credit on inputs and capital goods u/r 6(3)(i) of the CCR, the issue of time limitation and extended period of limitation u/s 73 of the Finance Act, 1994, and the demands for interest and penalty. The Tribunal's findings include that the telecommunication services involved consideration, the exemption under Explanation 3 was not applicable, the disallowance of Cenvat credit on capital goods was incorrect, the extended period of limitation was not justified, and consequently, the demands for service tax, interest, and penalty were set aside.
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Central Excise

• India exempts export of petrol, diesel to Bhutan from Road Cess; exports to other countries to attract levy.

  Notifications : This notification amends the previous Notification No. 10/2022-Central Excise to exempt the export of petrol and diesel to Bhutan from the Road and Infrastructure Cess (RIC). The key changes are: Petrol exported to countries other than Bhutan will attract RIC, while petrol exported to Bhutan will be exempt. Similarly, diesel exported to countries other than Bhutan will attract RIC, while diesel exported to Bhutan will be exempt. The notification comes into force on 3rd September 2024 and omits paragraph 2 of the previous notification.
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• Petrol & diesel exports to Bhutan exempted from Special Additional Excise Duty; other exports retain existing rates. Effective 03/09/2024.

  Notifications : The notification amends the previous Central Excise notification No. 04/2022 to exempt the export of petrol and diesel from the Special Additional Excise Duty when exported to Bhutan. Specifically, it inserts new entries in the table to provide a nil rate of duty for petrol and diesel cleared for export to Bhutan, while retaining the existing duty rates for exports to countries other than Bhutan. The amendment comes into force on September 3, 2024.
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• Aviation fuel exported to Bhutan exempted from special excise duty effective September 2024.

  Notifications : This notification amends the previous Notification No. 18/2022-Central Excise to exempt Aviation Turbine Fuel (ATF) exported to Bhutan from the Special Additional Excise Duty. The key changes are: 1) The existing entry for ATF export is modified to specify it applies to countries other than Bhutan. 2) A new entry is inserted exempting ATF exported to Bhutan from the Special Additional Excise Duty. The amendment comes into force on 3rd September 2024 under the Central Excise Act, 1944 read with the Finance Act, 2002.
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• Tribunal Upholds CENVAT Credit Claims, Rejects Penalties on Inputs, Returned Goods, and Brand Promotion Services.

  Case-Laws - AT : CENVAT credit availed by the assessee on inputs, input services, and brand promotion services was disputed. The Tribunal held that denying credit of Rs. 6,25,651 on inputs consumed in a single day based on mere suspicion without evidence is unsustainable. Credit of Rs. 5,14,168 on returned goods cannot be denied as they were accounted for in stock records. Credit of Rs. 89,61,000 on brand promotion services availed before the final product became exempt cannot be denied invoking Rule 6. Rule 11(3) mandates reversal of credit on inputs contained in exempted final products but not on input services. Denial of Rs. 26,70,004 credit for incorrect address on invoices is improper as per Rule 9(2) proviso. Extended period demand cannot be invoked without evidence of suppression of facts. Interest u/r 14 and penalty u/r 15 cannot be levied while recovering amounts u/r 11(3)(ii). The Tribunal allowed appeals by the assessee and dismissed the revenue's appeal.
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Case Laws:

• GST

• 2024 (9) TMI 302
  Violation of principles of natural justice - SCN did not provide any specific reason as to the alleged fraud, wilful misstatement and it did not provide any clue as to the facts which were allegedly suppressed by the petitioner - Cancellation of registration of petitioner - HELD THAT:- The show cause notice that was issued to the petitioner therein on 16.05.2023 had alleged that the petitioner s GST registration was proposed to be cancelled on account of fraud, willful misstatement or suppression of facts; however, it did not provide any specific reason as to the alleged fraud, wilful misstatement and it did not provide any clue as to the facts which were allegedly suppressed by the petitioner - Since specific ground for such proposed action was not provided and no further information was given to the petitioner, the order of cancellation of the petitioner s GST registration was set aside. This Court is of the opinion that interest of the petitioner can be sufficiently protected if a direction is issued to opposite party no.3 to provide all documents to the petitioner which have been referred to in the show cause notice, on the basis of which the show cause notice dated 22.03.2024 was issued to the petitioner, within ten days from today. Petition disposed off.

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• 2024 (9) TMI 301
  Refund of the excess amount paid by way of IGST un/s 54 of the Goods and Services Tax Act, 2017 - interest rate of 9% awarded by the writ Court. Refund claim - HELD THAT:- As has been rightly held by the writ Court, the provisions under Section 54 is made clear that, when the input tax paid is higher than what has been paid by way of tax for the output, then the dealer is entitled to seek for refund of the excess amount by way of ITC. This has been made clear under the Section, i.e., Section 54 of the GST Act - Even though it was argued on behalf of the Revenue that, ITC itself was only 5%, however voluntarily an excess payment has been made which has been admitted by the seller of the dealer concerned, that cannot ipso facto being an advantage to the dealer to claim refund by invoking the provisions of Section 54 r/w.Section 56 of the GST Act, we are not impressed with the said argument for the reason being that, the very intention of the legislature is to provide the refund only, when there has been an excess amount of tax being collected by way of ITC, that has to be set right by way of refund, if the output tax is lesser than the ITC. If this principle is applied, certainly in the present case, the dealer is entitled to get the refund as admittedly the output tax was only 5%, whereas ITC was 18% - the reason given by the writ Court in rejecting the claim made by the Revenue before the writ Court was to be justified. Rate of interest - HELD THAT:- Even though the finality has now been reached in this case by passing orders either by the Appellate Authority or the Tribunal or the Court of Law, it takes back to the Original Authority s order under Sub-section 5 of Section 54. When that being the position, the limitation would start from the date of the Original Authority s order and from that date, if sixty days period is over, after expiry of the sixty days, the dealer is entitled to get the interest at the maximum rate of 6%. The order impugned is sustained, therefore, to that extent, these Writ Appeals filed by the Revenue are liable to be dismissed, hence, are dismissed. However, the rate of interest of 9% allowed by the writ Court through the impugned order is modified into 6% which shall be paid by the Revenue from the date of expiry of sixty days from the date of order passed by the Original Authority.

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• 2024 (9) TMI 300
  Issuance of a notification bearing No. 56/2023 dated 28.12.2023 - issuance is 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 - Applicability of force majeure in extending the time limit for passing orders under Section 73(9) of the CGST Act, 2017 - HELD 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. The learned counsel appearing on behalf of the Petitioner would be entitled to the reliefs as proposed in the Financial Bill 2024. In addition to that, 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 - 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 Petitioner herein is 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 24.04.2024. List accordingly.

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• 2024 (9) TMI 299
  Cancellation of GST registration of petitioner - failure to file GST monthly returns for a continuous period of six months - HELD THAT:- The reason set out in the order of cancellation is non filing of returns for a continuous period of six months. In Suguna Cutpiece [ 2022 (2) TMI 933 - MADRAS HIGH COURT ], this Court directed restoration of GST registration subject to several terms and conditions. The said judgment was followed thereafter in many cases. In order to maintain consistency, the said judgment is inclined to be followed. The petitioner is directed to file her returns for the period prior to the cancellation of registration, together with tax dues along with interest thereon and the fee fixed for belated filing of returns within a period of forty five (45) days from the date of receipt of a copy of this order - The restoration of the GST registration is subject to and conditional upon fulfilling the conditions imposed - petitioner disposed off.

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• 2024 (9) TMI 298
  Admissibility of Input Tax Credit (ITC) on the Rotary Parking System falling under HSN code 8428 - Blocking of credit u/s 17 (5) of the CGST/TNGST Act, 2017 - HELD THAT:- The appellant renders Renting of Immovable Property Service of the commercial premises owned by him, and that the appellant is proposing to install a Rotary Car Parking System , within the premises owned by him, but not within the building - the provisioning of parking facility is for the tenants of the commercial building as well as the customers of those tenants. The exclusion clause, viz., other than plant and machinery , finds a place under both the clauses (c) and (d) of Section 17 (5) of the CGST Act, 2017, from which it gets conveyed that availment of ITC on plant and machinery is not blocked under the said provisions. It could also be seen from the explanation relating to plant and machinery that apparatus, equipment and machinery gets covered under the said category along with foundation and structural support by which they are fixed to earth, but excludes land, building or any other civil structure. A Rotary Parking System , as the name suggests, is a system in its own right, much more than an equipment, machinery or an apparatus, as it involves the functionality of various items like machines, equipments, motors, frame assembly, pallets, electrical panels, Hydraulic power packs, Operator boxes to floor/walls/columns and other electrical and electronic support system, a specialised civil foundation with steel structure to withstand the load, etc. Therefore, it could be seen that the overall system (Rotary Parking), takes shape and becomes operational only at the site of the appellant when all the constituent parts are assembled first and installed over the civil foundation and steel framework specifically designed for this purpose - the Rotary Parking system ideally falls within the category of a civil structure , which is clearly excluded under the expression plant and machinery - Moreover, as they cannot be termed as equipment, machinery or an apparatus by any means whatsoever, it is convincing that they do not fall within the category of Plant and Machinery , and that they are very much part of the immovable property that is being rented out in the instant case.. The service relating to Renting of Immovable property includes the land, building, staircase, lifts, common basements, play areas, open parking areas, common storage spaces, water tanks, sumps, apparatus connected with installations for common use, all other portion of the project necessary or convenient for its maintenance, safety, etc., and in common use. The corollary is that all the common areas and facilities extended become part of the immovable property that is being rented out. Further, it is not the case here that rent is collected separately for the living space, and for the other common areas or facilities like lifts, basements, play areas, parking facility, water tanks, sumps etc., and that the same is collected for the single service, viz., Renting of Immovable Property . Admittedly, the primary objective in the instant case is to extend the facility to the tenants in relation to Renting of Immovable Property service. Further, it is not the case of the appellant here that they are into providing Parking Service to the general public. Even in the event of considering the fact that they are providing parking service to the customers of tenants or general public and receiving consideration for the same, the ITC eligibility in any case would depend upon the immovable nature or otherwise of the structure constructed for this purpose. The rotary parking system , installed and commissioned at the premises of the appellant amounts to construction of an immovable property, whereby the input tax credit on the purchase of rotary parking system , by the appellant becomes ineligible under Section 17 (5) (d) of the CGST/TNGST Acts, 2017.

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• Income Tax

• 2024 (9) TMI 297
  Validity of reopening of assessment - notice u/s 148A(b) issued by the JAO - no valid approval u/s 151 - HELD THAT:- Principal Commissioner of Income Tax gave an approval without application of mind because had the draft order been read, it would have shown that reply of the assessee was scanned and mentioned from internal page 3 on-wards upto internal page -5. Although, the said reply was scanned and made a part of the order u/s 148A(d) in the columns meant for mentioning whether reply was submitted by the assessee it was mentioned that the assessee had not submitted any reply. This Court is of the considered opinion that clearly there is non-application of mind while giving approval u/s 151 of the Act. Revenue has placed reliance of the judgment of Hon ble Supreme Court in the case of Raymond Woolen Mills Limited [ 1997 (12) TMI 12 - SUPREME COURT] the said judgment does not say that JAO shall issue notice u/s 148 A(b) and order u/s 148 A(d) of the Act without application of mind and without jurisdiction and that the Principal Commissioner, Income Tax, Lucknow shall issue approval order u/s 151 of the Act also without application of mind against the assessee. Accordingly, the order u/s 148 A(d) and notice issued under Section 148 of the Income Tax Act both are quashed - WP allowed.

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• 2024 (9) TMI 296
  Scrutiny assessment - ITAT upholding the validity of jurisdiction assumed by the Assessing Officer to frame the assessment order u/s 144 - HELD THAT:- We are of the considered opinion that even if case of the appellant was not liable to compulsorily scrutiny in terms of the aforesaid clause of CBDT guidelines, yet the case of appellant squarely fell within the purview of Sub-section (2) of Section 143 of the Act. AO having noticed that certain income had escaped assessment was well within its power to issue notice under Sub-section (2) of Section 143 of the Act and proceed to frame assessment under Section 144 of the Act. The order of assessment framed under Section 144 of the Act by the Assessing Officer in the case of the appellant, therefore, cannot be found fault with. Under Section 143 (2) of the Act, if a return has been furnished by the assessee under Section 139 or in response to a notice u/s 142 (1) and the Assessing Authority has a reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, it shall serve a notice on the assessee specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him to produce any evidence or particulars specified therein or on which the assessee may rely in support of such claim. Similarly, under Sub-section (2) of Section 143 of the Act, if Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax, it shall serve on the assessee a notice either to attend his office or produce any evidence on which the assessee may rely in support of the return. This is notwithstanding anything contained in Clause (1). The power conferred upon the Assessing Authority under Sub-section (2) of Section 143 of the Act is statutory in character and cannot be tinkered with or taken away by any order or instruction issued by the CBDT in the exercise of the power conferred upon it under Section 119 of the Act, for, issuance of such order or direction would be tantamount to requiring the AO to make or dispose of a particular case in a particular manner not prescribed by statute. Viewed from any angle, no illegality or infirmity in the order impugned passed by the ITAT, Amritsar.

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• 2024 (9) TMI 295
  Validity of order passed u/s 153C r.w.s. 143(3) - whether question of law can directly be raised before this Court without being averred or pleaded before the ITAT ? - HELD THAT:- As relying on K. Lubna Ors. Versus Beevi Ors. [ 2020 (1) TMI 1209 - SUPREME COURT ] it is settled that the parties cannot be restrained to raise a question of law even at the last stage of adjudication. In the present case, the Revenue has raised substantial questions of law which were not decided by the ITAT because there was no averment or arguments to that effect before the ITAT. Therefore, this Court is of the view that the present appeal deserves to be remanded back to the ITAT for fresh adjudication. the Appeal is remanded back to the ITAT with direction to decide the appeal afresh after giving opportunity of hearing to the parties and pass a speaking and well reasoned order on merits within a period of two months.

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• 2024 (9) TMI 294
  Validity of reassessment proceedings - non consideration of the petitioner s objection - non disclosure of basis of arriving at unexplained credit - HELD THAT:- The impugned order insofar as it does not disclose the basis of arriving at unexplained credit suffers from non disclosure of reason which prompted the invocation of Section 148-A of the Act and the same has resulted in denial of opportunity to the petitioner to put forthwith his explanation. As it was held in the judgment referred supra, the procedures being contemplated under Section 148-A of the Act is not an empty formality. As the petitioner requested for an opportunity to submit his objection in person which was not considered by the respondents, this Court is inclined to set aside the impugned proceedings and direct the respondents to pass orders, after disclosing the basis on which the notice was issued stating that a sum represents the unexplained credit, in accordance with law and affording an opportunity of personal hearing to the petitioner. Assessee appeal allowed.

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• 2024 (9) TMI 293
  Time limit for filing of the compounding application - Rejection of compounding application filed by the petitioner on the ground that the application was filed beyond the period of limitation of 36 months, as stated in Para 7(ii) of the CBDT circular dated 16.09.2022 - HELD THAT:- Section 279(2) of the Act does not prescribe any time limit for filing of the compounding application. The judgment of this Court in Jayshree s case [ 2023 (11) TMI 1110 - MADRAS HIGH COURT] this Court has categorically held that the CBDT cannot issue a circular contrary to the object of the provisions. The explanation, which empowers the CBDT to issue circular, is only for the purpose of implementation of the provisions of the Act with regard to compounding of offences and not for the purpose of fixing a time limit for filing the application for compounding of offences and therefore, the same is contrary to the provisions of the Act and hence, it is not permissible in terms of Section 279(2) of the IT Act. This Court is of the view that once the nature of offence is compoundable by virtue of the provisions of the Act, it cannot be taken away by fixing a time limit for filing the compounding application. The law laid down by this Court in the aforesaid judgment is squarely applicable to the facts of the present case. Hence, the impugned order is liable to be set aside and it is accordingly set aside. WP allowed.

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• 2024 (9) TMI 292
  Rejection of exemptions u/s 11 and 12 - delay in filing Form 10B - genuine hardship u/s 119(2)(b) - HELD THAT:- In the decision of this Court in case of Sarvoday Charitable Trust [ 2021 (1) TMI 214 - GUJARAT HIGH COURT ] it is held that furnishing of audit report along with refund filed is to be treated as procedural requirement though it is mandatory in nature but substantial compliance is required to be made. It was further observed that the approach of the authority in such type of case should be equitable and judicious. It is also not in dispute that the petitioner trust for past many years has substantially satisfied the conditions for claiming the exemption which should not be denied for non filing of Form 10B in time. The petitioner has explained the reason for delay in filing Form 10B due to illness of the Accountant who was on leave for a long time due to medical reasons. The petition is allowed. The impugned orders are quashed and set aside. The matter is remanded back to the respondent to pass appropriate order to condone the delay in filing the Form 10B for AY 2018-2019 by the petitioner. Such exercise shall be completed within a period of 12 weeks from the date of receipt of a copy of this order.

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• 2024 (9) TMI 291
  Rejection of objections filled before Draft Resolution Panel - DRP rejected the assessee s application merely on the ground that it was not filed within 30 days - Applicability of provisions of section 56(2)(vii)(b) which came into effect from 01.10.2009 - HELD THAT:- As per Section 4 of the Limitation Act, 1963 when the limitation period expires on a holiday, application may be instituted on the next working day. In this case, admittedly, assessee s application was received on 15.04.2024(Monday) which was the next working day. Therefore, as per Section 4 of the Limitation Act, 1963, Assessee s application was within time. Therefore, we are of the considered opinion that DRP has erred in rejecting assessee s application on the ground of limitation. DRP alleges that assessee had not submitted certified copy of the assessment order, Form No.35A was not filed in quadruplicate. These are the defects in appeal application. For this, DRP should have issued a defect memo. DRP has become hyper-technical. Assessee had filed application by post which is sufficient compliance of the Rule 4(1) of the I.T. Rules. The substantial justice is more important. Application of Section 56(2)(vii)(b) - The amendment is applicable to transactions undertaken after 01/10/2010. In this case the AO has admitted that entire payment was made by the assessee as purchaser to seller on or before 12/08/2008. The assessee has also filed copy of Agreement dated 20/08/2008 before us, however it is not clear whether the impugned agreement was filed before the AO or not. AO/DRP needs to analyze section 56(2)(vii)(b) proviso which states that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not same, the stamp duty value on the date of the agreement may be taken for the purpose of this section. In this case, before us, assessee has also filed copy of agreement to purchase dated 20.08.2008(which is in hindi). AO has not discussed about this impugned agreement dated 20.08.2008 which does mention about the payments referred by the AO in the assessment order. Thus, in this case, apparently facts have not been properly analyzed by the AO. We have already mentioned that AO has nowhere mentioned Date of Registration, which is crucial as the Section 56(2)(vii)(b) came into effect from 01/10/2009 and assessee claimed that there is an agreement dated 20.08.2008. As already mentioned about that Dispute Resolution Panel has rejected assessee s application erroneously, though assessee had filed application within the time. Appeal of the assessee is allowed for statistical purpose.

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• 2024 (9) TMI 290
  Revision u/s 263 - Relevance of the valuation report received after the assessment - valuation report had not been submitted within the statutory period of six months from the end of the month in which the reference is made under sub-section (1) - HELD THAT:- There is no time limit for furnishing of the report by the valuation officer under the above statutory provision. We further deem it appropriate to conclude that once the legislature has not even included the time spent between the date of reference and submission of DVO report in the time limit prescribed for framing of an assessment, such a mutuality contradictory interpretation of section 142A(6) is not sustainable in law. We accordingly reject the assessee s first and foremost substantive argument. PCIT s had not applied his mind once having acted as per the Assessing Officer proposal made for section 263 revision jurisdiction - We note that the assessee s instant second substantive argument also deserves to be rejected as the learned PCIT s revision directions have duly discussed all the relevant facts before reaching to an independent conclusion that the foregoing regular assessment was an erroneous one causing prejudicial to interest of the Revenue. Rejected accordingly. Once the AO had made it clear that the matter shall be examined afresh in section 154 proceedings once the DVO submits his report, the PCIT has erred in law on facts in assuming his section 263 revision jurisdiction - We are of the considered view that the assessee s instant third substantive argument deserves to be declined only as an issue which is subject matter of valuation to be followed by the objection thereto, would hardly be treated as an apparent mistake so as to attract section 154 rectification as per T.S. Balaram ITO vs. Volkart Bros [ 1971 (8) TMI 3 - SUPREME COURT ] Rejected accordingly. PCIT (Central), Nagpur did not have jurisdiction in section 263 revision proceedings once the Assessing Officer had framed his assessment at Nashik - We find that the assessee has failed to bring any material in the case file indicating the PCIT (Central), Nagpur lacking jurisdiction as per provisions of the Income Tax Act. We make it clear that till the time contrary is proved, an income-tax authority exercising its jurisdiction in proceedings which are treated as general in nature u/s 136 of the Act, could not be held as lacking jurisdiction on mere conjectures and surmises. We accordingly reject the assessee s instant last argument as well. Decided against assessee.

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• 2024 (9) TMI 289
  Ex-parte revisionary order u/s 263 - assessee would like to make us believe that it was not given any opportunity of defending its case - HELD THAT:- It has been noted that the present revisionary order has arisen only on account of an order issued by this tribunal to the PCIT to read judicate the matter. Needless to say the appellant had not complied with the notices of the tribunal also. Coming to the principle controversy as to whether the PCIT has passed an ex-parte order without providing adequate opportunity, it is seen that in Para-4 of his impugned order the PCIT has clearly mentioned that finally the assessee has filed its return submissions dated 23.02.2024 . DR submitted that there is nothing on record to indicate that assessee s right to natural justice of being heard was violated and that it is the assessee which is a habitual defaulter. PCIT has duly considered the defence offered by the assessee and the blame of passing an ex-parte order without affording adequate opportunity of being heard cannot be rested on his shoulder. The argument of the assessee therefore fails. Order was passed beyond available statutory time and without jurisdiction and hence deserves to be quashed - Section 263 of the Act empowers a PCIT to exercise his revisionary powers in respect of orders passed under any proceedings of the Act if he holds the view that the impugned order is erroneous in so far is it is prejudicial to the interest of the Revenue. The only limitation imposed upon is that no order can be passed after the expiry of two years from the end of the Financial Year in which the order sought to be revised was passed. Facts of the case indicate that the assessment order u/s 143(3) was passed by the AO on 21.12.2019. Thus the relevant financial year ended on 31.03.2020. Further material available on record shows that the first revisionary order was passed by the PCIT on 23.03.2022 well before the end of statutory time limit on 31.03.2022. The revisionary order dated 08.03.2024 presently contested by the appellant is on account of directions of this tribunal [ 2022 (7) TMI 1534 - ITAT CHENNAI] . Thus no case of revisionary action taken by the PCIT beyond the available statutory time limit is made out against the Revenue. Revisionary order suffering from the want of jurisdiction - Revisionary Jurisdiction gets vested in a PCIT if the order to be revised is found to be erroneous in so far as it is prejudicial to the interest of the Revenue. Material on records indicate that the case selected for complete scrutiny under CASS on the issue of cash deposits made in its bank accounts during demonetization period. The PCIT noted that copies of ledger of the assessee showed cash payments in excess of Rs. 20,000/-. Section 40A(3) of the Act mandates disallowance of expenses cash expenses in excess of Rs. 20,000/-. The assessee had admitted before the PCIT in revisionary proceedings that it had entered into cash transactions exceeding the limits prescribed u/s 40A(3) but its case was falling within the exemption clause of business expediency. The order of the Ld. AO nowhere indicates that any of the issues discussed by the Ld. PCIT in the revisionary order were enquired into by him during assessment proceedings. The Ld. AO has passed a very cryptic order alluding towards lackadaisical approach. There is nothing in the order to indicate as what was to be examined and how was it examined. There is not even an whimper of evidence to suggest that the cash transactions for which complete scrutiny was ordered was at all examined by the Ld. AO. To the extent the order of the Ld. AO falls within the mischief of an order being erroneous in so far as it is prejudicial to the interest of the Revenue as mandated in section 263. Arguments of assesses qua existence of element of business expediency have been adequately countered by the PCIT in his revisionary orders. Material available on records indicate that this was a case of complete scrutiny under CASS to examine the issue of cash deposits. Consequently, it was incumbent upon the Ld. AO to have examined assessee s affairs carefully, inter-alia, including inspection and examination of Form-3CD enclosed with the return of income. The Ld. CIT(A) has drawn his conclusions indicating that the same was not enquired into by the Ld. AO. To the extent the order suffers from erreonity of being an order prejudicial to the interest of Revenue. Further, the copies of the ledger examined and discussed by the PCIT in his revisionary order were produced before the Ld. AO during assessment proceedings and evidently they were not examined qua cash payments of about Rs. 13,99,815/-. Thus once again the order of the Ld. AO becomes erroneous in so far as it is prejudicial to the interest of the Revenue and the PCIT would be rightly assuming its revisionary powers. We are therefore hold the view that the PCIT had lawful revisionary jurisdiction to be exercised in the case. The arguments of the appellant therefore fails. Matter concerning applicability of section 40A(3) was considered by the Ld. AO in original proceedings - DR held view that no such fact is available in the assessment order. Upon hearing the Ld. Counsel for the assessee we hold the view that the impugned assessment order is totally silent that the Ld. AO considered any matter concerning applicability of section 40A(3). The only addition made by the Ld.AO was an account of unsubstantiated purchases - The arguments of the appellant therefore fails on this aspect as well. Examination of applicability of penal provisions in terms of 269SS and 269T could not be subject matter of revisionary proceedings and that in the absence of satisfaction recorded in the original order, the same cannot be substituted by way of a revisionary order - It is noted that the PCIT has, in principle, pointed towards two mistakes firstly being that expenses amounting to Rs. 13,99,815/- were falling under the purview of disallowance of u/s 40A(3) and repayment of loan was done by cash leading to presumption of application of provisions of section 269SS and section 269T r.w.s 271D. It is pertinent to note that PCIT has merely concluded that the above were the mistakes which contributed to the order falling in the category of an order being erroneous in so far as it is prejudicial to the interest of the Revenue and thus he exercising his revisionary authority u/s 263, set aside the order dated 21.12.2019 of the Ld. AO directing him to pass a fresh assessment order, inter-alia, including initiation of any consequential penalty as per law. In this view of the matter we hold the view that the PCIT has not transgressed his jurisdiction and the order under section 263 dated 08.03.2024 passed by him does not require any interference by us at this stage. Accordingly, all the grounds of appeal being 2 11, raised by the assessee are dismissed.

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• 2024 (9) TMI 288
  Computation of interest u/s. 244A - adjustment of refund first towards interest payable and balance towards principal portion of tax, if any, does not tantamount to paying of compound interest, as alleged by the Revenue - HELD THAT:- We find that assessee has raised the ground before us stating that refund granted to the assessee is to be first adjusted against the correct amount of interest due on that day and thereafter the leftover portion should be adjusted with the balance tax. This is more so when the refunds were issued to the assessee in parts. According to the assessee, AO has reduced the interest only to the extent it was determined at the point of issuance of the earlier refunds, thus leading to larger adjustment of the refund towards the tax component as against the interest component. Refering to analogy drawn by the assessee in terms of explanation to section 140A(1), we note that there is no such specific provision u/s. 244A with respect to adjustment of refund, already issued for computing amount of interest payable to assessee on the amount of refund due. The law is silent on this issue. In our mind, under these circumstances, it would be just and fair that the same principle is applied while granting the refund, as is applied while collecting the tax. We have perused the judicial precedents referred by assessee as quoted above and notice that Coordinate Benches have consistently held after taking into consideration the decision relied upon by the ld. CIT (DR) that ld. Assessing Officer is required to adjust the interest component first and then the taxes for the purpose of calculating interest u/s. 244A of the Act. Following the Rule of Consistency, we hold that assessee is entitled to interest on the unpaid refund in accordance with the principle laid down in the aforesaid decisions relied upon by the assessee. According to us, the manner in which the AO has adjusted the refund is not correct. Assessee has furnished detailed working of the manner in which the interest u/s. 244A ought to have been computed by the AO. We thus, direct the AO to compute the interest u/s. 244A as claimed by the assessee in its detailed working, placed on record. Assessee appeal allowed.

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• 2024 (9) TMI 287
  Disallowance made for prepaid finance charges - assessee submitted amortization schedule of such expenses over the subsequent financial years and claimed that the finance charges are in respect of payments made for availing loan such as processing charges, bank charges and stamping charges - HELD THAT:- We noted that the Tribunal in assessment year 2011-12 [ 2023 (9) TMI 1546 - ITAT CHENNAI] has recorded a clear finding that assessee for the purpose of income tax computation claimed total finance charges including prepaid finance charges on the ground that the said expenditure has been incurred wholly and exclusively for the purpose of business and further, expenditure needs to be allowed as deduction in the year of payment. Since the assessee has already paid finance charges, respectfully following the Tribunal s decision in assessee s own case for assessment year 2011-12 deduction should be allowed towards finance charges including prepaid finance charges, if any, in the year of payment itself, even though, said expenditure has been treated as deferred revenue expenditure or prepaid expenditure in the books of accounts and claimed over a period of loan. Accordingly, we delete the disallowance and allow the appeal of assessee on this issue. Excess interest spread income earned on assignment of receivables - HELD THAT:- As the assessee is governed by RBI norms and Accounting Standrds for the purpose of disclosure in the books of accounts and hence, to follow the norms issued by RBI in respect of securitisation transaction and income arising thereon was disclosed accordingly. As noted that this issue fully stands covered by the Tribunal decision in assessee s own case for assessment year 2016-17 [ 2022 (8) TMI 1012 - ITAT CHENNAI] and the facts being identical, we respectfully following the same, delete the addition and allow the appeal of assessee. Disallowance of excess deduction in relation to provision for bad and doubtful debts under section 36()(via)(d) - HELD THAT:- In our view, the provision the way the assessee is interpreting as equal to 5% rather not exceeding 5%. This interpretation will lead to absurd results. In our view, the upper limit is 5% of the total income and deduction is allowable as per section 36(1)(viia)(d) of the Act is not equal to 5% but that is upper limit only. Hence, as originally debited in the books of accounts the provision for bad and doubtful debts of Rs. 49.45 crores, the assessee is eligible and AO has rightly added the differential amount of Rs. 13.87 crores, as the assessee is not eligible for the same and the CIT(A) has also rightly confirmed the same. Alternatively claimed by assessee before CIT(A) that the proposed disallowance by the AO u/s. 36(1)(viia)(d) of the Act is in relation to provision for bad and doubtful debts, reversal of provision for standard assets and diminution in value of investments has no barring and correlation with section 36(1)(viia)(d ) has not been examined neither by AO nor by CIT(A) - As regards to the alternative claim, since the facts are not examined and the legal position for claim of provision for bad and doubtful debts, what is the impact of this reversal, the AO will examine and decide the issue as per law and hence, the alternative plea of the assessee is remanded back to the file of the AO for fresh adjudication. In term of the above, this issue of assessee s appeal is allowed for statistical purposes

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• 2024 (9) TMI 286
  Disallowance of brokerage expenses u/s 57(iii) - Addition in the proportion of ratio of principal and interest received by the assessee from the Builder - HELD THAT:- There is nothing enabling contained in the said section allowing the ld. AO to estimate the incurring of expenditure towards the income reported by the assessee under the head income from other sources from which the said deduction is claimed. Once it is established that the expenditure has been incurred wholly and exclusively for the purpose of earning such income and it is not in the nature of capital or personal expenses or not covered by section 58 the same is allowable. It is merely incidental that part of the money recovered is subjected to tax and part of it is not. Section 57 provides for allowing such expenditure which is wholly and exclusively laid out or expended for the purpose of earning such income. It does not provide for such expenditure to be partly allowed on an estimation basis if in the opinion of the AO, the expenditure is partly laid out or expended for earning such income. AO cannot have presumption that exemption of expenditure is partly laid out or expended for earning the income. We need to look at the entire transaction as a whole and not to adopt a dissecting approach. AO ignored that assessee had other legal recourse to recover the principal amount from the Builder. In order to recover not only the principal amount but also the interest thereon from the Builder, assessee took up the matter by availing the services of the brokers and their associates by agreeing to pay them a lump sum amount of Rs. 50 lakhs which ultimately resulted into the recovery of the entire amount including the principal and interest thereon. Assessee has duly offered the interest component as income in his return under the head income from other sources and has thus claimed a deduction of 50 lakhs plus other expenses, from the said interest income which was received by him only after the services of the brokers. Accordingly, the balance of convenience is in favour of the assessee and thus the deduction of claim of Rs. 50 lakhs from the interest income of Rs. 85,63,262/- offered in the return by the assessee is justified. Implication of section 57(iii) is narrower by the use of the expression for the purpose of in conjunction with the words making or earning of income from other sources when compared with the words for the purpose of business or profession used in section 37(1). In order to decide whether a deduction is permissible, connection between the expenditure and earning of income must exist, either direct or indirect. Also, the expenditure must be incurred for the purpose for earning the income though it is not necessary that incurring of expenditure is profitable one or in fact income was earned. Hon ble Supreme Court in the case of Vijaya Laxmi Sugar Mills Ltd.[ 1991 (8) TMI 1 - SUPREME COURT] held that The requirement under section 57(iii) that the expenditure should have been incurred for the purpose of making or earning such income shows that the object of spending or the end or aim or the intention of such spending was for earning the interest income. Thus, we find it proper to delete the addition made by the AO by disallowing a portion of the total expense of Rs. 50 lakhs incurred by the assessee towards recovery of brokerage from total amount due from the builder. Accordingly, grounds taken by the assessee are allowed.

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• 2024 (9) TMI 285
  Taxation of interest income earned from funds borrowed for a project - whether the interest paid by the assessee can be adjusted against the earned income by the assessee on the fixed deposit made by it or not? - HELD THAT:- The law has been settled in the case of Tuticorin Alkali Chemicals and Fertilizers Limited [ 1997 (7) TMI 4 - SUPREME COURT] wherein it has held that prior to the commencement of the business, there cannot be any adjustment of interest payable by the company against the interest earned by it. Thereafter, another judgment was passed in the case of CIT Vs. Karnal Co-operative Sugar Mills [ 1999 (4) TMI 7 - SC ORDER] wherein the Hon ble Supreme Court has distinguished the decision in the case of Tuticorin Alkali Chemicals and Fertilizers Limited [ 1997 (7) TMI 4 - SUPREME COURT] In our view, a close reading of the Hon ble Supreme Court in the case of Karnal Co-operative Sugar Mills what has been laid by the Hon ble Supreme Court was that the interest income earned on such deposits, which is a direct link for the purchase of plant and machinery, had been capitalized and could not be assessed as income from other sources. We are of the opinion that the AO is required to verify as to what was the amount deposited by the assessee to open the letter of credit for honoring its payment, which are directly relatable for setting up of its plants. In case, on verification, the AO concludes that the interest is directly relatable to the interest payment made for deposit in the bank for obtaining a letter of credit, the same shall be allowed. However, if the same is not relevant to the said interest, then the same shall be dealt with in accordance with the law, and more particularly, in light of the Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Limited (supra) - Appeal of the Revenue is allowed for statistical purposes.

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• 2024 (9) TMI 284
  Revision u/s 263 - as per CIT AO erred in allowing deduction u/s. 80G of the Act on donations which were part of the expenditure incurred on account of CSR - HELD THAT:- Merely, for reason that the PCIT does not agree with the view taken by the AO, the assessment order does not become erroneous. In the present case a view taken by the AO in allowing deduction u/s. 80G of the Act on donations which were part of the expenditure incurred on account of CSR is backed by various decisions of the Tribunal. Thus, AO has taken a view which has been approved by the Tribunal. The satisfaction of twin conditions set out in section 263 of the Act i.e. the order is (i) erroneous; and (ii) prejudicial to the interest of Revenue are sine qua non for excercising revisional jurisdiction. If, any of the above said conditions are not satisfied, the revisional jurisdictional u/s. 263 of the Act cannot be invoked. In the instant case the PCIT has erred in holding that the assessment order is erroneous. Thus, the impugned order is without jurisdiction, hence, quashed. Assessee appeal allowed.

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• 2024 (9) TMI 283
  Adhoc disallowance of expenses - Consumable expenses, Wages and Salaries, Miscellaneous and other Expenses - HELD THAT:- We find that the books of accounts were completely produced before the lower authorities by the assessee. The assessee had duly furnished the complete details of consumable expenses, works contract tax, site rent expenses, business promotion expenses, consultancy expenses, legal professional expenses, conveyance expenses, labour charges paid, bonus/exgratia charges, repairs maintenance , salary wages paid before the lower authorities. The assessee had also produced the audited financials for the years ended 31.3.2014, 31.3.2015, 31.3.2016 and 31.3.2017 to enable the lower authorities to have a comparison of each of the expenditure that is sought to be disallowed. We find that all the expenses are duly comparable with that of the earlier years. No specific defects were pointed out by the ld. AO or by the ld. NFAC, Delhi on the same. Merely making a general bald statement that vouchers submitted are not verifiable, personal element of expenses cannot be ruled out , etc would not suffice. The assessee is a private limited company and the books of accounts were duly subjected to statutory and tax audit as per the provisions of the Companies Act and Income Tax Act. Admittedly, the lower authorities had not resorted to reject the book results of the assessee company by invoking the provisions of section 145(3) of the Act. no scope for making any adhoc disallowance. Decided in favour of assessee. Addition made on account of cash deposits made during the demonetization period - HELD THAT:- The entire cash book for the whole year is duly produced before the AO and learned NFAC, Delhi. Hence, it is established beyond reasonable doubt that the cash deposits made in bank account are properly explained by available cash balance with the assessee as per its cash book. Hence, there is absolutely no case for making any addition towards cash deposits - Decided in favour of assessee

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• 2024 (9) TMI 282
  LTCG - deduction u/s 54F - deduction claim for investment in residential property not solely owned by the assessee - only objection of the AO is that the plot of land on which capital gain is utilized for construction, is not in the name of the assessee, rather it is in exclusive name of her husband - HELD THAT:- Purposive construction is to be preferred as against the literal construction, more so when even literal construction also does not say that the house should be purchased in the name of the assessee only. Section 54F is the beneficial provision which should be interpreted liberally in favour of the exemption/deduction to the tax-payer and deduction should not be denied on hyper-technical ground. The word assessee must be given wide and liberal interpretation so as to include his legal heirs also. As in Chandrakant S. Choksi Vs ACIT [ 2015 (2) TMI 313 - ITAT MUMBAI] also held that for the purpose of provision of Section 54, it was not necessary that the assessee should become owner of property through registration as Section speaks of purchase and registration of document was not imperative. The Hon ble Supreme Court in the case of Mysore Minerals Limited Vs CIT [ 1999 (9) TMI 1 - SUPREME COURT] held that the term own , ownership , owned are generic and relative terms. They have a wide and also a narrow connotation. The meaning would depend upon the context in which the terms are used. The term owned as occurring in Section 32(1) must be assigned a wider meaning. Anyone in possession of a property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having right to use and occupy the property and/or to enjoy its usufructs in his own right would be owner of the building though a formal deed of title may not have been executed and registered as contemplated under Transfer of property Act. Thus in there is no impediment in claiming deduction u/s 54F on investment of capital gain in the residential house, which is in the name of assessee s husband. Hence, we direct the AO to allow deduction u/s 54F of the Act claimed by the assessee. In the result, grounds of appeal raised by the assessee are allowed.

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• 2024 (9) TMI 281
  Disallowance of warranty provision expenses - reasonableness of the provision - eligibility of deduction u/s 37 - HELD THAT:- We observe that the AO allowed similar provisions in subsequent assessment years, including AY 2018-19 and AY 2021-22. This consistent tax treatment across different years indicates that the department accepted the reasonableness of the provision, further validating the assessee s approach in AY 2017-18. We also take note of the fact that the warranty provision made in AY 2017-18 was reversed in AY 2021-22, and the reversal amount was offered as income in AY 2022-23. This reversal demonstrates that the provision was prudently and accurately estimated and adjusted based on actual warranty claims, further supporting its legitimacy. We rely on the Hon ble Supreme Court s decisions in Rotork Controls India (P) Ltd. [ 2009 (5) TMI 16 - SUPREME COURT] and Bharat Earth Movers[ 2000 (8) TMI 4 - SUPREME COURT] which support the deduction of provisions for future liabilities when they are based on reasonable estimates and comply with recognized accounting standards. We also consider other judicial precedents cited by the assessee, which consistently uphold the admissibility of such provisions when made on a scientifically sound and consistent basis. Provisions based on scientific methods, consistent business practices, and compliance with AS-29 should be recognized as allowable deductions. The consistent application of these principles is essential to ensuring that business liabilities are accurately reflected in the financial statements and tax assessments. Disallowance is directed to be deleted, and the provision for warranty expenses is allowed as a deduction under Section 37 of the Act. Assessee appeal allowed.

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• 2024 (9) TMI 280
  Entitlement to avail foreign tax credit withheld in USA - Assessee failed to file the corresponding prescribed Form 67 under Rule 128(9) before the due date of filing of return u/s 139(1) - directory or mandatory provision - HELD THAT:- We find no merit in the revenue s technical objection once it is come on record that case law Duraiswamy Kumaraswamy [ 2023 (11) TMI 1000 - MADRAS HIGH COURT] had settled the issue in assessee s favour that compliance to the foregoing provision(s) is only directory than mandatory in nature. Learned departmental representative could hardly dispute the fact that the assessee had filed its Form 67 on record in section 154 rectification proceedings. That being the case, we accept the assessee s argument in principle and leave it open for the assessing authority/CPC to factual verify the same as per law.

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• 2024 (9) TMI 279
  Denial of Benefit of exemption u/s 11 and 12 - assessee has not filed revised return of income for making a new claim which is not raised in the original return of income - in the return of income the assessee claimed exemption u/s 10(23C)(iiiad) of the Act however, the gross receipt of the assessee was more than Rs. 5 crores which exceeds monetary limit provided in the Rule 2BC of Income Tax Rules therefore, the said claim of the assessee cannot be allowed which was also realized by the assessee while making a fresh claim before the AO HELD THAT:- when the registration u/s 12AA was yet to be granted at the time of filing return of income then the assessee was not supposed to make any claim in the original return of income filed u/s 139(1) of the Act. Further the limitation for filing the revised return of income also expired by the time the registration u/s 12AA was granted vide order dated 28.09.2019. Thus, it is not a case of non-filing of revised return of income by the assessee despite having an option but the registration was granted after the time limit of filing revised return of income and therefore, the question of filing the revised return does not arise for making claim of exemption u/s 11 12 in view of the proviso to section 12A(2) which mandates the applicability of section 11 12 of the Act on the income of the assessee for the assessment year preceding to the assessment year for which the registration was granted but such preceding year is pending assessment before the AO Assessee is entitled for exemption u/s 11 12 for the year under consideration. We find that when there is no change in the objects and activities of the assessee since inception as a certificate to this effect was filed by the assessee before CIT(E) which was duly considered while granting registration u/s 12A therefore, the question of verifying the claim does not arise. Further when the claim u/s 11 12 was made only after the registration was granted by the CIT(E) then filing the audit report in 10B at the time of filing the return of income would amount to asking the assessee to make a compliance for non-existing fact at that point of time. Even otherwise filing of tax audit in form 10B is a directory requirement. Therefore, the delay in filing the tax audit report is not deliberate but due to the reason of subsequent registration u/s 12A cannot be a ground for denying the claim of exemption u/s 11 12 of the Act as this issue is now settled by the Hon ble High Courts. As decided in Welfare Association for the Disabled [ 2023 (12) TMI 1346 - ITAT INDORE] we find that the assessee can t be denied the benefit of exemption u/s 11/12 as claimed in return of income for mere delay in filing of audit-report (Form No. 10B), when the assessee has in fact filed such report though after filing of return. We, therefore, deem it fit to remand this matter back to the file of AO for a fresh assessment after considering audit-report (Form No. 10B) filed by assessee. The assessee succeeds in this appeal.

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• 2024 (9) TMI 278
  Validity of reopening of assessment - jurisdiction to issue notice - no order u/s 127 passed/communicated for transfer of jurisdiction from ITO, Circle-I, Gandhinagar to DCIT, Circle Gandhinagar - absence of valid sanction as required under Section 151 - Addition u/s 68 - AR submitted that the AO while reopening the assessment has reviewed the original assessment order and, therefore, the review of the original assessment order is not permissible and the assessment itself is bad in law HELD THAT:- It is pertinent to note that the contention of the Ld. AR that no order under Section 127 of the Act was passed/communicated for transfer of jurisdiction, but the same is there mentioned in the Assessment Order which categorically does not require any communication to the assessee as it is an internal transfer for the administrative purpose of the Assessing Officer and the powers are envisaged with the concerned authorities. The decision of Ajantha Industries [ 1975 (12) TMI 1 - SUPREME COURT ] will not be applicable as the jurisdiction invoked by the Assessing Officer who has the power, passed the Assessment Order in assessee s case. Besides this, the contention of Ld. AR is that there is a review of the original assessment order is also not justifiable as the Assessing Officer while giving the satisfaction note has dealt with the different issues after indicating the same in the reopening while recording the reasons. Thus, the additional ground is dismissed. No proper sanction u/s 151 - CIT(A) has erred in law and on facts in upholding valid reopening of assessment in absence of valid sanction as required under Section 151 of the Act for which it is pertinent to note that the assessee has not objected the satisfaction at the relevant time and, therefore, the following decisions cannot be applicable in assessee s case. Thus, ground nos.1 2 are dismissed. Addition u/s 68 - Assessee has given the details related to Shukan Finance Investment and also has given the details related to the identity of Shukan Finance Investment as relates to genuineness and credit worthiness. The assessee submitted ITR, computation of income and confirmation from Shukan Finance Investment for which the assessee also submitted the details about loan which was subsequently repaid and, therefore, it will not be justifiable to make the addition under Section 68 of the Act as unexplained cash credits. Assessee has explained before the Assessing Officer as well as before the CIT(A) related to the unsecured loan received from the two parties i.e. Shukan Developers Pvt. Ltd. and Shukan Finance Investment and after going through the same, it appears that the Assessing Officer as well as the CIT(A) was not justified in making addition. Thus, ground no.4 is allowed.

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• 2024 (9) TMI 277
  Nature of expenses - professional charges paid for identifying medical healthcare technology companies with feasible investments, growth potential, strategic value, etc. for the purpose of acquisition by the assessee - Capital or revenue expenditure - HELD THAT:- The amount paid to Graymatter Solutions LLC, USA towards professional charges for acquisition of new business in the area of healthcare technology companies and later on the purpose was not materialised. We also note from the order of AO that such expenses were not incurred in the previous year is not correct. In the financial statements produced before us for the AY 2016-17 the assessee has paid professional charges and it was placed before the AO too and no disallowance was made in the 143(3) assessment. There is no dispute regarding genuineness of transactions for services rendered. As relying on On mobile Global Ltd. [ 2021 (1) TMI 923 - KARNATAKA HIGH COURT ] we hold that the payments made by the assessee are to be treated as revenue expenditure. Disallowance u/s. 14A - We found substance on the submission of the ld. AR that no disallowance u/s 14A of the Income Tax Act can be made if the assessee has not received any exempt income. Appeal by the assessee is allowed.

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• 2024 (9) TMI 276
  Validity of assessment u/s 153A - addition u/s 69C based on the report of the Department Valuation Officer - Addition based on or made with reference to any incriminating material or documents found in the course of search or not? - HELD THAT:- There is no whisper/mention of any material leave alone any incriminating material seized during search to justify the addition in these unabated assessments other than the invalid valuation report. The valuation report of DVO in the facts discussed cannot be held to be incriminating material, since it is not a fall out of any incriminating material unearthed during search to suggest any investment in building which is over and above the investment shown by the assessee in its audited books. As relying on Narula Educational Trust [ 2021 (2) TMI 459 - ITAT KOLKATA] as following judgement of Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] we hold that the additions based on DVO report cannot survive. Accordingly the ground of revenue for these two assessment years is dismissed. For assessment years 2013-14, 2014-15 and 2015-16 are concerned, which are abated assessment years, we find that the matter was in the case of B.G.Shirke Construction Technology Pvt Ltd. [ 2018 (8) TMI 1207 - BOMBAY HIGH COURT] wherein held question as proposed is academic, unless the Revenue first challenges finding of fact arrived at by the Tribunal. The finding of fact is that, there is no excess work in progress than that declared by the Respondent-Assessee as on 31.3.2009 and the valuation done of the work-in- progress as on 31.11.2008 was only on provisional basis. Moreover, even if assume that the closing stock i.e. work-in- progress is in excess of that recorded/disclosed by the Respondent, the same has to be added to the income only under Section 69A of the Act as held by this Court in Dialust [ 2002 (1) TMI 9 - BOMBAY HIGH COURT] . In fact, the impugned order of the Tribunal places reliance upon the above decision of this Court. No submission was made on the part of the Revenue as to why the above decision is not applicable to the present facts. Addition on account of so called difference in valuation of the construction carried away as per the valuation report - By no means the addition could have been made on the basis of the departmental valuation report. No enquiry whatsoever has been conducted by the AO to positively come to a conclusion that such an expenditure was incurred outside the book and the assessee was not in a position to explain the nature and source thereof. In fact, the PCIT (Central) had revised the order on the ground that the valuation report was failed to have been taken into cognizance by the AO, but she had judiciously ordered for denovo assessment. Therefore, the Assessing Officer had all the powers to further conduct enquiry and to positively come to a conclusion that certain unexplained expenditure was there. But in the subsequent proceeding, the AO simply added back the difference in the valuation u/s 69 and after cursorily dismissing the objection raised by the assessee against the valuation report. Since the assessment order is continuation of such proceedings and is a fresh order, he even passed the order without taking approval u/s 153D. Addition u/s 68 towards unsecured loans from various companies - As assessee had proved the existence of the shareholders and the genuineness of the transaction as share application money had been received by way of account payee cheques, thus addition made by the AO is unjustified and unjustified and unwarranted.

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• 2024 (9) TMI 275
  Approval u/s 80G(5)(iii) - Assessee had violated the mandatory time lines as statutorily provided - HELD THAT:- It is admitted fact that the assessee is a old trust having commenced its activities year 2010. It sought approval u/s 80G(5)(iii) by filing Form No.10AB on 25.09.2023 which has been rejected by CIT(E) on the ground that the assessee had violated the mandatory time lines as statutorily provided. However, we find that this issue has been decided by co-ordinate bench in bunch of appeals titled as M/s CIT-1982 Charitable Trust Ors. [ 2024 (3) TMI 1201 - ITAT CHENNAI ] wherein held we agree with the argument of ld. counsel for the assessee that the timeline prescribed under clause (iii) of first proviso to section 80G(5) of the Act should be treated as directory and not mandatory especially considering the transitional nature of the amendment as brought out by the taxation of other laws (relaxation and amendment of certain provisions) act 2020 for bringing new regime. Hence, in our view, the CIT(Exemptions) should not have rejected the assessee s application in Form No.10AB only for this technical reason. Decided in favour of assessee.

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• 2024 (9) TMI 274
  Allowance of Standard deduction u/s 24(a) if the income is computed in the case of a Charitable Trust granting exemption u/s 11 - HELD THAT:- Issue decided against the assessee by decision of ITAT for the A.Y. 2012-13 [ 2019 (4) TMI 762 - ITAT MUMBAI ] where the Tribunal after considering the relevant facts held that standard deduction of rental income @30% u/s. 24A of the Act cannot be allowed while computing income of interest claim u/s.11. Not allowing deduction for actual repairs as reflected in Income and Expenditure Account - Decision of the Hon ble Coordinate Bench for the A.Y. 2012-13 [ 2019 (4) TMI 762 - ITAT MUMBAI ] has covered the said ground as held it is settled position of law that once income of a trust / institution is computed under the provisions of section 11 of the Act, whatever income derived from the property held under trust is to be taken into account and against which actual expenditure incurred for the objects of the trust has to be considered as application of income. Therefore, while arriving at income u/s 11, the AO needs to allow deduction towards actual repairs and maintenance expenses incurred - we direct the AO to allow deduction towards actual repairs and maintenance expenditure incurred before arriving at income available for accumulation u/s 11(2) / taxable income of the trust / institution. Deduction of amount of accumulation u/s. 11(2) - As decided in [ 2019 (4) TMI 762 - ITAT MUMBAI ] the facts with regard to the availability of funds for making investments are under dispute. The assessee failed to file any details with regard to the availability of funds for making investments in the modes specified u/s 11(5) of the Income-tax Act, 1961. Therefore, we are of the considered view that there is no merit in the argument of the assessee that it has accumulated income u/s 11(2) of the Act, for the purpose of object of the trust in compliance with provisions of section 11(5) of the Income-tax Act, 1961. Therefore, we reject the ground taken by the assessee.

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• 2024 (9) TMI 273
  Capital gains on sale of immovable property - deduction u/s 54 in respect of investment in new residential house property - assessee did not file the return of income - HELD THAT:- In the present set of facts, it was established by the assessee before the First Appellate Authority that long term capital gain on the sale of immovable property was utilized for the purchase of another residential property within the permissible time and the consideration for the purchase of new house was much more than the amount of sale consideration received by the assessee on transfer of her immovable property on which capital gain had accrued. We direct the AO to recompute the taxable total income of the assessee by taking into consideration the benefit available to her under section 54 of the Act. Accordingly, grounds taken by the assessee on the merits of the case allowed.

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• 2024 (9) TMI 272
  Validity of reassessment proceedings initiated u/s 148 - scope of amended provisions of sec. 148 - AO has not issued notice u/s. 148A(b) - HELD THAT:- Since for the assessment year under consideration the reassessment proceedings were initiated on 25.06.2021, in violation to the procedure laid down under the provisions of sec. 148 as stood amended w.e.f. 01-04-2021. AO has not issued notice u/s. 148A(b) to the assessee. Consequently, no order u/s. 148A(d) has been passed and hence the above assessment order dated 29-03-2022 passed u/s. 147r.w.s. 144 is without jurisdiction and bad in law and the same would be liable to be quashed. As pertinent to mention that the notice issued u/s. 148 dated 25.06.2021, based on which the order dated 24.03.2022, has been passed, has already been considered and treated as notice issued u/s. 148A(b) of the Income Tax Act, therefore, the assessment order dated 25.06.2021, which is under appeal, has been passed without issuing any notice u/s 148 of the Act. In view of that matter, the reassessment order passed without issuing notice u/s 148 would be liable to be treated as bad in law and deserved to be quashed. We hold the assessment order passed under section 147 r.w.s. 148 without jurisdiction and as such, it is quashed as void ab initio. Assessee appeal allowed.

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• 2024 (9) TMI 271
  Claim of loss due to robbery of gold ornaments - CIT(A) restricted such loss by on misinterpretation on news items printed in newspaper as compared to loss due to robbery as per the books of account - how much amount is to be allowed as deduction on account of loss by robbery? - HELD THAT:- Assessee is entitled to claim the loss on account of robbery/theft. The loss due to embezzlement, theft, dacoity, etc, is allowable deduction, if it can be proved to have arisen, out of the carrying on of the business and the same must be incidental to it. What is material is it should be caused in the course of his business activity and closely connected with business. If that is so, it (loss) will be an allowable deduction in computing the profits . It is also undisputed that one should make possible efforts to recover the loss occurred due to theft/ embezzlement, etc. The Hon ble Supreme Court in Ramchander Shivnarayan [ 1977 (11) TMI 2 - SUPREME COURT] has held that it is open to the assessee to claim the loss if it has a proximate connection with its business. Hence, it is settled law that the loss arising by embezzlement/robbery of money by a stranger to the business is also a trading loss and the loss is liable to be allowed as deduction provided the loss is incidental to the normal operation of the business. The arguments, advanced by the DR for the revenue to the effect that no quantitative details in the FIR is mentioned and the assessee does not have any cogent documents and evidences to claim loss, is not acceptable, particularly considering the above facts, that assessee had submitted police reports related to the robbery and FIR and apart from this assessee submitted newspaper clippings also. Thus we allow the loss suffered by robbery and delete the balance loss. Assessee s appeal is allowed.

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• 2024 (9) TMI 270
  Deduction u/s 80IB - assessee company owns an industrial unit in Belur, West Bengal - as per AO assessee had not maintained separate profit and loss account for the Belur unit and secondly, following the earlier year, he has held that global profit of the entire company should be applied on the profit of the Belur unit - HELD THAT:- From the records it is seen that assessee had filed audit report in Form 10CCB which was part of the return of income. Auditor has duly verified the deduction u/s.80IB and profitability statement of the Belur unit was also filed before the ld. AO. Thus, in this year unlike in A.Y.2002-03, assessee did filed separate profit and loss account for the Belur unit duly certified by the Auditor in Form 10CCB. In A.Y 2001-02, this matter was remanded back to the ld. AO and as stated by the ld. Counsel, AO has accepted the profitability as shown by the assessee. Thus, the net profit of 11.66% of the turnover of the Belur unit is to be accepted and global profit cannot be applied. This principle has been upheld in the case of Delhi Press Patra Prakashan [ 2013 (6) TMI 71 - DELHI HIGH COURT] wherein under similar facts, the AO had sought to impose the overall margin of the assessee s units (9.92% in that case) against the profit rate of 62.31% of the concerned unit declared by the assessee therein. The Hon ble High Court held that the assessee was entitled to a deduction u/s 80IA and 80IB of the Act on the profits of the concerned unit. It has been informed that the decision of the Tribunal for A.Y.2002-03 partially disallowing assessee s claim u/s.80IB which has been relied upon by the ld. CIT(A) has been subsequently set aside by the Hon ble Calcutta High Court and therefore, the stand taken by the CIT(A) now gets vitiated. Accordingly, the claim made by the assessee in the return of income which is as per the certificate in Form 10CCB is allowed in full. Deduction u/s 80HHC - AO has disallowed the claim as the assessee has received money from the sale of DEPB license - AO has relied on the retrospective amendment made in section 80HHC which denied deduction to company having export turnover in excess of Rs. 10 crores on account of sale of DEPB license - HELD THAT:- We find that reliance placed by the AO and CIT(A) on the retrospective amendment has now been struck down in the case of Avani Exports [ 2012 (7) TMI 190 - GUJARAT HIGH COURT] wherein as quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of amendment and not in respect of earlier assessment years of the assessees whose export turnover is above Rs.10 crore. The retrospective amendment should not be detrimental to any of the assessees. This judgment of the Hon ble Gujarat High Court has been affirmed by the Hon ble Supreme Court in the case of Commissioner of Income Tax v. Avani Exports [ 2015 (4) TMI 193 - SUPREME COURT] . Hon ble Jurisdictional Bombay High Court in the case of Vijaya Silk House [ 2012 (9) TMI 263 - BOMBAY HIGH COURT] has also held that retrospective amendment u/s 80HHC is ultra vires and invalid. Thus, exclusion of profit on sale of DEPB license from business profit for computation of deduction u/s 80HHC is not correct and the entire claim for deduction u/s 80HHC is held to be allowed because the sole basis for disallowance was retrospective amendment which has been quashed by the constitutional Courts. Assessee appeal allowed. Disallowance of deduction for commissions paid by the assessee - notice u/s.133(6) could not be served - HELD THAT:- Simply because notice u/s.133(6) has not been served cannot be the ground when assessee has produced all the evidences and details before the ld. CIT(A) as additional evidence on which remand report has also been sought. Once there is no discrepancy found in the details and evidences filed, then as held by the Hon ble High Court disallowance cannot be made simply for non-service of notice u/s.133(6). No addition can be made simply by want of the confirmation from the parties and accordingly, deduction paid as commission is allowed. Nature of expenses - expenditure incurred on repairs and replacements of plant and machinery - revenue or capital expenditure - HELD THAT:- Simply because assessee has capitalised expenditure in the books of accounts but later on in the computation has claimed it as revenue expenditure, then what is required to be seen is whether these falls in the ambit and scope of current repairs u/s. 31. As in the case of Saravana Spinning Mills (P) Ltd. [ 2007 (8) TMI 16 - SUPREME COURT] held that u/s 31(i) of the Act, needs to be seen whether the expenditure incurred by the assessee is for current repairs . It is irrelevant to consider whether the expenditure is revenue or capital in nature. If this principle is to be followed, then, what is required to be seen what is the nature of repair and maintenance which neither the AO nor CIT(A) have analysed. Thus, from the perusal of the details as in the paper book, it is seen that these are small repairs and replacement of part of plant and machinery which is to be allowed u/s. 31 of the Act irrespective whether it is a capital or Revenue in nature. Thus, AO is directed to examine the details - this ground is allowed subject to verification by the ld. AO. Claim of deduction of amount paid as service charges to BMCL - HELD THAT:-If the services have been taken in the relevant assessment year, the charges paid by BMCL on this account as per case of PCIT v. M/s Merck Ltd. [ 2019 (9) TMI 1506 - BOMBAY HIGH COURT] then same are allowable. Further here in this case, assessee not only received sundry managerial services from BMCL but also availed the services for which sample evidence of service has been furnished by way of additional evidence before us. Similar evidences were filed in AY 2004-05 wherein the First Appellate Authority had accepted the rendering of services and allowability of deduction after detailed examination of the evidences. Thus, for this year also, we hold that payment made to BMCL for rendering service cannot be disallowed by invoking Section 40A (2). Thus, we direct the AO to allow the payment made to BMCL for rendering of services. Claim of deduction of amount spent by the assessee as community development expenses - assessee has explained that the expenses were incurred for assistance with respect to drinking water supply, educational support etc. in the neighbouring areas of mine - AO disallowed the expenses treating it as donation in nature being not connected with business of the assessee - HELD THAT:- This issue stands covered in the case of Madras Refineries Ltd. [ 2003 (11) TMI 47 - MADRAS HIGH COURT] wherein under similar circumstances, the assessee therein had incurred community development expenses of the same nature, and the said expenses were finally held to be non-philanthropic in nature, incurred wholly for the purpose of business. Thus, we hold that expenses incurred of sundry development are treated as expenditure incurred wholly and exclusively for the purpose of business. Deduction of the entrance fees paid to clubs - As per the ld. CIT(A), the expense cannot fall in the category of an expenditure incurred wholly, necessarily and exclusively for the purpose of business - HELD THAT:- As relying on Sayaji Iron Engg. Co [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] , Groz Beckert Asia Limited [ 2013 (2) TMI 375 - PUNJAB HARYANA HIGH COURT] it cannot be said that the assessee s expenditure on subscription to the club for its employees is for the personal use. Instead, the welfare of the employees gained out of the said expense goes towards running the business of the assessee and producing business benefits. Thus, ground is allowed. Disallowing set off of short term capital loss on sale of investments against profit on sale of investments - applicability of provision of dividend stripping - HELD THAT:- When original unit of K bond was sold, as per section 55(2)(aa), the cost of original unit remains the same at which the original units were acquired and sale of original units resulted in Loss CIT (A) has wrongly applied provision of dividend stripping contained in 94(7) on transaction in the nature of bonus stripping covered by section 94(8) which were not in existence in previous year 2002-03 - this matter should be restored back to the ld. AO to examine whether the losses of bonus stripping should be allowed as there is no application of section 94(8) in year under appeal. So far as loss on account of dividend striping is concerned, the ld. AO will examine the holding period of units and decide the issue to examine the issue of losses because Section 94(7) is not attracted due to adequate holding period. Accordingly, this ground is partly allowed for statistical purposes. Expenditure incurred on maintenance and depreciation of aircraft - trial run of machines - HELD THAT:- As decided in Ashima Syntex Ltd. [ 2000 (8) TMI 22 - GUJARAT HIGH COURT] wherein trial run of machines was held to be being used for the purpose of business as specified u/s 32 The trial run is held as use for the purpose of business, then the maintenance expenses should also be allowed as deductible. The assessee had also furnished flight details for the year under consideration which has been enclosed which clearly shows that it was a trial run and for training of the flights. Thus, depreciation and maintenance at the aircraft is held to be allowed. In the result, ground of assessee is allowed. Deduction u/s 80HHC has to be computed on the basis of adjusted book profit u/s 115JB and not on the basis of the profits computed under regular provisions of law applicable to computation of profits and gains of business - HELD THAT:- This issue is remanded back to the ld. AO to examine the computation of the revised working of 80HHC which is deductible from the book profit which is in light of the decision of Ajanta Pharma Ltd [ 2010 (9) TMI 8 - SUPREME COURT] Accordingly, additional Ground No.2 is allowed. Market value for computing the deduction u/s 80IA - Rates charged by Orissa State electricity board to its industrial consumer which was taken at Rs. 2.63 per unit as Transfer price to Aluminum unit is accepted to be at Market rate. Disallowance of repairs maintenance expenses - AO disallowed 5% of expenses because at the time of scrutiny proceeding only unit wise details has been submitted CIT (A) held that expenses on account of building and others was substantiated and accordingly, ld. CIT(A) has deleted the estimated disallowance of 5% - HELD THAT:- In any case, the entire repair expenses have been charged to profit and loss account and there is no allegation that they are capital in nature. Assessee had filed voluminous bills and invoices on account of repairs of plant and machinery before the authorities below and accordingly, no disallowance is called for on estimated basis. Thus, order of the ld. CIT(A) is confirmed and ground No.4 is dismissed. Addition as amount written back on the ground that write back of an amount does not amount to payment of statutory liability - assessee contended that the ground has become infructuous as AO himself after verifying the sum has already offered to tax in earlier years u/s 43B, hence allowed deduction of write back from taxable income while giving appeal effect - HELD THAT:- Since, ld. AO himself has verified and same has been offered to tax in earlier years u/s.43B, he has accepted deduction from write back from taxable income while giving appeal effect and the provision which was already offered to tax in the earlier years, they have been returned back in the subsequent years, therefore, the same cannot be taxed in subsequent years, accordingly, there is no substance raised by the department and the same is dismissed.

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• 2024 (9) TMI 269
  Denial of Registration u/sec.12AB - assessee is not registered under Rajasthan Public Trust Act, 1959, genuineness of the activities of the assessee could not be verified due to non-compliance; and Assessee has filed incomplete Form No.10AB - HELD THAT:- The provisions of the Andhra Pradesh Charities Act and provisions of the Rajasthan Public Trust Act are almost identical. Therefore, decision of the Hon ble Supreme Court in the case of New Noble Education Society [ 2022 (10) TMI 855 - SUPREME COURT] on this issue is squarely applicable to the assessee. As also observed that assessee had not submitted the details called by the ld.CIT(E), therefore, ld.CIT(E) observed that genuineness of the activities of the assessee could not be verified. After the amendment in the registration procedures for Charitable Trust parliament in its wisdom has introduced provisional registration and permanent registration w.e.f 01.04.2021. The provisional registration is issued almost automatically relying on the assessee s submissions. However, at the time of issuing permanent registration as per Section 12AB(1), it is mandatory for CIT(E) to verify genuineness of the activities of the assessee. In this case, assessee has not submitted the relevant details. Therefore, the ld.CIT(E) could not verify genuineness of the activities of the assessee. Even before this tribunal, assessee has not filed single document to prove genuineness of the activities of the assessee trust. In these facts and circumstances of the case, we agree with the ld.CIT(E) that assessee is not eligible for registration u/sec.12AB of the Act as assessee could not prove genuineness of the activities. Appeal of the assessee is dismissed.

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• 2024 (9) TMI 268
  Rejection of approval u/s. 80G - application made by the assessee was not within six months prior to expiry of period of the provisional approval or within six months of commencements of its activities whichever is earlier - HELD THAT:- Recently CBDT has issued an advisory to relax that situation vide circular no. 07/2024 dated 25.04.2024. Considering that aspect of the matter the assessee could not put on a different situation. Assessee trust was not considered as Genuine - Since on that aspect of the matter where considering the activities of the trust registration u/s. 12AB was granted the recognition u/s. 80G cannot be denied. Noncompliance on the part of the assessee - We note that only two notices were issued and therefore, considering the peculiar set of facts we found force in the arguments of assessee that considering the facts of the case it demands that the same be set aside to the file of the ld. CIT(E) to be decided as fresh. Thus, we do not intend to go into the merit of the case or that of the dispute, but it is imperative that the assessee must be provided adequate opportunity of being heard by the ld. CIT(E) and based on circular of the CBDT the matter require a fresh examination. In this view of the matter, the Bench feels that the assessee should be given one more chance to contest the case before the ld. CIT(E). Appeal of the assessee is allowed for statistical purposes.

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• 2024 (9) TMI 267
  Addition invoking provisions of section 56(2)(x) - difference in the stamp duty value and actual purchase consideration of immovable property purchased by the assessee - assessee s share in the impugned property was 47.5% - assessee argued as had purchased an agricultural land whose stamp duty valuation was far less than the consideration for which land was purchased - HELD THAT:- The assessee has consistently stated to the authorities below that the stamp duty valuation of the land purchased by him by treating it as non-agricultural land for residential use purpose was not acceptable for the reason that the assessee had purchased agricultural land. He had pointed out this fact of the land purchased being agricultural from the sale deed of the property clearly referring to the land purchased as agricultural land and also mentioning the fact that land be used for agriculture purposes after sale. As contended that the approval for its non-agriculture use had been taken from the Collector, as a matter of convenience only so that the assessee could easily use it for non-agriculture purpose, if required, but the land had been purchased as agriculture land and for agriculture purpose only; That therefore, the stamp duty valuation of the land as non-agricultural residential use was always disputed. These facts were brought out before us through the relevant sale deed, and through the contentions made to the authorities below, and which have not been disputed/controverted by the ld.DR also. Therefore, it is evident that the assessee had disputed the stamp duty valuation of the land. In terms of provisions of section 56(2)(x) read with section 50C(2) of the Act, therefore, there is no doubt that the AO ought to have referred the valuation of the property to the AO. We find merit in this contention of assessee. No material difference between the purchase consideration of the property and its fair market value - Since on a valid reference made to the DVO for the valuation of the fair market value of the impugned property/land in terms of provisions of law in this regard, the FMV has been found to be in excess of approximately of Rs.20 lakhs only, i.e within 10% range of the purchase consideration of Rs.2.01 crores, there is no material difference between the FMV of the property and the purchase consideration for which it was purchased. DVO has found the FMV of the land to be far less than its stamp duty value being Rs.2.23 Crs as opposed to its stamp duty value of Rs.3.32 crs, there is no case with the Revenue for considering the stamp duty value of the land for computing the addition to be made to the income of the assessee in terms of section 56(2)(x) of the Act. At the most, the FMV could be taken for the purpose of determining the excess between the FMV and the purchase consideration, but since the difference is only to the tune of Rs.20 lakhs, which is approximately 10% of the purchase consideration of the property of Rs.2 .01 Crs, it is not a material difference. Therefore, there is no occasion for making any addition in the hands of the assessee for receiving immovable property for consideration which is less than its stamp duty value/FMV for the above reasons. We direct the AO to delete the addition made in the hands of the assessee under section 56(2)(x) - Assessee appeal allowed.

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• 2024 (9) TMI 266
  Disallowance u/s 40(a)(ia) - non-deduction of TDS on ocean freight charges - HELD THAT:- In any case, action or inaction of any person cannot determine the correct position of law. In the present case, the position is clear from the above CBDT s Circular that neither section 194C nor is section 195 of the Act applicable to the payments made to the non-resident shippers or their Indian agents and it is needless to mention that Board Circulars are binding on the Income Tax Authorities. In view of this discussion and legal position, we are of the view that the addition is not sustainable. Therefore, the same is hereby directed to be deleted. Disallowances on account of travelling expenses - disallowance of entire expenses by the AO is completely unjustified and unsustainable as the parts of the expenses were incurred in respect of partner of the firm - HELD THAT:- No proof shown the purpose of travel, what business has been transacted and accompanied person have no relationship with business activities. We are of the opinion that it will deem fit and proper in these peculiar facts and circumstances that a lump sum disallowance @ 25% in head of the Travelling Expenses would be just and proper. We make it clear that our instant estimation based in these peculiar facts would not be taken as a precedent in any preceding or succeeding assessments. The Ld.AO is accordingly directed to re-compute the impugned disallowance @ 25% and make necessary adjustment in the income of the assessee. Addition u/s 41(1) - outstanding sundry creditors - Assessee submitted where the amounts were shown as liability in the balance sheet and there was no evidence / material to indicate cessation of liability, the addition cannot be made u/s 41(1) simply on the ground that the liability is outstanding for more than 3 years and the same is barred by the limitation - HELD THAT:- As perused the material on record such as copy of ledger accounts, Audit Report, copy of Return along with computation of account placed on record that amount shown as liability in this relevant assessment year. As noted that the impugned amount as income in the subsequent year and offered the same for tax in the return of income for AY 2013-14 filed on 26.09.2013, i.e. before passing the assessment order on 16.03.2015. Thus, the amounts to taxing the same amount twice and double taxation which is completely impermissible under the Act. That, the evidences are received shows that the assessee has shown Rs.78,350/- as income in subsequent year and paid taxes accordingly. We, therefore, delete the addition - AO is directed accordingly. Disallowance on account of motor-car expenses and depreciation - personal use criteria - assessee submitted that the motor-car was used for the purpose of business of the assessee-firm by the partners - HELD THAT:- Having heard both the parties and perused the material available on record, we are of the view that Motilal Laxmichand Sanghavi [ 2019 (10) TMI 184 - ITAT MUMBAI] and Urmila Co. Ltd. [ 2011 (1) TMI 1227 - ITAT MUMBAI] restricted the disallowance @ 10% for personal usage is reasonable. Above said are bindings decision. We restrict the disallowance of motor car expenses. This ground of assessee s appeal is partly allowed in above terms. Disallowance on account of excess interest payment u/s 40A(2)(b) - HELD THAT:- As relying on decision of Sarjan Realities Ltd [ 2014 (8) TMI 206 - GUJARAT HIGH COURT] we delete the disallowance made by the AO on account of excess interest payment under Section 40A(2)(b) - AO is accordingly directed to re-compute the impugned disallowance.

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• 2024 (9) TMI 265
  Unexplained cash deposits in bank account - assessee submitted before the AO that assessee company was entered into an agreement of sale of property measuring 5 Acre, and against the said agreement assessee firm received amount in advance during the year under consideration and deposited the same in its bank account - HELD THAT:- Admittedly, the disputed transaction of cash deposit was duly disclosed in the Audited books of Accounts as per Balance Sheet from the sale of land which clearly established the fact that it is a genuine transaction disclosed in books of accounts much before the search u/s 132 - AO or the Ld. CIT(DR) has failed to controvert the contention of the defendant assessee despite the department was granted opportunity by way of remand report during the appellate proceedings before the CIT(A) and in the present proceedings by the Tribunal. From the record, it is evident that Sh. Gurmeet Singh, in his statement has categorically admitted and explained that the disputed cash was deposited in the bank account of the assessee by the employee of M/S Bhagwati Lacto Vegetarian Exports Pvt. Ltd. on account of sale of land situated at Village Ballo Majra by the assessee company to M/S Bhagwati Lacto Vegetarian Exports and that there was no physical cash transaction since it was not possible to count huge cash in such short time as mentioned in the letter. In the remand proceeding, further the bank manager stated that no cash was transaction was involved, for the reason that the bank accounts of both the firm/company were in the same bank branch, so there was no need of actual movement of cash, since the funds were to be actually transferred from one bank account to another within the same branch, without the actual involvement of cash. Thus, it can be logically concluded from the statement of Sh. Sudhanshu Kumar, i.e. Branch Manager, that the certificate given by bank with respect to timing of cash deposit and cash withdrawal is factually incorrect as it is not possible to count huge cash in such time of few minutes. In the present case, the AO has made addition purely on presumption and guess basis. Decided in favour of assessee. Disallowance of interest paid on CC account - major part of funds remained invested in the immovable properties (as investment but disclosed under the head debtors) and share of other companies and not in the productive assets related to assessee s business - HELD THAT:- In the present case, the funds remained invested in the immovable properties and share of other companies i.e. in the business of the assessee meaning thereby that the discloser of the said funds as investment under the head debtors will not debar the appellant from the claim of interest expenses on the same as the investment was in the productive assets related to assessee s business. Following the Coordinate Bench decision in the assessee s own case on similar facts 2023 (11) TMI 1284 - ITAT AMRITSAR] the addition made by the AO is liable to be deleted. Assessee appeal allowed. Unaccounted sales receipts - HELD THAT:- CIT has allowed benefit of voluntary disclosure made by the assessee during search proceedings but he has ignored to consider the amount of sale receipts found as per Annexure A- 2, although on the same sale receipts, addition of gross profit has already been confirmed by the Ld. CIT(A) appeal. The observation of the ld. CIT(A) is self-contradictory as firstly, he has confirmed the Profit percentage on the trade/sale receipts Rs. 3,45,98,421 and secondly, he is disputing the same receipts as unexplained loan and interest entire which is illogically concluded against the principles of accounting and against the interest of justice. Thus, in our view, the funds available were explained by the appellant in the manner that Rs. 3,00,00,000/- was discloser made at the time of the search and Rs. 3,45,98,421 being sale receipts as per annexure A- 2, duly declared in the audited balance sheet where specific percentage profit has been applied and accepted by the AO and the Ld. CIT(A) as well. In view of that matter, we are of the considered view that the finding of the Ld. CIT(A) in confirming separate addition-is infirm and perverse to the facts on record as the entire sale receipts stands explained. Thus, the ground 4 of the appeal is allowed.

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• 2024 (9) TMI 264
  Denial of grant of registration u/s 12AB and u/s 80G(5) - application not filed before 30-09-2023 - timeline prescribed for filing Form No. 10A for recognition under section 12A/ 80G - HELD THAT:- Very recently vide Circular No. 7/2024 dated 25.04.2024 CBDT has further extended the due date of filing Form No. 10A/10AB under the Income Tax Act till 30.06.2024, taking into consideration the difficulties reiterated by tax payers electronic filing of 10A/10AB Since in the instant facts, as it evident from the various dates mentioned above, the assessee / Applicant Trust had filed application for grant of final approval under Section 80G(5) of the on 02.08.2023 and as noted by us in the preceding paragraph, the assessee could have filed application for grant of approval on or before 30.09.2023 which stands further extended to 30.06.2024 vide Circular No. 7/2024 dated 25.04.2024, then, in our considered view, the application for grant of final registration under Section 80G(5) of the Act could not be denied only on the ground that the same was not filed before 30-09-2023. Appeal of the assessee is allowed for statistical purposes.

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• 2024 (9) TMI 263
  LTCG - deduction u/s. 54 - CIT(A) has taken the cost of new residential house as a sum of only the stamp duty charged for the purchase of the said property instead of actual purchase price - HELD THAT:- We are of the opinion that the Ld.CIT(A) on the mistaken ground had disallowed the claim of deduction u/s. 54 amounting to Rs. 2,82,40,000/- treating Rs. 1,03,60,000/- as the cost of new asset which is in fact only the stamp duty paid by the assessee. Therefore, the entire purchase cost amounting to Rs. 19,53,60,000/- should be allowed as deduction u/s. 54 of the IT Act. However, this deduction may be restricted to the sale proceeds i.e. Rs. 3,86,00,000/-. Disallowance of interest on housing loan claimed u/s. 24 - CIT(A) on the mistaken ground that housing loan has been taken for the purpose of renewal of the same property which is already under rent had disallowed the entire claim of deduction u/s. 54 - We are of the opinion that assessee had received rent amounting to Rs. 4,74,69,381/- during the F.Y. 2020-21 relevant for the A.Y. 2021-22. Therefore, the house property is let out during the year and there is no maximum limit on the deduction for interest on borrowed capital. In the instant case, as the assessee has produced the bank certificate showing payment of interest towards loan, which the assessee was claiming in the preceding years and allowed by the IT department also. We find no merits in disallowing the deduction paid towards interest on housing loan u/s. 24

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• 2024 (9) TMI 262
  Exemption u/s 11 - corpus donations receipts - activities of running Kalyana Mandapam was in the nature of business, first proviso to Sec. 2(15) would be attracted - AO has alleged that the corpus donations as received by the assessee were nothing but rental receipts since the same was received from only those persons who had hired halls on various occasions - second proviso would also not apply since aggregate receipts from Kalyana Mandapam were exceeding Rs. 10 Lacs per year - HELD THAT:- Assessee has confined itself to carry out objects of the trust though the substantial activity has remained confined toward one activity as mentioned in Clause 3(k) of Trust Deed. Nevertheless, that fact would remain that the assessee-trust is working within the boundaries set out by trust deed. It could also be seen that the surplus generated out of this activity has been utilized by the assessee in furtherance of other charitable purposes viz. payment of school fees, contribution to relief funds etc. The surplus so generated out of this activity has been utilized in furtherance of other objects of the assessee-trust. It is quite clear that the assessee has confined itself to carry out those activities only which has been mentioned in the trust- deed. There is no material to indicate that the assessee has drifted from any of its objects and carried out any other activity which is not mentioned in the trust deed. Corpus donations were voluntary in nature and the same could not be treated as part of rental receipts. Further, the fact of application of income has also to be considered and kept in mind while examining the charity claim of the assessee considering the specific directions of Tribunal in its order dated 27-03-2015. Therefore, we do not concur with the re-working of profit by Ld. CIT(A) of impugned order. We would go by overall analysis of receipts and funds expended by the assessee during all these years to ascertain whether the aforesaid activity of Kalyan mandapam could be said to be carried out with profit motive with utter disregard to the other charities objective of the assessee. Going by above analysis, we find that though the activities of Kalyan mandapam may have resulted into some surplus for the assessee, nevertheless, the surplus funds were fully utilized to carry out charitable activities and therefore the assessee s claim of deduction u/s 11 could not be usurped merely on the finding that the assessee s activities resulted into surplus funds for the assessee. Thus, we would concur with assessee s claim of exemption u/s 11. AO is directed to grant the impugned exemption, in all the years and re-compute the income of the assessee for all these years. The assessee has also assailed reassessment proceedings on legal grounds. However, we concur with the adjudication of Ld. CIT(A) on legal grounds and find no reason to interfere in the same.

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• 2024 (9) TMI 261
  Cancellation registration of the assessee u/s 12AB(4)(b)(i) - Retrospective application of cancellation of registration - assessee submitted that the change being the substantive and penal provision for cancellation it cannot apply retrospective - Whether the CIT(E) is under mandatory obligation to cancel the registration u/s 12AA to the Trust which was already granted earlier, consequent upon amendment to the Act or not? - HELD THAT:- The bench noted that the apple of discord for the proceeding under question arose as the AO made proposal based on the assessment proceeding conducted in AY 2017-18 that the assessee trust is not involved in charitable activity but involved in carrying out contract work for various municipal corporations and major part of the receipt comes from those activities. In execution of these contract the assessee also execute sub-contract. Assessee claimed in that proceeding that they are engaged in the preservation and protection of environment but in fact the assessee is doing the commercial activity and thereby doing the activity with profit motive. AO also noted that the assessee trust has advanced a sum to the persons specified u/s. 13(3) of the Act and thus, there is diversion of fund. Assessee also made contract payment to various other parties / concerns referred to in section 13(3) of the Act. Thus, the rule of consistency should follow in favor of the assessee. Even the circular of board no. 21/2016 direct the revenue officer The cancellation of registration without justifiable reasons may, therefore, cause additional hardship to an assessee institution due to attraction of tax liability on accreted income. The field authorities are, therefore, advised not to cancel the registration of a charitable trust granted under section 12AA just because the provision of section 2(15) comes into play. The process of cancellation of registration is to be initiated strictly in accordance with the section 12AA(3) and 12AA(4) after carefully examining the applicability of these provisions. Thus, on the issue of the doing business by the assessee the finding is already recorded by the bench in the case of the assessee and the same reached finality. Thus, in the case of the assessee when it is held that doing business or not does not warrant the cancellation of registration the revenue should not raise the issue again and there must be some finality on the issue. Thus, whatever observation or reasons discussed in the order of the CIT(E) has no validity as the said issue is already becomes final. Whether the violation observed by the ld. CIT(E) is sufficient to cancel the registration of the trust which has already been granted? - On the first issue we have held that the action is not correct by the ld. CIT(E) vide para 10 above so now the rest two issue left to decide whether the same warrant the cancellation of registration of the trust or not. Now the left over issue that transferring money to related parties as advance or personal benefits and the assessee transferring money to related parties in garb of salary, rent and subcontracts can be reasons to cancel the registration of the trust after the amendment in the law after 01.04.2022 Whether the cancellation will operate from a retrospective date or prospective date ? - This issue is decided in the case of Auro Lab. Vs. ITO [ 2019 (1) TMI 1478 - MADRAS HIGH COURT ] holding that in the absence of specific mention of the amended provisions to operate retrospectively, the cancellation cannot operate from a past date and in this case from A. Y. 2017-18. Whether the payment made to specified persons warrants the cancellation of registration of the assessee trust or not? - As it is clear from the facts recorded that the ld.CIT(E), Jaipur has initiated the impugned proceedings of cancellation of registration based on the reference received from ld. DCIT(E), Jaipur dated 06.02.2020 as evident from the Impugned Order itself i.e passed u/s 12AB(4)(b)(i) of the Act. As per the amended provision of section 12AB(4) of the Act, reference has to be after granting of the registration u/s 12AB(1)(a) as evident from the bare reading of the provision itself which states subsequently, if there is reference by Ld. AO, then only the Ld. PCIT/CIT can proceed further. Admittedly in the present case, there is no such reference after granting registration on 23.09.2021. Thus, when the provision for making the reference was inserted in law w.e.f. 01.04.2022 and when at the time of impugned reference, there was even no provision for making such reference under the 2nd proviso to section 143(3) of the Act for the trusts and institution referred under section 11 of the Act. Therefore, the reference itself is without the authority of any statutory provisions and there was no fresh reference by the ld. AO. Further the bench noted that the impugned reference upon which the addition was made and that order is pending for adjudication before ld. CIT(A) and there is no final finding on that aspect of the matter. The bench further noted that there was no intimation to the assessee that the ld. CIT(E) intend to proceeded with retrospective effect. Even nowhere in any of the communication to the assessee was allowed to defend their case and the importance of show cause notice has been emphasized by the Apex Court in case of Umanath Pandey v. State of UP [ 2009 (3) TMI 526 - SUPREME COURT ] that Notice is the first limb of this principle. It must be precise and unambiguous. It should appraise the party determinatively the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him. As we note that the ld. CIT(E), Jaipur has issued first show cause notice in which it has been show cause registration u/s 12AA/12AB should be withdrawn due to violation of section 2(15) of the Act (para 5 on page no. 94 of PB) and due to trust money being allegedly mis utilized by specified person as mentioned u/s 13(3) of the Act However, in the impugned order, Ld. CIT(E), Jaipur has invoked clauses (a), (b) and (e) of specified violation as defined under explanation to section 12AB(4) of the Act (which applies prospectively). Therefore, we note that the action of the ld. CIT(E) cancelling the registration of the trust w.e.f. A. Y. 2017-18 is beyond the scope of the show cause notice as the conditions for cancellation of registration on account of specified violation, which were not specified earlier in the law, have been inserted under section 12AB(4) of the Act w.e.f. 01.04.2022 and would accordingly apply prospectively being penal provision and having very harsh consequences . Thus, the action of the ld. CIT(E) in the Impugned Order cancelling the registration of the Assessee retrospectively w.e.f. AY 2017-18 without any basis and without authority of the law as in AY 2017-18, there were no such conditions of specified violations in the law, therefore, Assessee cannot be penalized by reason of the amendment to the law effected subsequently. In view of the above, provision of law, binding precedent of the jurisdictional high court and the CBDT circular the law of specified violation has been inserted w.e.f. 01.04.2022 and hence would not apply retrospectively based on the specified violations (which was defined by Finance Act 2022) based on the transactions occurred in AY 2009-10 or AY 2017-18 or earlier. Thus, we hold that cancellation of registration u/s 12AA(3)/12AB(4) by the ld. CIT(E) is bad in law - appeal of the assessee is allowed.

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• 2024 (9) TMI 260
  Disallowance of deduction u/s. 54 - LTCG arising from sale of property and reinvestment in new residential property as short term capital gains - HELD THAT:- In the present case, there is no dispute with regard to fact that the conditions stipulated u/s. 2(47) of the Act r.w.s.53A of the Transfer of Property Act, 1882, are satisfied. Therefore, in our considered view, transfer of property took place on the date in which the assessee has released his right in the property by way of Release Deed dated 07.08.2013. If you consider the date of transfer as 07.08.2013, then the period of holding of the impugned asset by the assessee, is less than 36 months and thus, in our considered view, there is no error in the reasons given by the AO Ld.CIT(A) to assess the gain derived from transfer of property under the head Short Term Capital Gain . Since, gain on transfer of property has been assessed under the head Short Term Capital Gain , the question of allowing deduction u/s. 54F of the Act, does not arise, and thus, in our considered view, there is no error in the reasons given by the AO and the CIT(A) to reject deduction claimed u/s. 54/54F of the Act. Thus, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the assessee. Additions towards difference in commission payment and also difference in closing balance of parties accounts - assessee claimed that entire commission payment is subject to TDS - AO was not satisfied with the explanation furnished by the assessee and according to the AO, mere deduction of TDS on payment, is not sufficient to prove the incurring of expenditure - HELD THAT:- The assessee is accounting the commission paid on sales as and when goods are dispatched, whereas, the parties accounts, commission as per Invoice and only after the goods delivered to the customers. We find that the reasons given by the assessee to explain difference between parties balance in the books of accounts of the assessee when compared to confirmations submitted by them appears to be reasonable and bona fide. Further, the assessee has deducted TDS on commission payment as per law. In fact, the AO has not disputed TDS deducted on commission payment. Therefore, we are of the considered view that additions cannot be made merely for difference in parties accounts on the basis of confirmation submitted by them, even though, the assessee has explained reasons for difference in party s accounts. The Ld.CIT(A) without considering relevant facts simply sustained additions made by the AO and thus, we reverse the findings of the Ld.CIT(A) on this issue and direct the AO to delete the additions made towards difference in closing balance and difference in commission payment in respect of three parties. Disallowance of freight payment in cash u/s. 40A(3) - Although, the assessee claims to have incurred freight expenses in cash within the prescribed limit, but on perusal of the details given by the AO in the assessment order, it is noticed that the assessee has paid a sum of Rs. 22,237/- towards freight expenses in cash in violation of Sec.40A(3) which attracts disallowance. Therefore, there is no error in the reasons given by the CIT(A) to sustain the addition made towards freight paid in cash u/s. 40A(3) of the Act, and thus, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the assessee. Addition towards Sales Tax / Penalty / Sales Tax paid on behalf of Digitran Prints and difference in Sales Tax turnover reported in the Income Tax Return and Sales Tax Return - As per AO assessee could not adduce any evidences as to how penalty paid under Sales Tax Act can be allowed as deduction and assessee could not explain as to how Sales Tax paid on behalf of a third party can be claimed as deduction - HELD THAT:- We are of the considered view that there is no error in the reasons given by the AO the Ld.CIT(A) to make additions towards Sales Tax payment, penalty payment, and Sales Tax difference, and Sales Tax paid on behalf of Digitran Prints, and thus, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the assessee. Additions towards cash deposits into bank account as unexplained credit u/s. 68 - HELD THAT:- As undoubtedly clear that the assessee has made a vague claim of cash advance received from a party without there being any evidences to say that in fact, there are transactions between the assessee and said party. Further, the AO has made a categorical findings that M/s. IRIS is a rice pulling entity and dealing mainly in iridium. The goods traded by the assessee are different from one dealt by IRIS. Therefore, from the above, it is undisputedly clear that the assessee could not establish any business connection with IRIS to prove cash advance received from the party. Therefore, there is no error in the reasons given by the AO to reject the explanation offered by the assessee with regard to source for cash deposits from IRIS, and thus, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the assessee. As regards source for cash deposits from Shri Narendra Kothari (HUF), no documentary evidence was furnished by the assessee. The reasons given by the assessee that Shri Narendra Kothari (HUF) holding sufficient funds is not supported by any documents or Income Tax Returns filed by the assessee for relevant assessment year. Although, the assessee claims that Shri Narendra Kothari (HUF) does not have any taxable income for relevant assessment years, in our considered view, since the loan between the assessee and Shri Narendra Kothari (HUF) is in cash, Income Tax Returns filed by the creditor is one of the pointer to creditworthiness of a person. Since, the assessee failed to file necessary evidences to prove the creditworthiness of the creditor, in our considered view, there is no error in the reasons given by the AO to reject source for cash deposits claimed to have been received from Shri Narendra Kothari (HUF). Thus, we reject the arguments of the assessee and uphold the findings of the AO and the Ld.CIT(A) in making additions towards cash deposits into bank account u/s. 68 of the Act. Appeal filed by the assessee is partly allowed.

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• 2024 (9) TMI 259
  Addition u/s 68 - cash (SBN) deposited during demonetization period as unexplained cash credit - allegation of non rejection of books - HELD THAT:- Observations of the revenue authorities, shows that the assessee was unable to substantiate his contentions with any corroborative evidence regarding receipt of cash on account of sale as well as recovery from debtors. From the material placed before us in the form of paper book, again such contentions could not be substantiated. Here again the assessee failed in proving that the so-called debtors from whom the cash was collected during the demonetization period belongs to the relevant AY or preceding years so the profit from sale to such debtors have been brought to tax in the return of income of the year under consideration. The mismatch in closing and opening cash balance in the assessee s cash flow statement, which was noted by both the revenue authorities, could not be disproved even before us by placing any cogent evidence. As in view of various deficiencies in the books of assessee qua difference in cash balance, actual receipt from current sales or from debtors, which were called for explanations, but the assessee was unable to demonstrate before both the Authorities below, thus, it cannot be conclusively construed that the returned income offered by the assessee was again taxed under the provisions of section 68. Therefore, the contention that addition u/s 68 without rejection of books was invalid cannot be concurred with, but, we in our considered view are of the opinion that the issue in present case requires certain verifications qua the closing balance of cash as on 31.03.2016 and its matching with the opening cash balance as on 01.04.2016 from the audited accounts of the assessee, the verification of sale bills and sales recorded in the books of accounts, the verification of impact of cash collected from debtors on the returned income of the assessee for the year under consideration. Consequently, following the principle of natural justice the issue in the present appeal is remitted back to the file of Ld. AO for verification of all these material aspects and to re-adjudicate the issue afresh. Needless to say, reasonable opportunity of being heard shall be provided to the assessee.

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• Customs

• 2024 (9) TMI 258
  Scope of review - Detention order - Smuggling - Gold of foreign origin - non-application of mind in the detention order - HELD THAT:- Radhakrishnan Prabhakaran [ 2000 (2) TMI 825 - SUPREME COURT] has dealt with the scope of judicial review of an order of detention passed under the provisions of the COFEPOSA. It has held that, it is not for the Court to substitute the satisfaction but scrutinise the order to ascertain whether the detaining authority had really arrived at the satisfaction that the detenu has to be preventively detained in public interest. It has also observed that, all documents mentioned in the order need not be supplied. It has clarified that, copies of only such of those documents as have been relied upon by the detaining authority for reaching the satisfaction that preventive detention of the detenu is necessary shall be supplied to the detenu. Paul Manickam and another [ 2003 (10) TMI 61 - SUPREME COURT] has observed that, appropriate government is enjoyed with an obligation to accord the detenu the earliest opportunity to make a representation and to consider such representation speedily. The representation is to be considered in its right perspective keeping in view the fact that the detention of the detenu is based on subjective satisfaction of the authority concerned. Hemlata Kantilal Shah [ 1981 (10) TMI 172 - SUPREME COURT] has held that, when an order of detention together with the grounds of detention is served on a detenu, the detenu is not entitled to know which part or parts of the grounds was or were taken into consideration and which not. Abdullah Kadher Batcha and another[ 2008 (11) TMI 695 - SUPREME COURT] has held that, it is the duty of the Court to see whether the non-supply of any document is in any way prejudicial to the case of the detenu on not. It has held that, primarily, copies which form the ground for detention are to be supplied and non-supply thereof could prejudice the detenu. However, documents which are merely referred to for the purpose of narration of facts in that sense cannot be termed to be documents without the supply of which the detenu is prejudiced. The representation made by the detenu had been considered and dealt with within a reasonable period of time. Typographical error appearing in the consideration order has been highlighted as a material error vitiating the decision. In the facts and circumstances of the present case, the original file had been produced pursuant to the order of the Court. The consideration order of the representation does contain a bona fide typographical error and the same cannot be said to prejudicially affects the detenu. The order of detention dated September 5, 2023 cannot be said to be suffering from the vice of nonapplication of mind. Materials had been taken into consideration for passing the order of detention. Substantial materials such as statements recorded under Section 108 of the Customs Act, 1962, seizure of incriminating materials, recovery of gold, Indian and foreign currencies incriminating the detenu and making out a case for an order of detention passed under the COFEPOSA, exist which allows a plausible view of an order of detention to be passed under the provisions of the COFEPOSA - Materials which have been produced before us establish a live link between the detenu and the order of detention passed against him. As has been noted above, gold of foreign origin, Indian and foreign currencies, amongst others, have been seized on statements under Section 108 of the Customs Act, 1962 being recorded. Such statements have also incriminated the detenu. There is no merit in the present writ petition - Petition dismissed.

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• 2024 (9) TMI 257
  Suppression of material facts or not - it was alleged that petitioner had not realized the foreign exchange (sale/export proceeds) in respect of the goods exported based on which the drawback was sanctioned - HELD THAT:- It is averred in the petition that petitioner was shocked to know that the Order-in-Original has been passed by the Adjudicating Authority-Respondent no.4 against it in an ex-parte manner. Petitioner therefore, filed an appeal under Section 128A of the Act before respondent No. 3. The said appeal came to be dismissed vide order dated 24th December 2020. It is stated that the order came to be dismissed on the ground of limitation without appreciating the merit of the case. Against the said order, petitioner preferred a revision application before respondent No. 2 which also came to be dismissed by an order dated 18th September 2023. All these three orders are impugned in this petition. There is not even an attempt to explain the situation in this petition. There is no reference at all to this communication dated 19th November 2012 by petitioner or to the notice of personal hearing dated 19th October 2012. If petitioner had not addressed the said letter dated 19th November 2012, it is certain that would have been so stated in the petition. In the circumstances, we are satisfied that the attempt of petitioner is not only to hide truth from the Authorities but also to obtain orders from this Court by suppressing material facts. It is settled law that any party approaching this Court should come with clean hands and as noted here, petitioner s hands are absolutely muddied. The petition dismissed with cost in the sum of Rs. 5 lakhs that petitioner shall pay to Commissioner of Customs, Mumbai. If this amount is not paid within two weeks and compliance affidavit filed, respondents may recover this amount with @18% p.a. interest thereon from the date hereof together with the amount recoverable under the order-in-original passed on 3rd January 2013.

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• 2024 (9) TMI 256
  Conviction and imposition of sentencesoffence punishable under 420, 467, 468, 120B of the IPC and Section 5 (2) and 5 (1) (d) of the Prevention of Corruption Act, 1988 - Petitioner was working as Appraiser in the office of Collector of Customs - criminal conspiracy involving substitution of original writ petitions with fake ones for the purpose of cheating - obtaining gain for themselves or for any other person due to the criminal conspiracy and by dishonestly and fraudulently misappropriating or otherwise converting the amount which was entrusted to them as public servants and allowing Accused No. 5-Mr. K.P. Shah to obtain refund orders. HELD THAT:- On the basis of the evidence of PW 3 and PW 4, it is concluded by the learned trial Judge that the Petition was filed in the name of a ghost entity to claim the amount of refund and in the statement under Section 313 of Cr.P.C, Accused No. 4-Mr. K.P. Shah answered that he knew Mr. Pinakin Mody and the application for refund of Pinakin Mody was filed by him. He admitted that PW 4 given papers of M/s Jirat Chemicals for making application of refund and not for filing of the Writ Petition. It could be thus easily inferred that there was no Writ Petition filed by M/s Jirat Chemicals and its partners and Pinakin J. Shah was a fictitious entity, which was set up by Mr. K.P. Shah, in a unique way of claiming the refund in his name. From the evidence of Prakash Jaitpal (PW 15), once against the same modus operandi has featured before the learned Judge as Exh. H was also a fictitious document. As far as the present Appellant is concerned, by the Judgment dated 26/06/1997, he was found guilty of entering into criminal conspiracy with Accused No. 4-Mr. K.P. Shah of fraudulently and dishonestly claiming refund of countervailing /additional custom duty, by substituting original Writ Petition No. 304 of 1987 with fake and fictitious Writ Petition (Exh.49) and was sentenced to suffer R.I. for a term extending to seven years. In addition, he was held guilty under Section 5 (2) read with Section 5 (1) (d) of the Prevention of Corruption Act, 1947 and sentenced to suffer R.I. for a term extending three years. Both the sentences imposed upon the Appellant were directed to run concurrently. The Appellant, who was already on bail, was directed to be released on furnishing fresh bail bond in the sum of Rs. 1,00,000/- with one or more sureties. As far as the accused persons i.e. Accused Nos. 2, 3 and 5 are concerned, they were acquitted and the bail bonds issued by them was cancelled. As far as the accusations against the present Appellant is concerned, it stand on the same footing, as in the other three criminal cases and, the common witnesses were examined, including the key witness, Mr. Prakash Jaitpal (PW 15), who deposed in sync with his earlier evidence that he was working with Mr. K.P. Shah and he had seen Mr. K.P. Shah, meeting Accused No. 2 at Lalit Restaurant - The evidence surfaced on record in this case is on similar lines as in earlier two cases, on the basis of which the conviction of the Appellant is recorded under Section 120-B of IPC alongwith Mr. K.P. Shah. Since the prosecution has failed to prove the act of conspiracy or that the Appellant-Mr. Hirani has played any active role in substituting the Writ Petition and assisting Mr. K.P. Shah in getting the refund from the Customs Department, even in this case, the Appellant is entitled for an acquittal from the finding of conviction under Section 120-B of IPC and Section 5 (2) read with Section 5 (1) (d) of the Prevention of Corruption Act, 1947. By setting aside the conviction as well as the sentence imposed upon him, the appeal is allowed.

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• 2024 (9) TMI 255
  Valuation of imported goods - 1,2-Benzisothiazolin-3-ONE 85% (BIT PASTE 85%) China origin - rejection of the declared transaction cost and redetermination of assessable value under Section 17(5) of the Customs Act, 1962 - enhancement of the assessable value on the basis of contemporaneous import prices - HELD THAT:- The appellant have submitted corresponding bill of entries as well. The appellant has also submitted some literature from the internet indicating the explosion in Xiangshui Industrial Park in Yancheng, Jiangsu. From the chart it is seen that there was a brief period from August 2019 to April 2020 when the prices of the product sky rocketed however thereafter the prices cooled down. In this context, the explanation given by the appellant fits the data. The explanation given by the appellant is reasonable and therefore, the impugned order is set aside - Appeal allowed.

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• 2024 (9) TMI 254
  Old and used second hand goods or unused new goods - valuation of goods - rejection of transaction value - value determined by the adjudicating authority on the basis of the Chartered Engineer s report - confiscation - levy of penalties. Whether evidence available on record indicate that the goods imported by the appellant are old and used second hand goods as claimed by the department or unused new goods which looks old because of keeping them in stock for a longer period, as claimed by the appellant? - HELD THAT:- On perusal of the report issued by the Chartered Engineer, it is observed that the report is not in consonance with the physical availability of the goods in the consignment. In the examination report, the Chartered Engineer reported that, the date of manufacture is not available on the goods, ignoring the fact that the 19 LCD Panels of Lenovo Brands of 2876 pcs was manufactured on 01.08.2021, which was embossed on it. It is also observed that the Chartered Engineer s report is not conclusive as he suggested for further laboratory test to ascertain its functionality, residual life etc. Accordingly, the adjudicating authority could not have come to the conclusion that the impugned goods are old and used only on the basis of this Chartered Engineer s report, which is inconclusive on the nature of the imported goods in its findings. The evidence available on record does not indicate that the goods imported are old and used. On the contrary, the letter submitted by the appellant indicate that the supplier has categorically stated that the imported goods are new, supplied from the old stock. Unused goods supplied from old stock may look old and obsolete, but for the purpose of import policy, they cannot be called as second hand goods which require an authorization for importation. Accordingly, on the basis of evidences available on record and the decisions cited above, we hold that the goods imported by the appellant in this case cannot be considered as second hand goods which require authorization for import. Thus, there is no violation of EXIM policy warranting confiscation of the goods imported under the bills of entry - the order of confiscation and imposition of redemption fine for violation of foreign policy by the appellant set aside. Valuation of the goods - HELD THAT:- There is no evidence brought on record to establish that the transaction value between the parties was influenced by any other consideration. Value may be diminished on account of variety of reasons, such as wear and tear, non-use, obsolescence or the like. Depreciation on account of wear and tear is a well-known concept. So also depreciation on account of obsolescence. Hence as the goods are supplied out of stock lot, a slight variation in value as compared to the new item of similar goods is permissible. The adjudicating authority has not made any effort to find out the value of similar goods in the market. He has rejected the transaction value declared by the appellant only on the basis of the Chartered Engineer s report - the value determined by the adjudicating authority on the basis of the Chartered Engineer s report is arbitrary and not supported by any corroborative evidence - the value redetermined by the adjudicating authority is rejected. The differential customs duty confirmed in the impugned order on account of re-determination of the assessable value set aside. Since, the duty re-determined is set aside the question of demanding interest does not arise. Imposition of penalty - HELD THAT:- The penalty has been imposed on the appellant on account of redetermination of value and on the basis of allegation of mis-declaration. In the instant case, the goods from old stock has been sent on account of the mistake of the overseas supplier, which is beyond the control of the appellant. Since, the allegation of mis-declaration and under valuation is not sustained, the goods are not liable for confiscation. The question of imposition of Penalties u/s 112(a), 112(b) 114AA of Customs Act 62 does not arise - Regarding imposition of penalty under Section 114AA, it is observed that no evidence has been brought on record that the appellant used any false and incorrect materials or made any declaration, statement or document which is false or incorrect, in transaction of his business. Hence, imposing of penalty on the importer under section 114AA does not arise in this case. The impugned order is set aside - appeal allowed.

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• 2024 (9) TMI 253
  Classification of imported goos - Complete EPS ECU - Sub-assembly i.e. complete EPS ECU without cover - Parts of EPS ECU i.e. cover, housing frame assembly, heat sink, housing assembly, spacer, circuit assembly - to be classified under CTH 8708 or not. Classification of EPS-ECU and its sub-assembly - HELD THAT:- It is found from the details of the EPS-ECU provided by the learned counsel, that it acts as the brain and receives inputs from the speed sensor and torque sensor dynamically and processes this information to determine how much assistance should be provided to the driver in steering in a particular situation. Thereafter, based on this information it regulates the amount of voltage provided to the motor from the battery. The motor and battery are not part of the EPS-ECU. EPS-ECU is connected to the motor on one hand and the battery on the other. EPS-ECU regulates the amount of assistance provided to the driver in steering. This regulation is based on two other phenomena-speed and torque. In other words, two non-electrical quantities viz. speed and torque are measured by sensors which provide information to the EPS-ECU and based on this it regulates another quantity viz., amount of assistance provided in steering. EPS-ECU is in essence not a regulator of electrical quantity but is a regulator of the assistance provided to the driver in steering. EPS-ECU is not an instrument or an apparatus but is a part of the power steering system. Merely because it is in the form of a PCB and other electronic components does not change it from a part of an automobile into an instrument or an apparatus. It is, in essence, a microprocessor with certain other parts which receives information from the speed and torque sensors and processes it and issues instructions to regulate the assistance provided by the power steering to the driver. Therefore, EPS-ECU does not merit classification under CTI 9032 90 00. EPS-ECU is not designed for electricity distribution or electric control. It is a part of an automobile specifically a part of the power steering system to decide how much assistance should be provided to the driver in steering. The mere fact that it makes this determination and intervenes between the 12-volt car battery and a small motor does not, does not make, EPS-ECU into an electrical board, panel, etc. Thus, EPS-ECU does not merit classification under CTI 8537 10 00. EPS-ECU and its sub-assembly deserve to be classified and were correctly classified under CTI 8708 94 00. The impugned order insofar as this classification is concerned needs to be upheld. Classification of parts of EPS-ECU - HELD THAT:- EPS-ECU do not merit classification under CTI 8543 70 99, its parts, consequently, do not fall under CTI 8543 90 00. The impugned order deserves to be upheld - Appeal dismissed.

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• Corporate Laws

• 2024 (9) TMI 252
  Grant of extension of three months to hold 40th Annual General Meeting for the financial year ending 31.03.2024 - no special reasons were provided by respondent No. 1 for allowing a three-month extension to the respondent No. 2 - HELD THAT:- The impugned order dated 22.08.2024 does not spell out special reasons and appears not to have been issued in accordance with the mandate of Section 96 of the Act. However, there is more to the content of the impugned order than initially apparent. The reasons for seeking an extension are outlined in the request letter dated 21.08.2024 submitted by respondent No. 2. There is merit in the submissions made by the learned counsel for respondent No. 1 that the sufficiency or insufficiency of the reasons for an extension cannot be assessed by respondent No. 1. Such orders are routine unless and until tangible evidence is presented showing that the extension was sought for ulterior motives or to the detriment of stakeholders. The petitioners have not demonstrated any exception grounds, either publicly or otherwise, that could have warranted the rejection of the extension. Evidently, the issues highlighted by the learned counsel for the petitioners regarding the management of respondent No. 2 s affairs are not recent developments, but obviously have a history. Therefore, the petitioners could have sought remedies under Section 241 of the Act by approaching the Tribunal for mismanagement or oppression by directors or shareholders, or for removal of any director or person in charge of regulating the company s affairs. This course of action would have been available in cases of mismanagement or oppression. It cannot be that the petitioners are suddenly caught unaware by the extension of time granted by respondent No. 1 to hold the AGM. The Act does not mandate that shareholders be heard before respondent No. 1 considers and decides on an application for an extension. Petition dismissed.

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• 2024 (9) TMI 251
  Restoration of the Company s name i.e. M/s. Era Financial Services (India) Limited in the Register of Companies maintained by Registrar of Companies, Uttar Pradesh - Section 252(1) of the Companies Act, 2013 - HELD THAT:- An appeal u/s 252(1) can be filed by any aggrieved person in case the company is dissolved by the ROC u/s 248 by initiating proceedings as provided u/s 248(1) but when a company gets its name struck off from the Register of Companies, certain aggrieved persons can only file application u/s 252(3). The provision for a company getting its name struck off is provided u/s 248(2). Therefore, filing of appeal by any aggrieved person against the action of the ROC dissolving the company u/s 248 is provided u/s 252(1) for which limitation period is 3 years. However, filing of application u/s 252(3) is provided only by certain persons on getting aggrieved against the company having its name struck off, which may happen when a company gets its name struck off as per the provisions of section 248(2) for which longer period of limitation of 20 years are provided. Thus, when a Company is struck off by the ROC as per the provision of section 248(1) on violation of certain provisions of the Companies Act, provision for revival of the company is provided u/s 252(1) and when a Company is struck off u/s 248(2) on its application to ROC having discharged its liabilities and passing of special resolution by the shareholders, provision for revival of the company is provided u/s 252(3). In the present case under appeal also, STK-1 dated 18.07.2022 was issued by the ROC after finding that the subscription which the company had undertaken to pay at the time of incorporation of the Company and a declaration to this effect, has not been filed within 180 days of its incorporation under sub-section (1) of section 10A, which is in violation of section 248(1)(d). Therefore, the ROC after giving notice u/s 248(5) vide STK-5 dated 30.08.2022, struck off the Company from the Register of the Companied by issuing notification in STK-7 dated 18.10.2022, from the date of publication of this notification in the Gazette of India and the said company was dissolved as mentioned at serial no 1750 of the list attached with STK-7 dated 18.10.2022. The instant appeal allowed to the extent of directing the ROC, Uttar Pradesh, Kanpur to restore the name of the appellant Company on the Register of Companies in the same position as nearly as may be as if the name of the company had not been struck off from the Registrar Of Companies, changing the status of the appellant Company from struck off to active and take such further action against the Appellant Company with respect to late payment of subscription as provided under section 10A of the Companies act, 2013 and any other violations of statutory provisions if any detected after revival of the company. Appeal disposed off.

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• Securities / SEBI

• 2024 (9) TMI 250
  Siphon off funds from the Reliance - public listed company by structuring them as loans to credit unworthy conduit borrowers - disproportionate lending - Moving of funds from the public listed company to non-descript and financially weak privately held companies connected with the Reliance ADA group - HELD THAT:- Credit defaults in financing business are not by themselves unusual or suggestive of fraudulent activity. Inter-corporate loans or related party transactions (subject to disclosures and compliance with law) are also not per se illegal or suspicious. However, the facts and circumstances of this case clearly indicate that the defaults are the culmination of an elaborate and coordinated design to move funds from the public listed company to non-descript and financially weak privately held companies connected with the Reliance ADA group. Adequate disclosures around this were not made to the Public shareholders of RHFL, evidenced by the absence of any material disclosures mandated by securities law. SEBI s investigation was not the only one to arrive at this conclusion. Separately the reports of PWC (RHFLs statutory auditor) and that of Grant Thornton (forensic auditor appointed by lead bank of consortium of creditors of RHFL Bank of Baroda) have also arrived at similar conclusions. Significantly, NFRA s order dated April 26, 2024 has also arrived at similar conclusions. The facts of this case is particularly disturbing since it reveals complete breakdown of governance in a large listed company apparently orchestrated by and/ or at the behest of the promoter aided by the indulgent KMPs of the company. The Company which was subject to the regulatory framework laid down by NHB and subsequently RBI (as an HFC) as well as by SEBI (as a listed company) did not seem to care about the need to maintain high standards of governance. This is also a peculiar case where the company s management has brazenly defied the diktat of its own Board that had raised concerns about GPCL lending and asked the company management to ensure compliance with the law. By preponderance of probability, the mastermind behind the fraudulent scheme is the Chairman of ADAG Anil Ambani (Noticee No.2). It is also apparent that Noticees 3 to 5, KMPs of the company, played an active role in perpetrating the fraudulent scheme. While Noticee No. 2 was not a director in RHFL, he has used his position as Chairperson of the ADA group and his significant indirect shareholding in the holding company of RHFL to orchestrate the fraud thereby not just adversely affecting RHFL s stakeholders but also the confidence in the integrity of governance structures in regulated financial sector entities. As a director and a KMP of both the listed company as well as its holding company, Noticee 3 Amit Bapna - has clearly fallen well short of the standards of governance that was expected from him. The watchman appointed by the Board to arrest the continuing decline in the financial stability of the public listed company, turned out to be part of the group that executed the fraudulent scheme. Similarly, Noticee no. 4 in capacity of CEO of RHFL was the central point of communication between the Board of Directors, all the personnel involved in Corporate Operations of the Company, and with all the senior management personnel like CRO, Operational Heads, Company Secretary etc. who were reporting to Noticee no. 4. This Order has elaborated on his direct involvement in the fraud by approving the loans to ineligible customers, defying the decision of RHFL s board, and his wanton non-compliance with the legal mandate to make true and fair disclosures. The Company continued to disburse large quantum of GPC loans despite Noticee Nos. 3- 5 being directly aware of the Board s directions not to do so. Both Noticee Nos. 4 and 5 had also signed off on CEO/ CFO certifications actively hiding the true state of affairs in RHFL. Noticee Nos. 6-28 have played the role of being either recipients of illegally obtained loans or conduits to enable illegal diversion of monies from RHFL. Subsequently, most of the GPCL borrowers accounts turned NPAs and as a consequence of the same, RHFL defaulted in its payment obligations towards its lenders which has culminated in its Resolution under RBI Framework. As a result, the company s public shareholders have been left high and dry. As a point of reference, as of March 2018, the RHFL scrip price had closed at around INR 59.60. By March 2020, as a result of this egregious scheme to hollow out the company by siphoning out significant funds, and as clarity emerged about the extent of the fraud involved, the share price had collapsed to INR 0.75. Even as on date, there are more than 9 lakh shareholders that are invested in RHFL. The findings made in the foregoing paragraphs of this Order have established the existence of a fraudulent scheme, orchestrated by Noticee No. 2 and administered by the KMPs of RHFL, to siphon off funds from the public listed company (RHFL) by structuring them as loans to credit unworthy conduit borrowers, and in turn, to onward borrowers, all of whom have been found to be promoter linked entities i.e. entities associated/ linked with Noticee 2 (Anil Ambani). The relationship of onward borrowers with Noticee No. 2 is described in Table - 28 of this Order. It is well established through various decisions of the Hon ble Supreme Court, Hon ble High Courts and Hon ble SAT that the scope of the power under Section 11B of the SEBI Act is wide, under which directions can be passed to order refunds/ bring back monies/ disgorge illegal gains made by any person in violation of securities law. Investigation in the matter has concluded that the Noticees were involved in perpetrating a fraudulent scheme by disbursing GPC loans resulting in erosion of the company s finances due to such loans ventually being declared NPA. Though the Interim Order cum SCN explicitly alleges that promoter/ promoter linked entities were beneficiaries of the funds diverted from RHFL, the gains they made haven t been quantified and persons haven t been directed to show cause why a specific gain should not be refunded or disgorged. I note that Investigation Report and Interim Order contain repeated references to promoter-linked entities being the beneficiaries of the funds diverted from RHFL. Also, the Investigation Report and Interim Order contain repeated references to GPC loans given by RHFL being rendered NPA. From the aforesaid two sets of references, it may be inferred that NPAs of RHFL were equated with the benefits made by promoter linked entities for the purposes of Show Cause Notice issued to the Noticees. There is a need to quantify such receipts/ gains and ascertain the real beneficiaries behind the web of companies as illustrated in images at Annexure B1-B3 and discussed in paragraph 54.5 above. Therefore, in compliance with principles of natural justice, I find that illegal gains, if any, must be quantified. Noticees who have made the said gain must be identified, and an opportunity should be granted to Noticees to rebut the findings of SEBI on the illegal gains/ benefits made by them, before any direction is passed with respect to such gains. In view of the above and absence of any findings made in the Interim Order cum SCN regarding illegal gains made by Noticee Nos. 3-5, it is not a fit case for issuance of directions for recovery of remuneration against these Noticees. However, the Noticees conduct warrants remedial and punitive directions with respect to their association with the securities market, intermediaries and listed companies considering the serious damages that they have done to the integrity of the securities market. Considering the egregious nature of the fraud perpetrated in this case, I am of the view that the maximum possible penalty must be imposed on all Noticees except against Noticee Nos. 1 and 5 for the reasons cited in paragraphs 67 and 68 respectively. Directions: (i) Noticee No. 1 is restrained from accessing the securities market and prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of 6 months, from the date of coming into force of this order. (ii) Noticee Nos. 2 25 and 27 are restrained from accessing the securities market and prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, for a period of 5 years, from the date of coming into force of this order. (iii) Noticee No. 2 is restrained from being associated with the securities market including as a director or Key Managerial Personnel in any listed company, holding/ associate company of any listed company, or in any intermediary registered with SEBI, for a period of 5 years, from the date of coming into force of this direction. (iv) Noticee Nos. 3 - 5 are restrained from being associated with the securities market including as a director or Key Managerial Personnel in any listed company, or any intermediary registered with SEBI, for a period of 5 years, from the date of coming into force of this direction. (v) The present proceedings initiated against Noticee No. 26 (Reliance Broadcast Network Limited) and Noticee No. 28 (Reliance Capital Limited) shall be decided by separate orders for the reasons mentioned at paragraphs 50.2 and 50.3 above.

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• Insolvency & Bankruptcy

• 2024 (9) TMI 249
  Entitlement to allotted units - claims filed before approval of the plan by the Adjudicating Authority - HELD THAT:- The claims which were filed after the cut-off date (which includes the claims filed by the Appellants) were kept alive for period of six months even after approval of the plan by the Adjudicating Authority and they were to be dealt with by SRA. Admittedly, after the approval of the plan, SRA called for the claims from the Applicants who have again submitted their claims which according to the Appellant has not been verified. From the order of the Adjudicating Authority, it is clear that the claims were filed by the Appellants after the cut-off date. There are no doubt that SRA has to take care of the claims as per Clause 18.4 (v) of the Resolution Plan and whatever amount is entitled to the Appellant to be paid as per Clause 18.4(v) shall be considered and paid by the SRA because the Resolution Plan binds all concerned including the SRA, Appellants and all stakeholders. There are no error in the order of the Adjudicating Authority rejecting the application - the Adjudicating Authority itself has observed that the claims have to be dealt with in accordance with Clause 18.4 (v) of the Resolution Plan - appeal disposed off.

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• 2024 (9) TMI 248
  Seeking direction for release of payment of an amount sanctioned as Industrial Promotion Subsidy claim for the mega project of the Corporate Debtor - HELD THAT:- The CIRP against the Corporate Debtor commenced on 12.08.2022 and the letter dated 28.02.2022 which was relied in paragraph 5.2 was written by the erstwhile management. After the CIRP having commenced, all amount which is payable to the Corporate Debtor has to be given in the kitty of the Corporate Debtor and disbursement of the amount has to take place as per the Resolution Plan which has been approved by the CoC as submitted by the Counsel for the Appellant. The Appeal allowed in part and direction contained in paragraph 5.3 to the Principal Secretary, Directorate of Industries, Government of Maharashtra, to pay the amount of investment subsidy within 30 days in accordance with the disbursal advice to the Government Authorities as mentioned in paragraph 5.2 is set aside. Let the amount which has not yet been paid to the Corporate Debtor be paid to the Corporate Debtor within time as allowed by the Adjudicating Authority.

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• PMLA

• 2024 (9) TMI 247
  Money laundering - procceds of crime - First bail application filed under section 438 of Cr.P.C - rejection of Remdesivir Injections at a higher price - offence under section 420, 488, 304, 308, 467, 468, 471, of IPC and 3/7 of Essential Commodities Act and section 3 of Epidemic Diseases Act - It was held by High Court that Considering the money trail produced by the prosecution, which clearly proves involvement of the applicant in the present case, in which proceeds of crime is Rs.2,89,00,000/-, this court is of the view that in view of the rigor of section 45 of the Act, 2002, the applicant is not entitled for anticipatory bail . HELD THAT:- The case is covered by the decision of this Court in the case of TARSEM LAL VERSUS DIRECTORATE OF ENFORCEMENT JALANDHAR ZONAL OFFICE [ 2024 (5) TMI 837 - SUPREME COURT] where it was held that after cognizance of the complaint under 44(1)(b) of the PMLA is taken by the Court, the ED and other authorities named in Section 19 are powerless to arrest an accused named in the complaint. Hence, in such a case, an apprehension that the ED will arrest such an accused by exercising powers under Section 19 can never exist. Hence, the interim order dated 13th May, 2024 is made absolute on the said terms and conditions.

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• 2024 (9) TMI 246
  Dismissal of petition under Section 227 of Criminal Procedure Code for discharge - allegations in the complaint under PMLA constitute the offence of money laundering as defined under Section 3 of PMLA or not - prosecution of share holders of the company in the absence of any specific evidence to hold their involvement in the commission of crime - HELD THAT:- Carving out a line between the material evidences available in the complaint and the grounds taken by the accused persons, seeking discharge, are to be considered with reference to the objectives of the PMLA. The scope of Section 3 of PMLA cannot be narrowed down so as to grant exoneration from the proceedings merely on the ground that a person is not directly connected with the affairs of a company. Section 3 of PMLA unambiguously stipulates that whosoever indirectly attempts to indulge or knowingly assist or knowingly is a party, are also guilty of offence of money laundering. Mere concealment or possession or use, would be sufficient to prosecute a person under Section 3 of PMLA. The connecting material evidences would be sufficient for the purpose of allowing the trial to go on. It is not necessary that there must be a direct link between the accused and the offence of money laundering. Indirect involvement and the connecting link, if established, would be sufficient for the purpose of prosecuting the person and therefore, discharge under Section 227 of Criminal Procedure Code in respect of PMLA cases cannot be granted akin to that of the criminal cases registered under the general penal laws. Whether any material evidences are available in the complaint against the petitioner for considering the present Revision Case? - HELD THAT:- In the context of material evidences available in the complaint, the Trial Court in Paragraph No.10 has observed that whether the consent of the petitioner/A-16 as a major shareholder was obtained by the Board of Directors in any special resolution passed by SIHL to borrow money from the IDBI Bank or to offer collateral security for the loan as required under Section 180(1)(c) and 180(2) of Companies Act, 2013, are to be proved in the trial. Section 70 of PMLA cannot be read in isolation in view of the spirit of Section 3 of PMLA. Section 3 of PMLA, if to be implemented effectively, then Section 70 of PMLA, as enumerated under the Act, is to be scrupulously followed. Therefore, a general principle that shareholder is not liable for prosecution under general penal law cannot have any implication with reference to a shareholder against whom a prosecution is launched under PMLA. In the present case, the petitioner admittedly was holding 86% shares of the company. Her then husband is also an accused. Therefore, it is for the affected persons to prove that the money laundering has been made without the knowledge of such person seeking exoneration and not merely on the ground that such person is a shareholder of the company. Whether the person is a Director, Shareholder or holding an Executive post in a company, but if the material evidences are available to implicate any person who is connected with the company, then it constitutes an offence under Section 3 of PMLA and under proviso clause to Section 70 of PMLA and it is for such person to establish that he/she had no knowledge about such money laundering during the course of trial. In view of the fact that the complaint contains material evidences for prosecution, the petitioner has to prove her innocence by undergoing the trial - conclusion reached is that the case on hand is not fit to grant discharge from proceedings under PMLA. There are no infirmity in respect of the findings made in the order impugned - the Criminal Revision Case stands dismissed.

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• Service Tax

• 2024 (9) TMI 245
  Dismissal of appeal on the ground of monetary limit - Issues involved: Classification of services - Site formation and Clearance, Excavation and Earthmoving and Demolition Service or Mining service - service of removal of overburden in relation to mining of lignite - HELD THAT:- In view of the latest Circular dated 06.08.2024, issued by the Central Board of Direct Taxes, in exercise of its power under Section 35R of the Central Excise Act, 1944, whereby the monetary limit of Rs.5 crore has been fixed for not filing the appeal in the Supreme Court, it is not inclined to entertain these appeals, which are, accordingly, dismissed in terms of the above-cited Circular. The pending interlocutory applications also stand disposed of.

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• 2024 (9) TMI 244
  Recovery of arrears of tax, interest and penalty - specific case of the petitioner is that the petitioner opted to settle the dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, and filed proper declaration in Form No.SVLDRS-1 as early as 31.12.2019 - HELD THAT:- The attempt of the parliament to recover the arrears of tax under the aforesaid Scheme in Finance Act No.2/2019 vide Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 was partly frustrated and derailed due to outbreak of Covid-19 pandemic. Pursuant to which, lockdown was imposed with effect from 15.03.2020 which continued up to 28.02.2022. The Hon ble Supreme Court has passed several orders whereby, limitations were extended wherever deadlines had expired. In fact, the Central Government had also issued ordinance called the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Ordinance, 2020 which was later replaced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and the limitation for passing the order would have stood extended from time to time that is up to September 2022 - In the case on hand, the Show Cause Notice was issued on 02.12.2020 when the Country was still under intermittent lockdown. The demand was confirmed vide impugned Order-in-Original No.18/2021-ST Adj (DC) dated 22.06.2021 passed by the second respondent when also the Country was still under intermittent lockdown. This writ petition is allowed by quashing the impugned order subject to the condition that the petitioner deposits a sum of Rs. 38,57,329/- to the credit of the Central Government, within a period of thirty days from the date of receipt of a copy of this order together with interest at 15% from 01.07.2020 till such date. Subject to the petitioner complying with the other requirements, the impugned order shall stands quashed. Petition allowed.

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• 2024 (9) TMI 243
  Invocation of the extended period of limitation - classification of services - health care services or Business Auxiliary Service - service charges taken by the appellant from the medical shop - HELD THAT:- In the case of M/S SIR GANGA RAM HOSPITAL VERSUS COMMISSIONER OF SERVICE TAX, NEW DELHI [ 2020 (11) TMI 536 - CESTAT NEW DELHI] , the Revenue had alleged that the collection charges/facilitation fee retained by the hospital are liable to service tax under the category of business support services . The claim of the Revenue was that the hospital had provided infrastructural services to various doctors and the amount retained by the hospital out of the total charges collected from the patients should be considered as an amount for providing infrastructure like rooms and certain other secretarial facilities to the doctors to attend to their work in the appellant s hospitals was rejected by the Tribunal observing that the appellant s hospitals are engaged in providing health care services, which can be done by appointing the required professionals directly as employees and same also can be done by having contractual arrangements. There are no necessity to decide the issue of invocation of extended period of limitation or imposition of interest and penalty on the appellant - the demand proceedings against the Appellant hospital are hereby dropped - appeal allowed.

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• 2024 (9) TMI 242
  Liability of service tax - reverse charge mechanism - IT Service received from Microsoft for which payments were made by appellant to Microsoft - demand has been raised against the appellant alleging that Microsoft has sold the software to the appellant - Whether Microsoft has provided any IT Services to the appellant by which the appellant is liable to pay service tax under reverse charge mechanism? - HELD THAT:- There are no document which shows that Microsoft has sold the software to the appellant. As per the Microsoft Channel Agreement entered by Microsoft and appellant, the appellant is authorised as a Large Account Reseller. The Department has been carried away by the word Reseller to reach the conclusion that the software has been sold by Microsoft to the appellant who is reselling the software to its end customers. The Agreement does not show that the Microsoft has transferred the title and ownership or right to use of software to the appellant. It is pertinent to note that the demand raised is on reverse charge basis construing the appellant to be a deemed service provider. There is nothing to show that the appellant has downloaded the software. Even by the case of the Department as discussed by the Adjudicating Authority in para 14, after a customer places purchase order for software, the same is provided by Microsoft to the end customer. The appellant facilitates procurement of order, issuance of invoice and collection of payments. They also deliver the PIN given by Microsoft to the customer after payment formalities - no consideration is paid by the appellant as value of the software to Microsoft in the form consideration for sale or right to use. Again, the invoices issued by Microsoft mentions the name of the customer and not appellant. This itself is clear indication that Microsoft is not selling or transferring right to use the software to Wipro but, selling it directly to customer and the appellant only facilitates the placing of order, supply of software and collection of payment. Reliance placed upon the document furnished by the appellant before the Customs Authorities - This document is for compliance of FEMA Regulations in regard to foreign currency remittances. The document is reproduced here. Merely because, it is stated in the document that the right to use IT Services is transferred, it cannot be said that such right has been transferred to the appellant. Unless the document entered between Microsoft and appellant shows that software is sold or the right to use is transferred to the appellant, the allegation of the Department is not tenable. However, it is found that all these require thorough scrutiny. The Adjudicating Authority has not taken into consideration the pleas put forward by appellant. Instead has relied on the software Microsoft Volume Licensing Reference guide. It is stated that the software license provides the right to run a Microsoft software product. It requires to be examined whether these licenses issued by Microsoft are used by appellant. These issues are adjustment of service tax, credit availed, etc. On the basis of our finding in the first issue, the other issues have to be verified and reconsidered by the Adjudicating Authority. The Adjudicating Authority is directed to reconsider all issues afresh. The matter is remanded to the Adjudicating Authority for denovo consideration - appeal allowed by way of remand.

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• 2024 (9) TMI 241
  Recovery of service tax with interest and penalty - denial of CENVAT Credit - demand raised on the basis of 26AS record - appellant has not submitted any documents - HELD THAT:- During the impugned period, divergent opinion was being taken by the Tribunal and the Courts; no positive act of commission/ omission on the part of the appellants is evidenced to allege suppression of fact, mis-declaration with intent to evade payment of duty so as to invoke extended period. Therefore, the Revenue has not made out even a weak case for invocation of extended period. The Show Cause Notice issued invoking extended period is not maintainable and therefore, the impugned order passed in pursuant of the same requires to be set aside. It is further found that certain portion of the demand is beyond the extended period also. Appeal allowed.

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• 2024 (9) TMI 240
  Requirement to pay an amount equal to 6% of the value of the exempted products - appellant opted to reverse the proportionate credit in respect of the trading activity - separate books of accounts as prescribed under Rule 6(2) of the CCR, 2004 for CENVAT Credit maintained or not - HELD THAT:- Rule 6(3A) provides for intimating the Department by issuing a letter as to the exercise of option of reversal of proportionate Credit. In the decision relied by the Ld. Consultant for the Appellant, it has been held that the said requirement is only procedural in nature and the substantive benefit cannot be denied on such grounds. Further, in this case, the Appellant has intimated the jurisdictional Range Officer, explaining that they were availing only the proportionate Credit on the value of taxable services, which is also reflected in their Balance Sheet as well as their ST3 Returns. The Department ought to have taken note of the fact that the Appellant has exercised the option. The Department cannot force the assessee to pay 5% or 6% of the value of exempted services when the assessee has exercised the option of reversing the proportionate Credit. The demand raised cannot sustain and requires to be set aside - appeal allowed.

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• 2024 (9) TMI 239
  Scope of SCN - activity of provision of telecommunication services by the appellants, during the disputed period, involved receipt of any consideration; or was any service provided without any consideration/ free of charge - activities undertaken by the appellants for provision of telecommunication service - exempted service , in terms of Explanation 3 to Rule 6(1) of the CCR, when read with the definition of service under Section 65B(44) of the Act of 1994 or otherwise - telecommunication service provided by the appellants through M/s RRL, as Master Distributor - services are not provided to the subscribers and only provided to such distributor - Explanation 3 to Rule 6(1) of the CCR - ignoring the provisions of the Point of Taxation Rules, 2011 while determining the issue whether services had been provided without consideration - extended period of limitation invoked u/s 73 of the Act of 1994 read with Rule 14 of the CCR - interest and penalty. HELD THAT:- In the present case, the facts are not in dispute that the appellants have appointed M/s. RRL, as the Master distributor, who in turn, manages the entire supply chain of distribution of services, provided by the appellants. Telecommunication service can only be provided by Unified License holder(s), who have been issued with the license by the Department of Telecommunication (DoT), Government of India, under the Indian Telegraph Act, 1885. The persons/agencies (more particularly, M/s RRL) involved in the supply chain, were only for the purpose of facilitating ultimate usage of such service by the consumers, with whom the appellants have the contractual agreement. Thus, mere involvement of the agencies in the supply chain cannot change the nature of telecommunication service, which are being provided by the appellants to their subscribers and for that purpose, were also duly recognised by the Regulatory Authorities. The contract (CAF) has to be examined for determining the point of time, when the service is deemed to be provided. On going through the CAF and taken note of the clauses therein to the effect that the subscribers have agreed to pay all charges raised on account of services provided and that they have also agreed to the variation in the tariff charges. Insofar as the subscribers who are within the specified threshold of 100 SMS and 4 GB data are concerned, the point of taxation is the point of time when such subscribers become contractually obliged to pay for the services. It is relevant to note qua the subscribers whom the point of taxation did not arise till 31.03.2017, the same arose under the new tariff plans as applicable from 01.04.2017, which mandated every subscriber to pay for a minimum recharge amount. An element of consideration was always present in the provision of telecommunication service, as a continuous supply of service, during the disputed period. Therefore, the observations of the learned adjudicating authority that the telecommunication service provided by the appellants free of charge/without consideration to the subscribers, during the period 05.09.2016 to 31.03.2017, falls under the category of exempted service , is not proper and justified. Even if a view is taken that an activity without consideration is an exempt service by virtue of Explanation 3, such a view will not help the case of Revenue in any manner inasmuch as, the value of such an exempted service would have to be necessarily nil , in view of Explanation 4. The said Explanation 4 stipulates that the value of the exempt service shall be the invoice/agreement/contract value, which undisputedly as per the Revenue s own say is NIL , in the facts of the present case. Whether, the learned Commissioner was justified in disallowing the entire amount of CENVAT credit availed on input, input services and capital goods, by applying the provisions of Rule 6(3)(i) of the CCR? - HELD THAT:- Though the learned Commissioner does not dispute that disallowance under Rule 6 of the CCR cannot cover capital goods, he has held that the appellants had incorrectly considered certain inputs as capital goods. According to the learned Commissioner, the capital goods whose value were below Rs.10,000/- per piece were required to be treated as inputs and not as capital goods. Instead of quantifying the quantum of such instances, the learned Commissioner has treated all CENVAT credits taken on capital goods, as pertaining to inputs. It is found that such an approach is perverse, in absence of any specific provisions contained in the statute to such extent. According to the appellants, the quantum of CENVAT credit on the capital goods, whose value was less than Rs.10,000/- per piece, was Rs.6,90,70,509/-. The quantification of demand of the disallowance amount under Rule 6(3)(b) of the CCR is therefore, inflated to the extent of Rs.4724,77,29,885/- and accordingly, the impugned order, to the extent it has denied the CENVAT credit on the entire capital goods is without any legal basis. Time Limitation - HELD THAT:- The entire dispute had arisen from verification of the details submitted by the appellants and it is an issue of interpretation by the departmental authorities that such services provided during the disputed period has to be considered as an exempted service , in terms of Explanation 3 appended to Rule 6(1) of the CCR - The department, in the present case, had not relied upon any evidence, other than those furnished by the appellants under the cover of the periodic returns and that submitted during the course of investigation proceedings. Thus, it cannot be said that there is element of suppression of fact, mis-statement etc., which justify invocation of the extended period of limitation. It has also been contended by the learned ASG that the appellants have requested TRAI not to share information, we find that this submission besides being irrelevant is incorrect, as it is TRAI, which has under cover of its letter 19.08.2021, while being requested to furnish copy of Accounting Separation Report (ASR) filed with them informed the department that the covering letter under cover of which the same was filed by the appellants had a request to the authority to maintain confidentiality. This cannot be a basis to contend that TRAI did not share information at the behest of the appellants - the ruse of the so-called information not having been furnished at the behest of the appellants is not a submission available to the Revenue. Therefore, there is no legal basis for invoking the extended period of limitation provided in the proviso to Section 73(1) of the Act of 1994, for confirmation of the adjudged demands on the appellants. Interest and penalty - HELD THAT:- Since the service tax demand is not sustainable in view of the discussions made in the foregoing paragraphs, the demand for interest and penalty are also not sustainable. Even otherwise, there was no justification of ordering for recovery of interest on the amount determined as payable under Rule 6(3)(b) of the CCR, since the appellant had CENVAT credit balances far exceeding amounts determined as payable. There are no substance in the impugned order dated 10.12.2022, insofar as it has confirmed the adjudged demands on the appellants. Therefore, the impugned order is set aside - appeal allowed.

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• Central Excise

• 2024 (9) TMI 238
  CENVAT Credit - brand promotion services - invoices addressed to head office/corp. office - inputs contained in semi-finished goods - inputs contained in final product lying in stock - returned goods - Interest and penalty under Rule 14 and Rule 15 of the CCR respectively. Where there is a difference of opinion between the Appellant-Assessee and the adjudicating authority, is with regard to consumption of inputs involving CENVAT credit amount of Rs.6,25,651/-? - HELD THAT:- The allegation of the Department in the report and in the impugned order is merely on the basis of an apprehension or a suspicion that the Assessee could not have consumed so much inputs in a single day. This allegation has been made without any corroborative evidence on the part of the department. It is a settled law that suspicion however strong, cannot take the place of evidence - the Department has not submitted any evidence to the contrary. Accordingly, there is no substance in the allegation of the Department that all those inputs are consumed in a single day. This is evident from the stock register maintained in RG-23A Part-I which forms part of RUD-3 to the Show Cause Notice dated 27.02.2014. Accordingly, we hold that the CENVAT Credit of Rs.6,25,651/-availed by the Appellant-Assessee cannot be denied on this ground. Thus, we set aside the demand confirmed in the impugned order on this count. Difference of opinion in the report dated 06.08.2024 is with respect to returned goods involving CENVAT Credit of Rs.5,14,168/- - HELD THAT:- The Appellant-Assessee entered such returned goods in their finished goods stock records. However, for the purpose of control, they have also recorded the factum of receipt back of cleared goods in a separate register. Merely relying on such recording of these goods in separate register, the Department assumed that the inventory of these products was separately maintained without physically verifying the same or even checking the accounting of finished goods stock. A bare look at the goods return register would have revealed that these goods were received back during the period November 2011 to June 2012. There would be no rationale to keep these goods in stock separately up to 28.02.2013. Thus, the demand of reversal of CENVAT credit of Rs.5,14,168/-is not warranted - the demand confirmed in the impugned order on this count. CENVAT Credit on brand promotion services - HELD THAT:- CENVAT credit of Rs. 89,61,000/- on brand promotion services provided by 2 IPL franchises was availed by the Appellant-Assessee on 25.02.2013, i.e., before 01.03.2013, when the final product manufactured by the Appellant-Assessee was dutiable - Rule 6 of the CCR cannot be invoked in this case to deny CENVAT Credit on input service which was rightly taken when the final product was chargeable to duty. It is to be noted that Rule 6 is applicable only in cases where the assessee is manufacturing both dutiable as well as exempted products. It is not applicable where the input/ input service is used in the manufacture of final product, which is exempted subsequently. Rule 11(3) which was inserted on 01.03.2007 under the CENVAT Credit Rules, mandated the manufacturer to pay an amount equivalent to the CENVAT credit taken in respect of inputs received for use in the manufacture of the final product, which is lying in stock or contained in the final products, if the final products become exempted subsequently. We observe that Rule 11(3) is only restricted to inputs and there is no provision which requires paying of an amount in respect of input services - CENVAT credit availed on input services before the final product became exempt cannot be denied to the Appellant. Regarding the appeal filed by the Revenue against allowing CENVAT credit to the tune of Rs.26,70,004/-, it is observed that there is no dispute regarding receipt and utilization of the inputs or input services by the Appellant-Assessee in the factory. The objections raised by the Department in the Notice are procedural in nature. It is the settled position of law that substantive benefit of CENVAT Credit cannot be denied for mere procedural lapse of mentioning incorrect/not proper address in the invoice issued by the service provider - as per proviso to Rule 9(2) of the CCR, address of service recipient is not a mandatory requirement; hence CENVAT credit cannot be denied on this ground - the ld. adjudicating authority has rightly allowed the credit of Rs.26,70.004/- For the same reason, the confirmation of demand of Rs.14,962/- in the impugned order is not sustainable. Hence, the Revenue s appeal on this issue is dismissed. Time Limitation - HELD THAT:- The fact of availment of CENVAT credit was duly reflected in the periodical returns (ER-1) filed by the Appellant-Assessee. Thus, there is no evidence of suppression of fact with intention to evade the payment of tax established in this case. In absence of any such evidence of suppression of fact, thus raising of demand by invoking of extended period of limitation is not sustainable - This view has been held in the case ofPr. Commissioner vs. Himadri Speciality Chemical Ltd. [ 2022 (9) TMI 1213 - CALCUTTA HIGH COURT] wherein it has been held that if availment of credit shown in ER-1 return filed with Department, then five years extended period of demand cannot be invoked - the entire demand confirmed vide impugned order dated 20.08.2015 is legally unsustainable on the grounds of limitation. Demand of interest on the payment/reversal of CENVAT Credit - HELD THAT:- Rule 14 of the CCR has been invoked to levy interest on the amount to be recovered under Rule 11(3)(ii) of the CCR. As per Rule 14(2), if CENVAT credit is taken and wrongly utilized, only then can interest be levied. An amount determined under Rule 11(3)(ii) of the CCR cannot be termed as CENVAT credit taken and wrongly utilized. Hence, Rule 14 cannot be invoked in this case to levy interest while recovering an amount under Rule 11(3) of the CCR. Penalty imposed on the Appellant-Assessee - HELD THAT:- Penalty under Rule 15 can be imposed only when CENVAT credit taken is wrongly utilized in contravention of any provision of the Central Excise Act or Rules made thereunder - while recovering an amount under Rule 11(3)(ii), no penalty can be imposed under Rule 15 of the CCR. The appeals filed by the Appellant-Assessee are disposed off.

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• Indian Laws

• 2024 (9) TMI 237
  Maintainability of pettion - availability of efficacious and alternative remedy - Liability to pay stamp duty on the order of NCLT Allahabad in view of the express statutory provision contained in the Indian Stamp Act, 1899 - order passed by NCLT Allahabad is an instrument or not. Whether the Petitioner has an efficacious and alternative remedy and whether this objection can be considered in the light of order dated 25-11-2020 passed by this Court? - whether the principle of res-judicata is applicable to the interlocutory orders or not? - HELD THAT:- Since, the respondents did not challenge the order dated 25-11- 2020, therefore, the principle of Res-Judicata would apply and the respondents cannot re-agitate the question of alternative remedy in the same proceedings. Therefore, the preliminary objection with regard to availability of alternative remedy is hereby rejected. What was the very genesis for starting the proceedings and its effect? - HELD THAT:- The impugned order is primarily based on interpretation of law. According to Collector of Stamps, Sidhi, the instrument became chargeable on the date of execution i.e., 2-3-2017, whereas it is the case of the Petitioners that the instrument is chargeable on the date when it is received in State of Madhya Pradesh. Therefore, this Court is of the considered opinion, that so far as the interpretation of law is concerned, the vague Show Cause Notice will not have any adverse effect. Therefore, this Court would like to proceed further to decide that which date is relevant for making an instrument chargeable in State of Madhya Pradesh, i.e., whether the date on which the instrument was executed in State of Uttar Pradesh or the date on which the instrument was received in Madhya Pradesh - the submissions made by the Counsel for the parties shall be considered in the light of the law relating to interpretation of fiscal laws. Whether order dated 2-3-2017 passed by NCLT Allahabad is an instrument? - HELD THAT:- The order passed by NCLT Allahabad, thereby accepting the Scheme of arrangement by which the properties were transferred is an instrument chargeable under Indian Stamp Act. Whether the Stamp Duty is payable on the date of execution of instrument or it is payable when it is received in State of M.P.? - HELD THAT:- In order to apply the provisions of Section 19-A of Indian Stamp Act, the date of ascertainment and payment of Stamp Duty is not material, but the important aspect is the liability to pay stamp duty. In the present case, since, the instrument was executed in State of Uttar Pradesh, therefore, the first liability of the Petitioner No.1 was to pay the Stamp Duty chargeable in the State of U.P. and thereafter, the Petitioner No.1 was liable to pay the difference of stamp duty to the State of M.P., provided the rate of duty is higher than that of State of Uttar Pradesh - since, the instrument was executed in State of Uttar Pradesh, therefore, the date of execution of instrument for the purposes of charging stamp duty in State of M.P. would not be relevant but the relevant date would be the date on which the instrument was received in State of M.P. However, as the Petitioner No.1 had not paid the stamp duty in Uttar Pradesh prior to ascertainment of stamp duty by Collector of Stamps, Sidhi, therefore, the Petitioner No.1 would not be entitled to seek adjustment/ set off of the stamp duty paid by it in Uttar Pradesh. What is the date on which the instrument was received in the State of M.P.? - HELD THAT:- Not only there was reference of order of NCLT Allahabad in the registered deeds, but the execution of four Mining Lease Transfer Deeds clearly show that the Petitioner No.1 had acted upon the order passed by the NCLT Allahabad. Once, the Petitioner no.1 had put the instrument i.e., order of NCLT Allahabad into operation and had also got the mining lease transferred in its name, then it is held that even if the copy of order of NCLT Allahabad might not have been filed, but still the reference of said order and further action on the basis of said order, would certain mean that the instrument i.e., order of NCLT Allahabad was received in State of M.P. on 29-6-2017 - the chargeable instrument i.e., order of NCLT Allahabad was received in Madhya Pradesh on 29-6-2017 and not on 24-10-2017 or 5-8-2019. Whether the Notification dated 3-7-2017 by which cap of Rs. 25 Cr. was provided would apply to the facts of the case or not? - HELD THAT:- Since, the instrument i.e., the order of NCLT, Allahabad was already received in M.P. on 29-6-2017, therefore, it became chargeable on the said date and the rate of stamp duty which was prevailing on 29- 6-2017 would apply. It is held that since, the cap on stamp duty to the tune of Rs. 25 Cr came into existence by Notification dated 3-7-2017, therefore, the Petitioner No. 1 is not entitled for the benefit of cap of Rs. 25 cr. Thus, the Collector of Stamps, Sidhi did not commit any mistake by not extending the benefit of cap of Rs. 25 cr. Thus, the findings recorded by the Collector of Stamps, Sidhi regarding cap of Rs. 25 cr. is affirmed, although on different ground. It is further observed, that the findings given by Collector of Stamps, Sidhi are not well reasoned as claimed by State Counsel. Whether Stamp Duty of 1% is chargeable on movable properties? - HELD THAT:- From plain reading of Section 9 of Indian Stamp Act, it is clear that Section 9 is not a charging provision and it merely gives power to the Govt. to reduce, remit or compound duties. Since, there is no provision in proviso to Article 25 of Schedule 1-A of Indian Stamp Act, for charging stamp duty on movable property, therefore, the State Counsel is incorrect in submitting that 1% stamp duty can be charged on movable properties. Therefore, the stamp duty imposed by the Collector of Stamps, Sidhi, on the movable properties of the Petitioner No.1 is bad in law and is hereby quashed. Whether Upkar Cess @ 10% is chargeable on stamp duty - HELD THAT:- None of the parties have disputed the fact that Upkar Cess is chargeable on the stamp duty @ 10%. Therefore, imposition of Upkar Cess @ 10% on stamp duty is hereby affirmed. Whether the Janpad Cess @ 1% is payable on the value of immovable assets or on Stamp Duty? - HELD THAT:- Since, this Court has already held that the instrument i.e., order of NCLT Allahabad was received in Madhya Pradesh on 29-6-2017, therefore, whatever Janpad Cess was payable on the said date would apply. Since, the Notifications dated 6-10-2018 and 25-8-2020 are subsequent to the relevant date, therefore, the Janpad Cess @ 1% on the stamp duty is not chargeable, but it is chargeable @ 1% of the value of the immovable assets. Therefore, the imposition of Janpad Cess @ 1% on the value of the immovable assets is hereby affirmed. Penalty - HELD THAT:- The Petitioner is correct in submitting that while calculating the Penalty, the Cess payable under different statutes should not have been taken into consideration. Therefore, the Collector Stamps, Sidhi is directed to recalculate the Penalty by excluding the Janpad Cess and Upkar Cess. Thus, the Petition filed by the Petitioners is partially allowed and the Stamp Duty fixed/ascertained by the Collector of Stamps, Sidhi @ 5% on the value of immovable assets is upheld; the Upkar Cess @ 10% on stamp duty is also upheld; Janpad Cess @ 1% on the value of the immovable property is also affirmed. However, the Stamp Duty on the movable assets is hereby quashed. However, the matter is remanded back to the Collector of Stamps for reassessing the amount of Penalty by not taking the Upkar Cess and Janpad Cess into consideration.

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• 2024 (9) TMI 236
  Dishonour of cheque - compounding of offence under Section 147 of the Act - amicable settlement of dispute - whether this court after upholding the judgment of conviction and order of sentence recorded by the court below can proceed to review its own judgment dated 31.3.2023, whereby criminal revision petition having been filed by the petitioner accused came to be dismissed or not? - HELD THAT:- This Court vide judgment in Gulab Singh v. Vidya Sagar Sharma [ 2017 (12) TMI 1837 - HIMACHAL PRADESH HIGH COURT ], while relying upon judgment of Hon ble Apex Court as well as other Constitutional Courts has already held that court, while exercising power under Section 147 of Act can proceed to compound offence even in those cases, where accused stands convicted. Since in the case at hand, petitioner after being convicted under Section 138 of the Act has compromised the matter with the respondent-complainant-Bank and in terms thereof has already paid the entire amount of compensation, prayer for compounding the offence can be accepted in terms of judgment passed by the Hon ble Apex Court in DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ], wherein it has been categorically held that court, while exercising power under Section 147 of the Act, can proceed to compound the offence even after recording of conviction by the courts below. The parties are permitted to get the matter compounded in the light of the compromise arrived inter se them. Accordingly, judgment of conviction and sentence recorded by the learned trial court is quashed and set-aside and petitioner is acquitted of the charge framed against him. His bail bonds are discharged. Amount, if any, deposited by the petitioner before the court below be released in his favour on his filing appropriate application. Petition disposed off.

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