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2024 (5) TMI 840 - ITAT DELHI
Assessment made u/s 144 r.w.s. 142(1) OR 153C - recording of a satisfaction that the assets/documents seized belong to a person other than the person searched - HELD THAT:-As relying on Jasjit Singh [2023 (10) TMI 572 - SUPREME COURT] and RRJ Securities Ltd [2015 (11) TMI 19 - DELHI HIGH COURT] assessments made for A.Y. 2012-13 u/s 144 r.w.s. 142(1), consequent to the satisfaction note recorded ought to have been made u/s 153C of the Income Tax Act, 1961. Since, the provisions of Section 153C have not been invoked and since, the proceedings u/s 153C have not been initiated, the assessment made u/s 144 r.w.s. 142(1) is treated as void ab initio.
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2024 (5) TMI 839 - PUNJAB AND HARYANA HIGH COURT
Validity of Assessment u/s 153A - no search conducted u/s 132 and 132A as against the petitioner - authorisation issued to conduct search and seizure relating to the petitioner or not? - relevancy of panchnama as document - HELD THAT:- In the present case, we find that challenge is to the very initiation of proceedings at the initial stage; search under Section 132 of the Act and jurisdiction of the assessing officer by initiating proceedings u/s 153A of the Act which needs to be examined. The validity of initiating search proceedings cannot be examined by the Appellate Authority as is already held in Chandra Kishor Jha. [1999 (9) TMI 948 - SUPREME COURT], OPTO Circuit India Limited [2021 (2) TMI 117 - SUPREME COURT], M/s. J. M. Trading Corporation [2009 (6) TMI 988 - BOMBAY HIGH COURT] and Sarvmangalam Builders’ cases[2015 (12) TMI 1882 - DELHI HIGH COURT]
The petitioner has challenged the panchnama where its name has been entered and submits that it has already suffered search and seizure earlier resulting in an order passed under Section 153A of the Act and, therefore, proceedings again initiated under Section 153A were wholly unwarranted. The exercise of power under Section 153A based on panchnama was not available.
In the present case, we find that there is no authorisation issued to conduct search and seizure relating to the petitioner. The panchnama prepared at Gurgaon office of M3M India Limited only reflects the name of the petitioner company.
The term panchnama is not defined in the Income Tax Act. A panchnama is a document prepared in the ordinary course at a site of incident - panchnama would be a document which has to be prepared recording articles, material and objects which may be seized as incriminating documents at the time of conducting search of premises. Mentioning of the name of any company in the panchnama would only reflect that documents relating to that company were found during the search at the premises. A panchnama, therefore, cannot be treated to mean authorization issued to the authorities u/s 132.
Thus we find that the respondents were obliged to compulsorily follow the procedure for reassessment of the petitioner company in the manner as prescribed u/s 153C (1) alone and in no other manner. However, we find that the respondents have invoked and initiated proceedings u/s 153A of the Act, although neither there is any search initiated u/s 132 as against the petitioner nor it can be said that the search was conducted at its premises. Similar view has been taken in Hitesh Ashok Vaswani [2023 (11) TMI 347 - GUJARAT HIGH COURT] and Subhash Khattar’s cases[2017 (7) TMI 1091 - DELHI HIGH COURT] - Thus, the proceedings initiated under Section 153A are found to be vitiated.
When there was no search conducted u/s 132 and 132A as against the petitioner and only a panchnama reflects the name of the petitioner prepared at the registered office of M3M India Limited, the action of the respondents in passing second assessment order on 07.02.2024 on the basis of notice u/s 153A is held to be unjustified and without jurisdiction. Assessee appeal allowed.
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2024 (5) TMI 838 - CESTAT MUMBAI
Benefit of exemption - Duty Free Import Authorisations - DFIA scheme - Import of ‘saffron’/ ‘saffron pushali B’ - ‘food flavour’ and ‘food colour’ in edible goods - actual use condition and disclosure - HELD THAT:- No clarification emerges from that order to impact any of the other ‘authorizations’ impugned in this appeal. It is pertinent to note that reliance on this development strikes at the very pillar on which the impugned proceedings have been erected as none of the other ‘authorizations’ were similarly proceeded against and must be deemed, for want of similar outcome, as validated. In the light of importer being a transferee of ‘authorizations’ invalidated subsequent to its use, the detriment, flowing thereby from processing subsequent to transfer by the two entities who were issued with it, is hit by the bar of limitation in the absence of any finding that the ‘person liable to pay duty’ had been involved in obtaining of ‘authorization’ or in the exports that enabled transfer. There is no such finding and the consequence of invalidation is not only restricted to imports effected against those ‘authorizations’ but also barred from being deployed for recovery by lapse of normal period of limitation.
According to the adjudicating authority, ‘actual use’ attaches to the inputs, covered by the norms, at the time of export which is to mirrored even after the export obligation has been fulfilled and licence endorsed for transfer. Thus, it is the case of the adjudicating authority that the ‘pre-export’ entitlement remains unaltered ‘post-export’ and even after fulfillment of export obligation; impliedly, the incentive is nothing more or less than that would entitle as drawback. We have set out supra that the generality of description in ‘standard input output norms (SION)’ is intended to assist the policy objective of providing incremental incentive for export and, while that may not be entirely impossible in ‘pre-export’ importation, such possibility of alternative product being cleared in ‘post-export’ importation is not exactly not remote. The rigour of the expression ‘actual use’, to the extent inferred by the adjudicating authority, does not rule out such possibility
It is the case of the adjudicating authority that only the first aspect may be varied though neither the Foreign Trade Policy (FTP) nor the corresponding exemption notification contain anything that may suggest such limited perspective of ‘actual use’ which, with fulfillment of export obligation, implicitly and literally, does not continue to insist that the importer must deploy it in production or that it should be deployed in the very product that is specified in the authorization for domestic sale instead of being exported. There is no percentage in such insistence on one aspect of ‘actual use’, and conveniently selected, when such is not sanctioned either by the Foreign Trade Policy (FTP) or in the exemption notification without insisting on the other two aspects.
The adjudicatory jurisdiction should not have been extended beyond the contents of the authorizations which were themselves to be evaluated only in terms of claim of the appellant that ‘saffron’ is capable of use as ‘food flavour’ and ‘food colour’ which were the descriptions in the impugned authorizations. These are not disputed in the proceedings and the test of commercial viability, adopted in the impugned order, is not conceptually intrinsic to export promotion schemes in the Foreign Trade Policy (FTP) and, thus, undoing the foundation of both confiscation and recovery of duty in the impugned order.
Thus, the impugned order is set aside to allow the appeals.
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2024 (5) TMI 837 - SUPREME COURT
Money Laundering - Denial of benefit of anticipatory bail - whether power to arrest vesting in the officers of the Directorate of Enforcement (ED) under Section 19 of the PMLA cannot be exercised after the Special Court takes cognizance of the offence punishable under Section 4 of the PMLA? - order of the Court accepting bonds under Section 88 - HELD THAT:- There is no provision therein which is in any manner inconsistent with Section 205 of the CrPC. Hence, it will apply to a complaint under the PMLA. A summons is issued on a complaint to ensure attendance of the accused before the Criminal Court. If an accused is in custody, no occasion arises for a Court to dispense with the personal attendance of the accused - If the accused who appears pursuant to the summons issued on a complaint were deemed to be in custody, the lawmakers would not have provided for Section 205.
After examining the provisions of the PMLA, it is apparent that Section 88 is in no manner inconsistent with the provisions of the PMLA. Therefore, Section 88 will apply after filing of a complaint under Section 44(1)(b) of the PMLA. If Section 88 is to apply even before a summons is issued or served upon a complaint, there is no reason why it should not apply after the service of summons. A discretionary power has been conferred by Section 88 on the Court to call upon the accused to furnish bonds for his appearance before the Court. It does not depend on the willingness of the accused - when an accused appears before the Special Court under a summons issued on the complaint, if he offers to submit bonds in terms of Section 88, there is no reason for the Special Court to refuse or decline to accept the bonds. Executing a bond will aid the Special Court in procuring the accused's presence during the trial.
If a warrant of arrest has been issued and proceedings under Section 82 and/or 83 of the CrPC have been issued against an accused, he cannot be let off by taking a bond under Section 88. Section 88 is indeed discretionary. But this proposition will not apply to a case where an accused in a case under the PMLA is not arrested by the ED till the filing of the complaint. The reason is that, in such cases, as a rule, a summons must be issued while taking cognizance of a complaint. In such a case, the Special Court may direct the accused to furnish bonds in accordance with Section 88 of the CrPC.
Whether an order of the Court accepting bonds under Section 88 amounts to grant of bail? - HELD THAT:- When an accused furnishes a bond in accordance with Section 88 of the CrPC for appearance before a Criminal Court, he agrees and undertakes to appear before the Criminal Court regularly and punctually and on his default, he agrees to pay the amount mentioned in the bond. Section 441 of the CrPC deals with a bond to be furnished by an accused when released on bail. Therefore, an order accepting bonds under Section 88 from the accused does not amount to a grant of bail.
Contingency where after service of summons issued on a complaint under the PMLA, the accused does not appear - HELD THAT:- While cancelling the warrant, the Court can always take an undertaking from the accused to appear before the Court on every date unless appearance is specifically exempted. When the ED has not taken the custody of the accused during the investigation, usually, the Special Court will exercise the power of cancellation of the warrant without insisting on taking the accused in custody provided an undertaking is furnished by the accused to appear regularly before the Court. When the Special Court deals with an application for cancellation of a warrant, the Special Court is not dealing with an application for bail. Hence, Section 45(1) will have no application to such an application.
Once cognizance is taken of the offence punishable under Section 4 of the PMLA, the Special Court is seized of the matter - 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.
The impugned orders declining to grant anticipatory bail set aside - appeal allowed.
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2024 (5) TMI 836 - DELHI HIGH COURT
Benefit of DTVSV Act - CIT(A) has rejected the appeal of the assessee on the ground of being barred by limitation - disputed tax demand after giving effect to the CIT(A) order - Whether appeal should be pending or the time limit for filing an appeal should not have expired as on the specified date? - HELD THAT:- As it is evident from the legislative intent as well as the Statement of Objects and Reasons, the aim of the DTVSV Act is to finally put an end to the litigation and set free the tax arrears entangled in the litigation battle. Considering the nature of the legislation to be beneficial and remedial in its form, it should be interpreted in a liberal and purposive manner.
It is crystal clear that in all the aforementioned exigencies as enshrined in Section 2 (1) (a) of the DTVSV Act, the assessee would be eligible to apply under the provisions of the DTVSV Act. It is noteworthy that as per the provisions of the DTVSV Act, inter alia, what is required is that either an appeal should be pending or the time limit for filing an appeal should not have expired as on the specified date and the disputed tax arrears should exist. The fact remains that the limitation to avail the remedy to appeal against the CIT(A) order was not exhausted as on the specified date and thus, the Revenue cannot pre-suppose that the assessee would not succeed in the appeal before ITAT under any circumstances.
It is of no significance whether the pending appeal merits consideration or is filed against an order, whereby, the dismissal was on the ground of being barred by limitation. These qualifications attached to a pending litigation have no bearing over the assessee for availing the benefits of the DTVSV Act. In the case of Medeor Hospital [2022 (11) TMI 26 - DELHI HIGH COURT] this Court also held that once the provisions of the DTVSV Act contemplate the condition of appeal being pending in order to avail the settlement benefits, then there is no requirement to add the qualifications to the pending appeal.
Designated authority cannot go beyond the purview of the DTVSV Act and attach qualifications to conditions which are already meticulously provided in the provisions of the DTVSV Act.
It cannot be gainsaid that once the CIT(A) has rejected the appeal of the assessee on the ground of being barred by limitation, the resultant effect of such an order would be confirmation of the assessment order so passed, unless and until such position is changed by the appellate forum. Therefore, upon a conjoint reading of Section 2 (1) (a) (ii) and Section 2 (1) (j) (B) of the DTVSV Act and applying the provisions in facts of the present case particularly in light of the objectives of the DTVSV Act, it is distinct to point out that the time limit for filing the appeal against the CIT(A) order dated 01.01.2020 was not expired as on specified date and the disputed tax arrears existed on the specified date as resultant effect of the CIT(A) order dated 01.01.2020 leads to confirmation of the assessment order thereby resulting in the disputed tax arrears.
After all, the DTVSV Act aspires to finally free the tax arrears locked in the litigation combat for ages and ultimately ensures timely collection of tax. In the present case, the dispute pertains to AY 2010-11, much water has already flown through the gates and a lot of time, resources and energy have already been consumed in the ongoing litigation combat. Moreover, since the assessee aspires to avail the benefits of the settlement scheme and we have the beneficial legislation in place to finally effectuate such aspirations. Therefore, under the facts of the present case, we do not find any reason to obstruct the assessee from availing the benefits of the DTVSV Act.
We confirm the liberty given to the assessee vide interim order dated 22.04.2021 and direct the Revenue to proceed with the application of the assessee in accordance with the provisions of the DTVSV Act and other applicable regulations.
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2024 (5) TMI 835 - BOMBAY HIGH COURT
Export Policy of Non-basmati white rice under HS Code 1006 30 90 is amended from “Free” to “Prohibited” - Notification No. 20/2023 - Prospective Or Retrospective effect of the Notification - Non application of mind or arbitrary exercise - Violation of the principles of natural justice - Denial of benefit of the transitional arrangement - FTP 2023 - burden upon the exporter to complete the obligation of fulfilling a complete contract - HELD THAT:- The reason for converting the policy for export of Basmati Rice from free to prohibited as per contention of Mr. Deshpande, learned DSGI is the domestic food security situation in India, which as claimed to be at risk and the need for price stabilization of food items, as is indicated, from para-3 of the reply of the respondent No. 2 (Pg.138). For this it is contended, that there was due consultation with the nodal Departments such as Departments of Agriculture and Farmers Welfare, Department of Food and Public Distribution and Department of Consumer Affairs and it is stated that the consultation process had taken into account all data relating to production and export of non-basmati rice. It is however material to note that except for a plain statement in this regard which is contained in Paras-3 and 4 (Pg.138 and 139) of the reply of the respondent No. 2, there is nothing else therein in the nature of what was the form of consultation, what data was collected and considered, in spite of the fact, that by amendment to the petition by inserting ground L (Pg.36-A), a specific plea was raised regarding absence of any such material, to indicate any food security threat or any need for price stabilization of food items, so as to demonstrate the reasonability of the restriction placed by way of the impugned notification on export of non-basmati rice.
The relief which is being sought is for enabling the petitioners to complete the concluded contracts, which they have with foreign traders for supply of basmati rice. In this context, it would be material to note, that in case the petitioners establish concluded contracts, for supply of non-basmati rice, to foreign traders, for which they have established ICLC and the petitioners have already procured the goods, this would be an action, relatable to the Policy prior to the impugned notification, which indicated that the export was free. If this is the case, then the petitioners, would have legitimate expectation, of fulfilling of their contracts, which they had entered into on the basis of the free policy, with foreign traders. IT is also necessary to note that non-fulfilling the concluded contract would also make the petitioners open to litigation on account of breach of contract and consequently damages. Thus, the expectation of fulfilling an existing concluded contract, on the basis of the existing policy could be said to be legitimately available to the petitioners.
Testing the impugned notification on the anvil of the principle of legitimate expectation, vis-à-vis Article 14 of the Constitution, we find that no reasons are forthcoming from the respondents, for denial of the benefit of the transitional arrangements, in the FTP, 2023, to the petitioners, and, though the same has been granted, in the case of wheat, as indicated, in a similar circumstance, denial of the same, in the impugned notification, is not justified.
Retrospectivity - Though it is contended, that it is retrospective in operation, the notification, does not indicate, that is to take effect, from any earlier date. However, clauses 2 (i) to (iv) in their effect, indicate, that past transactions, which have been entered and concluded, but which are yet to be performed, are also being taken in its sweep, which position is substantiated by the fact that clause 2 of the impugned notification indicates that the transitional arrangement in para-1.05 of the FTP, 2023, which saved concluded contracts, indicated by an irrevocable ICLC, was not applicable.
We find that the restriction imposed vide clause 2 of the impugned notification dated 20/07/2023, denying the benefit of para 1.05 of the Foreign Trade Policy 2023 regarding transitional arrangement to the petitioners, is clearly not justified, in absence of any reasons in that regard, forthcoming from the respondents, specifically in view of the fact, that it is not disputed that the FTP 2023, is applicable to the petitioners. We therefore, hold and declare, that the impugned notification, dated 20/07/2023, insofar as it denies the benefit of the transitional arrangement as contained in para-1.05 of the FTP 2023, is bad-in-law and the benefit of this transitional arrangement would be available to the petitioners, in case the requirements, as indicated in clause (b) therein are complied by the petitioners. The petition is accordingly allowed in the above terms and to the above extent. Rule is made absolute in the above terms. Thus, there shall be no order as to costs.
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2024 (5) TMI 834 - CESTAT ALLAHABAD
Smuggling - seizure of foreign origin gold bars - Confiscation - Penalty - No document regarding sale purchase/transportation - Violation of the provisions of Section 7 (1) (c), Section 11, Section 46 of the Act, read with the Section 123 - burden or onus to establish the smuggled nature of gold - HELD THAT:- We find that the impugned gold intercepted, initially taken possession by the officer of GRP and then handed over to Customs. Admittedly, the gold did not have any tell-tale foreign marking and it was merely accused that the markings were removed to hoodwink investigation. The place of seizure is not in Customs area. Hon’ble Supreme Court in the case of Gian Chand & Ors 2013 (7) TMI 1155 - SUPREME COURT, wherein in case of seizure by the Police and thereafter the possession was shifted to the Customs Officer, held that the pre-requisite of seizure is not satisfied.
Accordingly, it is held that the circumstances as required under the Customs Act are not satisfied and consequentially the whole burden or onus to establish the smuggled nature of gold is on the Revenue. In addition to the above, fact remains that the gold did not have any foreign marking; Department under established that the same has been smuggled. The situation would certainly create reasons to believe that the impugned gold could be smuggled one, necessitated further prove. It does not constitute reasonable belief to seize the gold u/s 123 of the Act.
Thus, we do not find any reasons to interfere with the impugned Order-in-Appeal passed by the learned Commissioner (Appeals) and accordingly, the same is sustained. The appeals filed by the Department are thus dismissed.
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2024 (5) TMI 833 - ITAT KOLKATA
Nature of expenses - Expenditure on registration of new and existing patents - revenue or capital - HELD THAT:- The existing patents were registered in order to protect the assessee’s interest in the said patents so that there is no infringement patents from any quarters. Similarly new patents were registered by the assessee to ensure the same are not used by any third party without any authorization and therefore these expenses has also been incurred by the assessee in order to protect the business interest. In our opinion, both these expenses were wholly and exclusively incurred for the purpose of business and are allowable u/s 37 of the Act. We are unable to understand as to how the expenses were split into relating to existing and new patents. See DALMIA JAIN AND COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA [1971 (7) TMI 2 - SUPREME COURT].
Thus the registration expenses incurred on the existing as well as new patents are wholly and exclusively incurred for the purpose of business and are revenue in nature. Decided in favour of assessee.
TDS u/s 195 - non-deduction of tax at source u/s 40(a)(i) - payment made to the foreign parties for procurement and marketing of export orders - HELD THAT:- Commission in the hands of foreign agents are not liable to tax in India as the same was paid in India in respect of services rendered abroad to non-resident commission agents. The case of the assessee finds support from the decision of Hon’ble Apex Court in the case of GE India Technology Cen. Pvt. Ltd. [2010 (9) TMI 7 - SUPREME COURT] as held that if the sum payable to the non-resident is not chargeable to tax in India , the payer is not liable to deduct tax at source as per Section 195 of the Act at the time of making the payment and therefore there is no question of invoking the provisions of Section 40a(i) of the Act.
As perused the provisions of Section 9(1)(i) of the Act which deals with the income accruing or arising through or from any business connection in India which shall be deemed to accrue and arise in India. Further explanation (i) to Section9(1)(i) provides for income deemed to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. But in the present case, it is not in dispute that non-resident commission agents did not carry out any activity in India and the entire services by such agents were provided abroad
Thus provisions of section 195 are not applicable to the assessee and therefore there no need for deduction of tax at source from payments made to foreign commission agents. Ground no. 2 accordingly is allowed.
Addition u/s 40(a)(ia) on payments made to foreign parties for various services rendered - HELD THAT:- We find that the assessee has not furnished the details/evidences before the authorities below and has harped on the issue that TDS Wing of International Taxation Department has examined these remittances in the light of various evidences furnished by the assessee and also relevant DTAA and having satisfied as to non deduction of TDS has not initiated any action u/s 201 of the Act. Therefore according to the assessee there is no default u/s 195 of the Act and no disallowance u/s 40a(i) could be made.
We note that the assessee has made remittances to 8 foreign parties which need to be examined at the level of the AO in the light of DTAAs and ascertain whether the assessee is covered under the Treaties. Needless to mention that if the AO can also find out about the examination by the TDS Wing of International taxation Department to the effect of non applicability of TDS u/s 195 of the Act then all these expenses are to be allowed. Accordingly we restore this issue to the file of AO to examine and decide accordingly. The ground no. 3 is allowed for statistical purpose.
Nature of receipt - liquidated damages - as per assessee these liquidate damages received by way of compensation for delay in the delivery and installation of plant and machineries/construction of building and they are to be treated as capital receipts and not liable to tax - AO held that these damages received has no nexus with the cost of fixed assets and cannot be said to have any relation to capital asset owned by the assessee and thus constitute a regular nature of business income - HELD THAT:- The liquidated damages does not fall within the ambit of cost of assets met by any other person as these were not intended to the subsidize the cost of assets but on account of failure of the suppliers for delay in delivery/installation /completing construction of capital asset within the stipulated time. Besides the written down value is defined u/s 43(6)(c ) of the Act as the value to be computed only in the manner provided thereunder i.e. value computed by adding actual cost of assets falling within the block of assets acquired during the previous year or deducting the money payable in respect of any asset within the block which is sold, discarded or demolished or destroyed during the previous year together with the amount of the scrap value.
The Act does not contemplate any other adjustment for computing the written down value such as liquidated damages of the block of assets. See Alpha Lab vs. ITO [2016 (6) TMI 560 - GUJARAT HIGH COURT] wherein as affirmed the view taken by the tribunal, we are inclined to hold that liquidated damages are capital receipts not to be reduced from the cost of fixed assets. Accordingly ground no. 4 by the assessee is allowed.
Disallowance u/s 14A r.w.r. 8D(2)(iii) - suo-motto disallowance made by assessee - assessee invested surplus fund generated from business activities in shares and securities and thus derived income by way of dividend and tax free interest - HELD THAT:- Non-maintenance of separate books of account evidencing expenditure incurred in relation to non-taxable income cannot be a ground to reject the assessee apportionment of expenditure incurred in relation to exempt income.
In the present case before us we are quite convinced with the calculation furnished by the assessee which worked out the expenditure u/s 14A read with Rule 8D(2)(iii) at Rs. 45,14,500/- and is a reasonable disallowance u/s 14A read with Rule 8D(2)(iii). This is line with the decision of the Coordinate bench in the case of M/S Ultratech Cement Ltd [2017 (12) TMI 1134 - ITAT MUMBAI]. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to restrict the disallowance of Rs. 45,14,500/-. Needless to say that the above disallowance come down based upon the stocks/securities yielding dividend income and hence the amount calculated of Rs. 45,14,500/- is less than the suo-motto disallowance in which the assessee has considered the securities yielded exempt income as well as those securities not yielding any income during the year.
Adjustment of interest payment on income tax dues against the interest received on income tax refund - HELD THAT:- As decided in the assessee’s own case [2018 (11) TMI 1611 - ITAT KOLKATA] wherein the decision of Bank of America [2014 (12) TMI 551 - BOMBAY HIGH COURT] as followed, thus held the interest received on income tax refund and the interest paid on delayed payment of income tax both have the same character and as such if the interest received from the tax department exceeds the interest paid, then only net amount could be taxed. Accordingly ground no. 8 raised by the assessee is allowed.
Issue raised for the first time before the Tribunal - Deduction of employees compensation cost on account of Employee Stock Option Plan (ESOP) - HELD THAT:- As in assessee’s own case in AY 2009-10 [2018 (11) TMI 1611 - ITAT KOLKATA] to hold that if a claim which is available in law is not raised either inadvertently or an account of erroneous plea of complex legal position, such a relief cannot be shut up for all the times to come merely because it is raised for the first time in appellate proceedings in absence of a revised return filed before the AO. We therefore accept assessee’s instant additional ground in principle and leave it open for the AO to verify all the relevant facts as per law after affording adequate opportunity of hearing in consequential proceedings - Thus we admit the issue which is admittedly and undoubtedly allowable to the assessee and restore the same for adjudication before the AO after doing verification of the facts.
Unexpired discounts on forward contract - assessee entered into forward exchange contract for hedging currency related risk in connection with various foreign currency exposure like import of raw materials, export of finished products etc - CIT(A) deleted addition - HELD THAT:- We find that the assessee has been regularly following these contracts accounting standard 11 (AS-11) qua the premium/discount on forward exchange contracts over the period of contract in line with the principles of accrual and mercantile system of accounting and in line with the requirement of AS-11. The unexpired discount in respect of the period /of the forward contracts which fell in the subsequent year was not accounted for in the books in FY 2009-10 but was recognized /credited in the profit and loss account in the subsequent year i.e. FY 2010-11 and similar accounting as regards forward contracts was followed in the subsequent assessment years and the amount offered as premium/claimed as discount have been duly considered while assessing the income of the assessee.
As decided in Woodward Governor India (P) Ltd. [2009 (4) TMI 4 - SUPREME COURT] wherein it has been held that in absence of any provision to the contrary, the accounting standard have to be followed for ensuring that books are prepared in accordance with accounting standard/ principles Thus. we are inclined to uphold the order of Ld. CIT(A) and direct the AO to delete the addition. Accordingly ground no. 1 raised by the revenue is dismissed.
Addition on account of marked to market loss on forward contracts - AO while relying upon CBDT’s Instruction No. 3/2010 dated 28.09.2010 disallowed the loss on account of market to market revaluation on the ground that the said loss is notional and contingent in nature - CIT(A) deleted addition - HELD THAT:- we observe that the claim of marked to market loss is allowable business expenditure and a settled issue the Hon’ble Supreme Court in the case of CIT vs. Woodward Governor India (P) Ltd. [2009 (4) TMI 4 - SUPREME COURT] and ONGC Ltd [2010 (3) TMI 81 - SUPREME COURT] - AO has simply made the disallowance by following CBDT Instruction No. 3/ 2010 dated 28.09.2010 which in our opinion is not binding on appellate authorities particularly in case the deduction is allowable in line with the provisions of the Act and in view of the decisions of judicial forum - Decided against revenue.
Nature of expenses - design charges - revenue or capital - HELD THAT:- We find that in the remand report the AO has not objected the nature of expenses but simply stated that the expenses has resulted into in the benefit of capital in nature. We note that the Ld. CIT(A) has allowed the appeal by recognizing the fact that expenses has been charged to profit and loss account based on the existing accounting standard and by recording a finding that similar expenses have been allowed in preceding assessment years - Decided against revenue.
Nature of expenses - revenue or capital - information technology expenses - HELD THAT:- These expenses were incurred to maintain the information technology assets and related consumables and were paid to various parties. Case of the assessee finds support from the decision of Hon’ble Apex Court in the case of Empire Jute Co. Ltd. [1980 (5) TMI 1 - SUPREME COURT] wherein as held that if the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more efficiently or more profitably, while leaving the fixed capital untouched, the expenditure would be of revenue account, even though the advantage may endure for an indefinite future. Decided against revenue.
Addition of advances written off - CIT(A) deleted addition - HELD THAT:- We note undisputedly these advances were given to the farmers against supply of materials/crops which could not be adjusted due to failure of crop or quality issues. In our opinion these advances were undoubtedly given in the ordinary course of business and has rightly been allowed by the CIT(A). Accordingly we dismiss ground no. 6 raised by the revenue by upholding the order of Ld. CIT(A).
Double deduction claimed in respect of excise duty on closing stock - As per AO when the excise duty included in closing stock is already profit neutral then the additional claim of deduction in respect of excise duty on closing stock amounts to double deduction - HELD THAT:- As we find that the issue has been decided by the Hon’ble Calcutta High Court in the assessee’s own case [2021 (7) TMI 1453 - CALCUTTA HIGH COURT] and [2019 (6) TMI 1723 - CALCUTTA HIGH COURT] we are inclined to dismiss the ground raised by the revenue by upholding the order of Ld. CIT(A).
Bogus purchases - CIT(A) deleted addition - HELD THAT:- As assessee has purchased petty gift items such as key chain-cum- torch from Heta Sales Pvt. Ltd. and duly furnished the details comprising number of goods received, copies of invoices and delivery challans, photograph of the products purchased which were given as free along with Food products, copies of bank statements reflecting the payment made. Similarly the assessee has purchased Rangoli powder for internal use from M/s Sambhav Traders of Rs. 731/- qua which the receipt was produced before the AO - considering the volume of operation and the documents placed on record, the addition with reference to Investigation Wing report without carrying on any further investigation by the AO is unreasonable and was rightly deleted by the Ld. CIT(A) - Decide against revenue.
Deduction u/s 80IA - captive power plant - AO denied claim as units in respect of which deduction had been claimed by the assessee were not separate undertakings and that the notional profit from such undertakings had not been included in the profit and loss account of the assessee - CIT(A) allowed the appeal of the assessee - HELD THAT:- We note that the issue has been settled in assessee’s own case for AY 2007-08 [2016 (3) TMI 1005 - ITAT KOLKATA] by the Hon’ble Calcutta High Court as well as by the Co-ordinate Bench in AY 2007-08, 2008-09 and 2009-10. Now the issue of CCP has been finally settled by the Hon’ble Apex Court in the case of CIT Vs M/S Jindal Steel & Power Ltd [2023 (12) TMI 417 - SUPREME COURT]. Accordingly the issue is squarely covered in favour of the assessee and the ground raised by the revenue is dismissed by upholding the order of ld. CIT(A).
Characterization of receipts - Income from sale of carbon credit units - capital receipt or regular business income -HELD THAT:- Considering the decision of the Hon’ble High Courts My home Power Limited [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT], Subhash Kabini Power Corporation Ltd [2016 (5) TMI 793 - KARNATAKA HIGH COURT] and Co-ordinate Bench in assessee’s own case [2018 (11) TMI 1611 - ITAT KOLKATA] we are inclined to hold that the sale of carbon credit units is a capital receipt and is not taxable.
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2024 (5) TMI 832 - CESTAT MUMBAI
Non-payment of service - Liability of service tax on ship crew recruitment services - export of service - intermediary services - place of provision rules - fees received for services rendered to ESM situated in Singapore, where payment is received in foreign currency - Rule 2(f) and Rule 9(c) of the Place of Provision of Service Rules, 2012 - extended period of limitation - HELD THAT:- The definition of taxable services under the category of ‘Ship Management Service’ defined under Section 65(96a) ibid included various activities including engagement or providing of ship crew. Further, such ship management service was covered specifically under the taxable clause (zzzt) of Section 65(105) ibid. Thus, it clearly flows from the above legal provision that the service of ship crew recruitment provided by the appellants to any person in the taxable territory are subjected to levy of service tax. Inasmuch as the Chapter V of the Finance Act, 1994 extends to the whole of India except the State of Jammu and Kashmir, it transpires as a corollary that services provided outside India are not liable for payment of service tax - the activities undertaken by the appellants in provision of ship crew management/ship management service to ESM Pte., Singapore as explained above does not get covered under the tax net of service tax.
The appellants had entered into a ‘Services Agreement ’dated 01.04.2013 with ESM Pte. Singapore for providing certain agreed services, as detailed in Appendix-I of this agreement. This contract covered the period from 01.04.2013 to 31.03.2016. Further, contract dated 01.04.2016 entered between the appellants and ESM Pte. Singapore, was of similarly worded but covered the period from 01.04.2016. For providing such services, the appellants are being paid an amount equal to ‘applicable costs’ i.e., direct and indirect operating expenses of the appellants incurred in connection with providing the services, plus 8.70% (upto 31.03.2016) and 6.50% (from 01.04.2016) along with applicable taxes, if any.
From plain reading of the legal provisions relating to ‘Place of Provision of Services Rules, 2012’ it clearly transpires that the place of provision of service in general has been specified under Rule 3 ibid, and in specific situations such as place of provision of performance-based services, provision of services relating to immovable property, provision of services relating to events, services provided at more than one location, services where provider and recipient are located in the taxable territory, provision of certain specified services have been specifically categorized and the place of provision in such cases have been given in the respective Rules 4, 5, 6, 7, 8 and 9 ibid respectively - since the services are provided in recruitment of ship crew and enabling them for the ocean voyage to be performed as per the directions of the service receiver ESM Pte., Singapore, which is situated out of ‘taxable territory’, the services provided by the appellant cannot be covered under the service tax net in terms of Section 66B ibid.
There is no evidence on record to show that the appellants are receiving any consideration from the Ship/Vessel owners or any other person and as such, the services could not be termed as falling under the category of “intermediary”.
Whether the services provided by the appellants could be treated as export of service or not? - HELD THAT:- The appellants cannot not be said to be acting as an intermediary i.e., the services were performed by the appellants on a principal-to-principal basis and at arm’s length basis. Inasmuch as all the conditions prescribed under Rule 6A of the Service Tax Rules, 1994 are satisfied, the services of the appellants are to be treated as export of services. Thus, the findings given by the learned Commissioner in the impugned order on this ground is also not sustainable.
Extended period of limitation - HELD THAT:- There are no specific grounds invoked for suppression of facts or willful mis-statement on the part of the appellants, particularly when the entire records of the appellants including periodical returns filed were available with the department. Thus, no effective case was made out in the SCN for invocation of extended period and for sustaining the same in the impugned order. Therefore, such order confirming the adjudged demands for extended period is patently illegal and therefore not sustainable, on the grounds of limitation.
The Tribunal in the case of EASTERN PACIFIC SHIPPING (INDIA) P. LTD. VERSUS COMMR. OF CGST, MUMBAI EAST [2019 (10) TMI 1324 - CESTAT MUMBAI] has held that appellant, a duly licensed Seafarer Recruitment service provider, as per agreement is not an intermediary particularly when entire process of selection, medical test, insurance, transportation etc. are carried out by him, for which he received payment in convertible foreign exchange from first party having its office in Singapore. It was held that services provided by him are to be considered as export of service.
In the case of Ernst and Young Limited [2023 (3) TMI 1117 - DELHI HIGH COURT], the Hon’ble High Court of Delhi had examined the scope of the term ‘intermediary’ and held that the services provided by the appellants cannot be considered as intermediary services and it would fall within the scope of the definition of ‘export of service’.
In another case relating to supply of services to foreign vendors in the case of SNQS International Socks Private Limited (Trading Division) Vs. Commissioner of Central Excise and Service Tax [2023 (6) TMI 1084 - CESTAT CHENNAI], the Tribunal has held that the services provided are in the nature of specified taxable services and not ‘intermediary service’ and the place of provision in such export of services is the location of the service provider abroad.
The impugned order is set aside - appeal allowed.
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2024 (5) TMI 831 - SUPREME COURT
Invocation of constitutional jurisdiction under Article 32 - seeking directions relating to the conservation of the species - Right to a healthy environment and freedom from adverse effects of climate change - Balance between conservation efforts and renewable energy development - HELD THAT:- The right to a healthy environment encapsulates the principle that every individual has the entitlement to live in an environment that is clean, safe, and conducive to their well-being. By recognizing the right to a healthy environment and the right to be free from the adverse effects of climate change, states are compelled to prioritize environmental protection and sustainable development, thereby addressing the root causes of climate change and safeguarding the wellbeing of present and future generations. It is imperative for states like India, to uphold their obligations under international law, including their responsibilities to mitigate greenhouse gas emissions, adapt to climate impacts, and protect the fundamental rights of all individuals to live in a healthy and sustainable environment.
India's commitment to promoting renewable energy sources, particularly in regions like Gujarat and Rajasthan, aligns with its broader sustainable development objectives. By transitioning towards solar power and other renewable energy sources, India aims to not only reduce carbon emissions but also improve energy access, foster economic growth, and create employment opportunities - India’s commitment to sustainable development is also underpinned by its international obligations and commitments. As a signatory to various international conventions and agreements, including the UNFCCC and the Convention on Biological Diversity, India has pledged to uphold principles of environmental stewardship, biodiversity conservation, and climate action on the global stage. Through partnerships, knowledge sharing, and collaborative action, India seeks to amplify the impact of its sustainable development efforts, contributing to collective efforts aimed at addressing global challenges.
The Union of India and the concerned ministries are directed to implement the measures described in the preceding paragraph, which it has undertaken to implement. Further, they are directed to continue implementing the measures detailed in paragraph 8(d) of this judgment. The directions contained in the order dated 19 April 2021 shall accordingly stand substituted by those contained in the present judgment. The project clearances which have been granted pursuant to the recommendations of the earlier committee appointed in terms of the order dated 19 April 2021 shall not be affected by the present judgment.
List in the second week of August 2024 for consideration of the report of the expert committee appointed in terms of the present judgment.
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2024 (5) TMI 830 - SC ORDER
Condonation of delay of 445 days in filing this civil appeal - sufficient cause for delay or not - HELD THAT:- The reasons assigned are not satisfactory so as to make out a case for sufficient cause for condonation of the delay. Hence, the application seeking condonation of delay is dismissed.
The appeal is dismissed on the ground of delay.
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2024 (5) TMI 829 - MADRAS HIGH COURT
Reassessment u/s 148/148A - escaped income is less than Rs. 50 lakhs or more? - petitioner submits that the respondents only took into consideration the credits in the bank account and did not take into account the debits therefrom and if such debits had been taken into account, she submits that the escaped amount would be much less than Rs. 50 lakhs - HELD THAT:- On perusal of the impugned orders, it is evident that the respondents proceeded ex-parte because the petitioner did not reply or otherwise participate in proceedings. It is also evident that the aggregate deposits were taken into consideration. The petitioner contends that the debits from the bank account were not taken into consideration and that if such debits were considered, the alleged escaped income would be less than the prescribed minimum threshold of Rs. 50,00,000/-. Since the petitioner could not contest the matter on merits earlier, the interest of justice warrants that an opportunity be provided to the petitioner. Since we propose to remand the matter, we do not intend to record any findings with regard to the legal arguments raised with regard to the scope of Section 149(1)(b) of the I-T Act.
The impugned orders are set aside and the matter is remanded for reconsideration. The petitioner is permitted to submit a reply to the show cause notice dated 27.02.2023 within 15 days from the date of receipt of a copy of this order.
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2024 (5) TMI 828 - MADRAS HIGH COURT
Validity of computation sheet and the consequential notice of demand - petitioner pointed out that no addition was proposed in relation to the return of income filed by the petitioner - HELD THAT:- By referring to the computation sheet and the notice of demand, he points out that patent errors were committed while demanding a sum of Rs. 5,04,29,383/-.
Accepts notice for the respondents. She submits that there appears to be a discrepancy when the assessment order and the impugned communications are compared.
On perusal of the assessment order, it is clear that it was concluded therein that no addition is being made in relation to the issues mentioned in paragraph 1 thereof. In those circumstances, the demand made in the computation sheet and the demand notice cannot be sustained. Therefore, this writ petition is allowed by quashing the impugned computation sheet and the consequential notice of demand.
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2024 (5) TMI 827 - DELHI HIGH COURT
Violation of principles of natural justice - the impugned order does not take into consideration the reply submitted by the Petitioner and is a cryptic order - demand including penalty - HELD THAT:- The observation in the impugned order dated 29.12.2023 is not sustainable for the reasons that the reply dated 25.10.2023 filed by the Petitioner is a detailed reply with supporting documents. Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply is incomplete, not duly supported by adequate documents, unable to clarify the issue which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner.
Further, if the Proper Officer was of the view that any further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details.
The impugned order dated 29.12.2023 cannot be sustained and is set aside. The Show Cause Notice is remitted to the Proper Officer for re-adjudication - Petition disposed off.
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2024 (5) TMI 826 - DELHI HIGH COURT
Violation of principles of natural justice - impugned order notes that as neither any reply was received from the noticee nor any one attended the hearing - HELD THAT:- As conceded by the respondent that a reply was filed but the same was not taken into account by the Adjudicating Authority while passing the impugned order. The impugned order is accordingly set aside. The show cause notice is restored on the record of the Adjudicating Authority. The Adjudicating Authority shall decide the show cause notice in accordance with law after giving one opportunity of personal hearing to the petitioner.
It is clarified that in case petitioner once again fails to appear pursuant to the hearing being granted, the Adjudicating Authority would be at liberty to proceed further with the adjudication of the show cause notice ex-parte. However, after taking into consideration the reply filed by the petitioner.
The petition is disposed off.
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2024 (5) TMI 825 - RAJASTHAN HIGH COURT
Jurisdiction - power of Joint Commissioner (Investigation) Enforcement Wing, Rajasthan–I, Jaipur to exercise powers and functions of adjudicating authority under Section 73 of the Act of 2017 - whether notification dated 25.02.2020 confers blanket powers on the Joint Commissioner, Deputy Commissioner and Assistant Commissioner in the matter of exercise of powers under Section 73 of the Act of 2017? - HELD THAT:- It is found that for the purposes of exercising powers of adjudicating authority under Section 73 of the Act of 2017, proper officer would be one who has been assigned that function as adjudicating authority. While notification dated 25.02.2020 provides that for the purposes of exercising powers under Section 73 of the Act of 2017, the officers of the rank of Joint Commissioner/Deputy Commissioner/Assistant Commissioner would be competent, the notification also clearly says that such power would be exercisable by them within their jurisdiction.
All other notifications which have been filed by the respondents do not show that in relation to exercise of powers of adjudicating authority under Section 73 of the Act of 2017, the jurisdiction of Joint Commissioner Enforcement Wing, Rajasthan–I, Jaipur has been extended beyond his jurisdiction including Udaipur jurisdiction.
List the matter on 12.07.2024.
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2024 (5) TMI 824 - CESTAT AHMEDABAD
Exemption from service tax - services of laying, terrazzo flooring, Polishing and PVC Joint Strips to TATA Consultancy Ltd SEZ Park Pune - exemption was denied only for the reason that the Authorization (Form A2 ) bears the wrong address of Bangalore of the appellant - wrong address mentioned and afterwards was rectified - HELD THAT:- The undisputed fact is that the said Form A2 has been rectified and accordingly, the correct address of the appellant was mentioned in the Form A2. Therefore, after rectification it is as if the correct address has always been there in A2 Form, moreover, if at all there is lapse, it is an inadvertent mistake in the form which was duly rectified. For this small lapse substantial benefit of Notification No. 12/2013 cannot be denied.
This Tribunal time and again held that the services received in SEZ is otherwise exempted as per Section 26 (1e) of SEZ Act, 2005 itself and in terms of Section 51 thereof has overriding effect over any other law for time being in force, therefore, in view of the SEZ Act itself no service tax is leviable on the services received in SEZ - The present case is on much better footing that by rectifying the mistake in A2 Form, the condition of the Notification No 12/2013 has been correctly complied with. The appellant are indeed entitled for the exemption Notification No. 12/2013-ST.
The impugned order is not sustainable, hence, the same is set aside - Appeal is allowed.
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2024 (5) TMI 823 - ITAT HYDERABAD
Estimation of Net profit - assessee failed to prove the source of cash deposits and that such deposits are only from the business, confirmed the addition - HELD THAT:- The figures establish that at no point of time, the net profit from the line of business of the assessee is as high as 10%. The accepted figures show that it is from 0.5% to 8%. In these circumstances, estimate of net profit at 10% is too high and on the face of the figures disclosed by the assessee, net profit at 0.5% is too low. Taking a pragmatic view, we consider the net profit at 5% is reasonable and will meet the ends of justice and, therefore, accept the contention raised by AR. AO is accordingly directed to estimate the net profit at 5% of the total sales. Appeal of the assessee is allowed in part.
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2024 (5) TMI 822 - ALLAHABAD HIGH COURT
Maintainability of petition - availability of statutory alternative remedy of appeal - Levy of penalty u/s 129(1)(a) of the U.P. GST Act, 2017 - HELD THAT:- In face of statutory alternative remedy of appeal available and it being equally open to the petitioner to raise all grounds pressed in the present petition before the appeal authority, we are not inclined to offer any interference in exercise of our extraordinary jurisdiction under Article 226 of the Constitution of India.
Since the petition has remained pending before this Court for sometime, it is disposed of with a direction subject to the petitioner availing statutory alternative remedy of appeal against the impugned order within a period of three days and filing stay application, the same may be dealt with and decided, as expeditiously as possible, preferably within a period of ten days therefrom.
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2024 (5) TMI 821 - ITAT HYDERABAD
Addition of unexplained income - cash deposits during the demonetization period - as per assessee sources for the deposits to be of' agricultural income' - HELD THAT:- As the assessee is an agriculturist having source of income from agricultural produce and he has furnished the document showing the agriculture holding of 20 acres of land belongs to his wife and children. The assessee deposited the amount during the demonetization period, which included proceeds from the sale of agricultural produce from his agricultural land and also from the agricultural land belongs to the family and also some deposits from past savings in the bank account.
However, AO has failed to take into consideration the above facts. Revenue has not been disputed about owning agriculture land by the assessee. It is quite fair to assume that the agricultural land must have yielded some produce and during the month of November, the assessee likely received some amount from the sale of agriculture produce.
In view of the above facts and considering the other factors that allow any individual to deposit for a sum of Rs. 2 lakhs in cash during the period of demonetization, we deem it appropriate to restrict the addition to a sum of Rs. 2,00,000/-. Thus, the appeal of the assessee is partly allowed.
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