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2025 (3) TMI 1464
Reopening of assessment u/s 147 - case has been reopened beyond 4 years - non-filing of a return by the assessee - HELD THAT:- In view of the assumption by Ld. AO that the assessee has not filed Income Tax Return, this fact has led to absence of necessary nexus between the tangible material and formation of belief which would vitiate the reassessment proceedings as held in the case of Sagar Enterprises[2001 (12) TMI 18 - GUJARAT HIGH COURT] holding that the factor of non-filing of return of income has overbearingly weighed with the AO for arriving at satisfaction about the failure on the part of the assessee about escapement of income. Therefore, the assessment stood vitiated.
Similar is the analogy in the decision of Ritika Gupta [2022 (8) TMI 796 - ITAT LUCKNOW] which referred to the decision of Sunil Kumar Rastogi [2019 (12) TMI 1612 - ALLAHABAD HIGH COURT]
We would hold that the jurisdiction of AO to reopen the case stood vitiated since the same has proceeded on wrong presumption that the assessee had not filed her return of income. Consequently, the assessment order stands quashed. Assessee appeal allowed.
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2025 (3) TMI 1463
Levy of late filing fess u/s 234E qua TDS returns for various quarters - CIT(A) confirmed the same in the absence of any explanation from the assessee - HELD THAT:- We find that this issue stand covered in assessee’s favor by the decision of Fatehraj Singhvi vs UOI [2016 (9) TMI 964 - KARNATAKA HIGH COURT] holding that the amendment in section 200A came into effect only on 01-06-2015 and the same would have prospective effect. Therefore, there could not be any levy of fee for late filing fee u/s 234E of the Act while issuing intimation u/s 200A prior to 01-06-2015.
It was thus held that amendment u/s 200A was prospective in nature and therefore, no computation of fee for demand or intimation u/s 200A could be made for the TDS deducted for the respective Assessment Years prior to 01-06-2015.
Since no decision of jurisdictional high court is been shown to us, we follow the analogy of decision of Hon’ble Supreme Court rendered in CIT V/s Vegetable products Ltd. [1973 (1) TMI 1 - SUPREME COURT] to hold that in case of two reasonable constructions of taxing statutes, the one that favors the assessee must be adopted. Accordingly, we direct Ld. AO to delete the impugned fees and revise thd demand as raised against the assessee. Assessee appeal allowed.
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2025 (3) TMI 1462
Addition u/s 68 - unexplained cash credits in the form of share application money - addition of commission paid for taking accommodation entries - CIT(A) deleted addition - HELD THAT:- In the case of PCIT vs. Narang Construction and Finance Pvt. Ltd. [2018 (8) TMI 1552 - DELHI HIGH COURT] relied upon the judgment delivered by the Hon’ble Supreme Court Lovely Exports [2008 (1) TMI 575 - SC ORDER] held at the relevant extracts have been reproduced in the order of the AO as well as the CIT(A) which disclosed that the share applicants were entering into proper commercial transactions and were not per se forged, bogus or sham investors.
In the case Lovely Exports [2008 (1) TMI 575 - SC ORDER] as mentioned hereinabove, the Hon’ble Supreme Court held that if the share application money is received by the assessee company from alleged bogus shareholders whose name is given to the Ld. AO then the Department is free to reopen individual assessment in accordance with law.
After hearing both and bare perusal of the impugned order, CIT(A) rightly observed that the assessee / appellant company furnished all necessary documents to prove the genuineness of the transaction and creditworthiness of the investor’s companies, we find material substance in the submissions advanced on behalf of the assessee / respondent. There is no any ground exists to interfere with the finding given by the Ld. CIT(A) and hence the appeal of the revenue liable to be dismissed, devoid of any substance. Appeal of revenue is hereby dismissed.
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2025 (3) TMI 1461
Bogus LTCG - Addition of unexplained cash credit u/s 68 r/w sec 115BBE - HELD THAT:- AR correctly relied upon the judgment of Smt. Krishna Devi [2021 (1) TMI 1008 - DELHI HIGH COURT] in which held that if there was no dispute that shares of said companies were purchased by assessee online and payments were made through banking channel and shares were dematerialized and sales were routed from demat account and consideration was received through banking channels, then the Ld. AO could not make addition only on assumption and conjecture by treating impugned LTCG as bogus.
Addition in question made without confronting any direct material / statement collected against the assessee.
As during the assessment proceedings on being enquired, assessee / appellant duly submitted that shares were originally purchased in cash and were physically delivered on 28.04.2011, and then bonus share were also issued to the appellant and all of them were dematerialized in the demat account ledger, transaction account statement with the registered broker namely M/s Quest Securities Ltd. and copies of the bank statement etc. Perusal of abovementioned documents the legitimacy of the transaction is clearly proved and the Ld. AO only on the basis of some investigation report, made the aforesaid addition and it is relevant to mentioned here that the assessee has not been provided the copy of said investigation report.
Thus, we find material substance in the submissions advanced on behalf of the assessee / appellant and have thoughtful consideration that addition in question deserves to the deleted by allowing the appeal. Assessee appeal allowed.
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2025 (3) TMI 1460
Reassessment proceedings against non-existent company which is already amalgamated with another company - HELD THAT:- Notice u/s 148 of the Act, has been issued in the name of the non-existent company and it is established principle of law that assessment framed in the name of non-existent company based on an issuance of notice is of no consequence.
As mentioned herein before, Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Pvt. Ltd. [2019 (7) TMI 1449 - SUPREME COURT] held that the amendment made in the name of Suzuki Power Train India Ltd. is in resulting since the entity has been amalgated with the Maruti Suzuki India Ltd.
Revenue relied upon the case of Mahagun Realtors (P) Ltd. [2022 (4) TMI 347 - SUPREME COURT] does not apply in this case as amalgamation was complete and notice u/s 148 was issued and also that prior information regarding amalgamation was submitted before competent authority. Hence, assessment framed in the instant case in the name of non-existing camp, suffers from vice of jurisdictional effect and which cannot be cured. Decided in favour of assessee.
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2025 (3) TMI 1459
Reopening of assessment u/s 147 - non complying with mandatory conditions u/s 147 to 151A - addition on account of infrastructure funds - HELD THAT:- As decided in favour of the assessee in assessee’s own case for AY 2013-14 [2025 (3) TMI 1416 - ITAT DELHI] and for AY 2014-15 [2025 (3) TMI 1417 - ITAT DELHI] on comparison of both the charts it will be noted that besides the components of Infrastructure fund having been wrongly identified in the assessment order even the TOTALS of the columns were wrong. Only on this basis of this patent mistake the impugned assessment order needs to be set aside and the addition deleted.
Addition on account of Infrastructure Fund AO has made the addition by a very cryptic and non-speaking order without mentioning anything about the issue involved, facts of the matter or any legal and accounting provision under which the same has been added. Appellant has tried to bring to my knowledge the inference drawn from the assessment order, pointing the para that might be relevant for the basis of this addition. A perusal of the para shows that AO has in fact calculated sum in every column, incorrectly. In fact if it is presumed that the table made by AO is correct then appellant has in fact credited more in P&L Account and not less. Secondly even if it is to be held that the accretion to his fund namely Infrastructure fund received can be added to the income of the assessee then also the same shall be free of taxation because of the fact that appellant enjoys the exemption u/s 11 of the IT Act. Appeal of the assessee is allowed.
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2025 (3) TMI 1458
TP Adjustment - comparable selection - HELD THAT:- As relying on Agnity India Technologies Pvt. Ltd. [2013 (7) TMI 696 - DELHI HIGH COURT] & M/s. Avaya India Pvt. Ltd. [2019 (7) TMI 1279 - DELHI HIGH COURT] we direct to exclude the three companies Wipro Limited, Infosys Ltd. and Tata Elexi Limited.
Addition relating to interest on outstanding receivables - HELD THAT:- Assessee has not filed any Balance Sheet or any financial statement to support its contention. We observed that whether there is a debt free entity, it is normal and logical to not collect the outstanding from its AEs. As per the trade practice, the terms of payment depend upon mutual agreement between the parties and it is also depend upon the market practice in this line of business. Since assessee has not submitted any agreement to submit the terms of payment already agreed between them.
Therefore, we are inclined to permit this issue back to the file of AO/TPO to consider the industry practice in this line of business and in case there exists mutual agreement to show that the assessee has allowed to give terms of payment as per the agreement or determined the industry average in this line of business. If the terms of payment are average period holding of the debtors within the industry average or within the mutual terms of agreement, the same may be allowed. As far as interest rate is concerned, in our considered view, LIBOR plus 425 basis is on the higher side and may be determined upon the terms of payment agreed between parties, it can be proper if the rate of interest on the basis of LIBOR may be computed - Ground is allowed for statistical purposes.
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2025 (3) TMI 1457
TP Adjustment - Comparable selection - whether the assessee is a software product company or provides contract software development services? - HELD THAT:- Infosys Ltd. - As having considered the functions performed, assets employed and risks assumed by both entities, we are of the considered view that being a contract software development service provider, the assessee cannot be compared with the company as giant in its operations as Infosys Ltd. Accordingly, we direct the TPO/AO to exclude Infosys Ltd while benchmarking the international transaction pertaining to “Provision of Software Development Services”.
Persistent Systems Ltd be excluded while benchmarking the international transaction pertaining to “Provision of Software Development Services” in the absence of relevant segment information of Persistent System Ltd, which is comparable to the assessee's international transaction under consideration.
Tata Elexi Ltd. (Segmental) is not functionally comparable to the assessee. Hence, we direct the TPO/AO to exclude Tata Elexi Ltd.(segmental) while benchmarking the international transaction pertaining to “Provision of Software Development Services”
Bodhtree Consulting Ltd. company is earning revenue from various streams, therefore, in the absence of relevant segmental information, this company cannot be said to be functionally comparable to the assessee. Further, as regards the submission of the learned DR that the assessee is seeking exclusion of its own comparable, as noted in the foregoing paragraphs, there is no estoppel on the taxpayer from pointing out that a particular company has been wrongly taken as a comparable. Accordingly, we direct the TPO/AO to exclude Bodhtree Consulting Ltd. while benchmarking the international transaction pertaining to “Provision of Software Development Services”.
TP Adjustment in relation to the international transaction of “Provision of ITeS” - Eclerx Services Ltd be excluded as not functionally comparable.
Cosmic Global Ltd. be excluded while benchmarking the international transaction pertaining to “Provision of ITeS”.
Accentia Technologies Ltd. develops its own software and renders medical transcription services, while the assessee, as noted in the foregoing paragraph, compiles data from various publicly available sources, which is used as an input by the associated enterprises in its various products and databases, which are created, maintained and owned by the associated enterprises. Thus, we direct the TPO/AO to exclude Accentia Technologies Ltd. while benchmarking the international transaction pertaining to “Provision of ITeS”.
Infosys BPO Ltd be excluded as a comparable on the basis of its high brand value and consequent higher profitability.
Denial of deduction claimed u/s 10A in respect of the UB Plaza Unit - Since the year under consideration is the 3rd year of claim of deduction u/s 10A of the Act by the assessee in respect of the UB Plaza Unit, which has been allowed by the coordinate bench in the first year of claim, in absence of any change in facts and law AO is directed to allow the deduction claimed u/s 10A of the Act in respect of the UB Plaza Unit in the year under consideration. As a result, Ground No.9, raised in the assessee appeal, is allowed.
Denial of deduction claimed u/s 10A in respect of the Titanium STPI Unit - Since the year under consideration is the second year of the claim of deduction u/s 10A in respect of the Titanuim Unit, Bangalore, therefore respectfully following the decision of the coordinate bench cited supra, AO is directed to allow the deduction claimed by the assessee u/s 10A with respect to the Titanium Unit, Bangalore. Accordingly, Ground raised in assessee’s appeal, is allowed.
Denial of deduction claimed u/s 10A with respect to the unit acquired from Reuters India Pvt. Ltd.- HELD THAT:- The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal. Accordingly, we direct the AO to allow the deduction claimed under section 10A of the Act with respect to the unit acquired from RIPL.
Denial of the claim of depreciation on goodwill - whether the assessee is entitled to claim depreciation on goodwill which arose on account of merger/amalgamation, being the excess amount of consideration over the value of net assets of the entity acquired, came up for consideration before various Courts/Tribunals? - HELD THAT:- As in the present case, it is evident that neither the AO nor the learned DRP considered the details filed by the assessee, as one of the reasons for rejecting the assessee’s claim was that the same was made by way of a letter instead of filing the revised return of income by placing reliance on the decision in Goetze India Limited [2006 (3) TMI 75 - SUPREME COURT]
We further find that vide letter dated 25/06/2021, the Revenue requested for verification of factual details with respect to the claim of depreciation on goodwill.
Therefore, we are of the considered view that this issue be restored to the file of the jurisdictional AO for de novo adjudication, in light of the decisions cited supra, after examining the details filed by the assessee. Since this issue is restored to the AO for consideration afresh, it is needless to mention that the AO can seek any other information from the assessee for complete adjudication of this issue and the assessee can also furnish any other documents in support of its claim.
Exclusion of communication expenses and travel expenses from both export turnover as well as the total turnover while computing deduction u/s 10A - HELD THAT:- We find that this issue is now decided in favour of the taxpayer in CIT v/s HCL Technologies Ltd, [2018 (5) TMI 357 - SUPREME COURT] Accordingly, respectfully following the aforesaid decision, we do not find any infirmity in the directions of the learned DRP in excluding the communication expenditure and travel expenditure from the total turnover also to the extent it was excluded from the export turnover. As a result, the impugned final assessment order on this issue is upheld and Grounds No. 2 and 3, raised in Revenue’s appeal, are dismissed.
Disallowance on software items u/s 40(a)(ia) - HELD THAT:- We find that the learned DRP while issuing the directions to the AO to delete the disallowance of depreciation on computer software made under section 40(a)(ia) of the Act, followed the aforesaid decision of the Hon’ble Karnataka High Court in Tally Solutions Pvt. Ltd. [2020 (12) TMI 1160 - KARNATAKA HIGH COURT] Thus, in the absence of any contradictory decision on this issue being placed on record, we do not find any infirmity in the directions issued by the learned DRP. As a result, the impugned final assessment order on this issue is upheld.
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2025 (3) TMI 1456
Denial of TDS credit claimed in the return of income only on the basis that the same did not appear in the 26AS of the Appellant - assessee, who is the sole beneficiary of a trust, on the ground that the tax was deducted in the name of the trust and, consequently, was reflected in Form No. 26AS of the trust rather than in the Form No. 26AS of the assessee.
HELD THAT:- It is the settled position that the Department grants credit for TDS only if the said amount appears in the Form No. 26AS of the relevant assessee. Since the TDS credit in the present case was not appearing in the Form No. 26AS of the assessee, the AO, relying strictly on procedural compliance, declined to grant such credit.
Ideally, the assessee ought to have ensured that the deductor deducted tax in the hands of the assessee rather than in the name of the trust. However, the crux of the matter is that the Department has neither granted credit for the TDS in the hands of the trust nor in the hands of the assessee. As a result, the tax deducted at source continues to remain with the Government, while, at the same time, a demand has been raised against the assessee.
This amounts to an inequitable situation, which cannot be countenanced in law. We note that the Ld. CIT(A) has already directed the Assessing Officer to verify the assessee’s claim and grant TDS credit in accordance with the provisions of the Income-tax Act, 1961.
If such credit has not been granted till the date of passing of this order, we hereby direct the AO to take necessary steps to address the request of both the assessee and the trust for the transfer of TDS credit from the Form No. 26AS of the trust to the Form No. 26AS of the assessee and, thereafter, to allow the credit in accordance with law. The grounds of appeal of the assessee are accordingly allowed for statistical purposes.
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2025 (3) TMI 1455
Treatment to amount found in diary and surrendered by the director - HELD THAT:- As no exercise has been made by the Assessing Officer as to hold that the surrender made by the assessee was not proper. No explanation was offered by the assessee before the AO, but the same was made before the Ld. CIT (A), which was also considered by the CIT (A) and in the first round of the litigation same was partly accepted also, who too was partly satisfied with the explanation and sustained addition by giving relief to the tune of Rs. 1.16 crores.
It was the claim of the assessee that the surrender made in the assessment year under consideration was a gross revenue figure and not the net undisclosed income and thus there is a scope for allowing expenditure incurred to earn the undisclosed gross revenue.
Therefore, in our considered opinion a lump sum addition of Rs. 10 Lacs can be applied to cover all the possibilities of revenue leakage as well as to satisfy the claim of the assessee about the expenditure incurred. Once it is settled that the amount surrendered is a gross undisclosed income, there can’t be a full amount addition and only the element of profit can be added into the same.
Thus, addition to the extent of Rs. 10 Lacs out of Rs. 1.35 Cr. is sustained in addition to the income already disclosed voluntarily by the assessee. In these terms Ground No. 3 raised by the assessee is partly allowed.
Method of accounting followed by the assessee - as categorically asked by the AO that by the assessee is not following percentage completion method. In response to this the assessee submitted that companies consistently following the completed contract method there was a discussion w.r.t. ICDS also as provided in section 145 of the Act - HELD THAT:- The facts of case are being governed by the accounting standard 9. It is further observed that the method of accounting adopted by the assessee is being followed consistently since in section and the same has been accepted by the revenue in past. In view of this on the one hand AS-7 is not applicable in the case of the assessee on the other hand as per AS-9 the assessee is consistently following the method and calculating its profits on project completion method this fact is not under challenged either by the revenue or by the assessee.
It is also being to our notice that the assessee had already offered to tax the income earned from the Project Completion Method in subsequent A.Y 2016- 17 and A.Y 2017-18.
In view of the above it is transpired that the transactions of the immovable property transfer are governed by the special provisions of the Transfer of Property Act, 1882 (“TPA” for short) where under, every transfer of an immovable property requires compulsory registration under the provisions of the Registration Act, 1917 and the transfer is considered completed only when the entire consideration is received by the seller from the buyer and thereafter possession is handed over to him. Even the cases of part performance u/s. 53A of TPA, 1882 cannot be considered to be a complete transfer in the context of the present case. Further no title can be validly transferred to the buyer by merely entering into a Sale Agreement in as much as the Sale Agreement cannot confer any legal title of ownership to the proposed buyer. The buyer may make the payment and comply with the conditions of the Agreement or may not. There is no prohibition upon a buyer to complete the transaction.
Pertinently, the so called binding Agreement does not provide for forfeiture of money and therefore the amounts have been refunded in full because of the right of the buyer to get the booking cancelled and also keeping in mind the commercial ground realities. In view of these peculiar facts & circumstances therefore, it will not be logical and justifiable to recognize the revenue by a prudent businessmen until the transaction come to a conclusion by receiving of the entire payment.
AO has not brought any special reason as to why he is taking a departure from the past settled history between the assessee and the Department in as much as all along in the past, the assessee declared the results (Net Profit) by consistently following the Project Completion Method only and the policy as stated above and accordingly the ROI was filled.
In view of the above, the facts of the matter and the ratio as laid down in the case CIT v. Excel Industries Limited [2013 (10) TMI 324 - SUPREME COURT] are similar. The facts discussed (supra) are not under challenge by either of the parties to the disputes and legal position goes in favour of the assessee.
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2025 (3) TMI 1454
TP adjustment - corporate guarantee and letter of comfort provided by the appellant to its AEs - HELD THAT:- AR had brought to our notice that this Tribunal in their own case for AY 2013-14, by relying on the decision in the case of CIT v. Everest Kento Cylinders Ltd [2015 (5) TMI 395 - BOMBAY HIGH COURT] had ascertained the ALP guarantee commission at 0.5%. Respectfully following the same, we direct the AO to adopt the guarantee commission @ 0.50% as against 2% and accordingly re-compute the transfer pricing adjustment. This ground therefore stands partly allowed.
Brand promotion expenses incurred during the year was in the nature of international transaction and thereafter making TP adjustment - HELD THAT:- Hon'ble Delhi High Court has held in the case of Maruti Suzuki Ltd [2015 (12) TMI 634 - DELHI HIGH COURT] that the Revenue needs to establish the existence of international transaction before undertaking benchmarking of AMP expenses. Hence, applying this ratio decidendi laid down in these judgments, we agree with the assessee that the approach of the TPO cannot be upheld. We note that the aforesaid judgments of Hon'ble Delhi High Court (supra) had not been considered by this Tribunal in assessee's own case for AY 2011-12
Even the assessee has not brought on record all the relevant facts concerning the Indonesian AE, AMP expenses incurred by the latter and if not, then whether can it be said that the assessee had indeed incurred expenses on its behalf etc. Also, the nature of AMP expenses incurred by the assessee, reasons for such excessive AMP costs vis-à-vis sales etc. have also not been explained before the TPO. Without these facts being brought on record, one cannot objectively ascertain and decide as to whether there exists any arrangement between the parties at all or not. For the aforesaid reasons and in fitness of the matters, we set aside the order passed by the AO on AMP expenses and restore the same to the file of AO/TPO for examining it afresh.
TP adjustment on account of royalty - HELD THAT:- In this case, assessee following the mercantile system of accounting, there is no question of deferment of receipt of income since the assessee was in a position to create the document as the transaction with AE which cannot be appreciated. It is only afterthought so as to postpone the liability of taxation. Accordingly, we are of the opinion that lower authorities were justified treating the accrued royalty as income of assessee.
Disallowance of u/s.14A read with Rule 8D - HELD THAT:- We note from the factual matrix discussed supra, that assessee had total own funds more than Rs 1121 crores and the total investment made only to the tune of Rs. 930 crores, therefore, the presumption in the cases of Reliance Utilities & Power Ltd supra is clearly applicable and the Ld. DR could not demonstrate that this presumption is factually incorrect, therefore, the disallowance made under section 14A read with Rule 8D(2)(ii) of the Rules, was not warranted and is directed to be deleted.
Coming to disallowance under Rule 8D(2)(iii), it is noted that in the case of ACIT v. Vireet Investment (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] has held that only the dividend yielding investments are to be considered in computation of disallowance under this Rule. Assessee also referred to the revised computation of disallowance in terms of Rule 8D(2)(iii) with reference to dividend yielding investments. Respectfully following the decision of Special Bench (supra), the AO is directed to verify the computation provided by the assessee and re-compute the disallowance under section 14A read with Rule 8D(2)(iii) accordingly. This ground is therefore partly allowed.
Disallowance of export agency commission paid to non-residents u/s.40(a)(i) - HELD THAT:- We note that this issue has already come up before this Tribunal in the assessee's own case for earlier assessment year 2011-12, wherein, this Tribunal was pleased to allow the contentions of the assessee by relying on the decision of this Tribunal in AY 2008-09. It is noted that the Tribunal has relied on the decision in the case of CIT v. Faizan Shoes Pvt. Ltd. [2014 (8) TMI 170 - MADRAS HIGH COURT] wherein held opening of letters of credit for the purpose of completing the export obligation was an incident of export and, therefore, the non-resident agent was under an obligation to render such services to the assessee, for which commission was paid. The non-resident agent did not provide technical services for the purposes of running of the business of the assessee in India. Therefore, the commission paid to the non resident agents would not fall within the definition of "fees for technical services" and the assessee was not liable to deduct tax at source on payment of commission.
Disallowance of loss on actual re- payment of External Commercial Borrowings ('ECB') loan during the year - HELD THAT:- In the present case, the assessee is noted to have obtained ECBs for acquiring indigenous fixed assets. It had accordingly entered into forward contracts to hedge the foreign exchange fluctuation at the time of repayment of loan. For this, it had paid an upfront premium to the seller of the contract. Further, the assessee had also incurred foreign exchange loss at the time of repayment of such ECBs. The assessee is noted to have amortized the premium cost over the life of contract, which along with the loss incurred on repayment of foreign currency loan was claimed as deduction from business profits.
The first claim in dispute before us relates to amortized portion of premium paid on foreign exchange forward contracts entered into by the assessee. These foreign exchange forward contracts were entered for the purposes of repayment of foreign exchange loan/external commercial borrowing taken by the assessee for acquiring indigenous fixed assets.
We find that this identical issue had come up for consideration in the case of CLP Wind Farm (India) Ltd [2022 (9) TMI 299 - ITAT AHMEDABAD] wherein it was held that the premium paid on foreign exchange forward contracts entered into by assessee for purpose of repayment of loan was to be amortized as revenue expenditure over life of contract. Thus we direct the AO to allow the deduction for the amortized sum of forward premium claimed by way of hedging cost.
Disallowance is the loss arising upon repayment of ECBs which were used for acquiring indigenous fixed assets in India - HELD THAT:- In the relevant FY 2011-12, the ICAI had modified Para 46A of AS-11 in December 2011, in terms of which the company now had an option to either debit such foreign exchange loss to the Profit & Loss Account or capitalize the same to the cost of assets. The assessee, in the present case, chose the latter option. Merely because the assessee chose the latter option would not be determinative of the character of the cost. It is by now trite in law that, the entries whether the assessee is entitled to a particular deduction or not depends upon the provision of law relating thereto. The existence or absence of entries in the books of account be decisive or conclusive in the matter.
As the reasoning given by the AO for making the impugned disallowance is found to be unjustified. Overall therefore, we hold that the impugned disallowance was untenable and is therefore directed to be deleted. This ground is allowed.
Denying the claim of balance additional depreciation on the assets which were put to use in the earlier FY 2011- 12 - HELD THAT:- In this case, the intention of the legislation is absolutely clear, that the assessee shall be allowed certain additional benefit, which was restricted by the proviso to only half of the same being granted in one assessment year, if certain condition was not fulfilled. But, that, in our considered view, would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year. The Tribunal, in our view, has rightly held, that additional depreciation allowed under Section 32(1)(iia) of the Act is a one time benefit to encourage industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting additional allowance. We are in full agreement with such observations made by the Tribunal. We direct the AO to delete the impugned disallowance and allow this ground of appeal.
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2025 (3) TMI 1453
Delay in adjudication of the SCN u/s 28 of the Customs Act, 1962 - denial of opportunity to respond to the merits of the SCN - violation of principles of natural justice - HELD THAT:- The Respondent has now obtained instructions and submits that the matter may be remanded to CESTAT. In the opinion of this Court, considering the fact that a provisional assessment was done and the Appellant has in fact deposited a sum of Rs. 2.80 crores, the Court is inclined to give the Appellant an opportunity to file a reply on merits.
List before the CESTAT for further proceedings on 5th May, 2025.
Petition disposed off.
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2025 (3) TMI 1452
Seeking grant of regular bail - Money Laundering - scheduled/predicate offence - proceeds of crime - collecting commissions and supplying unaccounted liquor to government liquor shops - twin conditions under Section 45 of the PMLA, 2002, are satisfied or not - delay in trial proceedings - HELD THAT:- It appears that the applicant had actively participated in the commission of predicate offence; had acquired proceeds of crime and had substantial share in proceeds of unaccounted liquor cannot be ignored. The investigation against 11 persons including the applicant is complete and three prosecution complaints against 11 accused persons spanning to nearly 20,000 pages with over 30 witnesses and 250 documents have been filed by the investigating agency and the investigation is going on. Despite the alleged huge scam, prosecution complaint has been filed against 11 persons. Even as per allegations made in the complaint filed by the ED, role of other individuals have also been surfaced. + There is no attachment of property against accused persons being distillers despite quantifying the same at over 200 crores and no proceedings under Section 8 of the PC Act has been initiated against them. Though it is true that the applicant has suffered long period of incarceration and the trial has not yet commenced and is not likely to conclude but the right to bail in cases of delay, coupled with incarceration for a long period, depending on the nature of the allegations, should be read into Section 439 of the Code of Criminal Procedure and Section 45 of the PML Act. there is substantial material indicating a strong nexus between the applicant and the other accused persons in the commission of the crime.
Records show that the grounds of arrest was communicated to the applicant by the ED in writing. Thus, without giving any observation as to whether the statement recorded under Section 50 of the PMLA are admissible in evidence, but their thorough consideration should be reserved for the trial court. It emphasized that at the bail stage, these statements can be examined to ascertain whether there are reasonable grounds to believe that the applicant is not guilty. There is a difference between the admissibility of a statement of an accused recorded under Section 50 of the Prevention of Money Laundering Act (PMLA) and its evidentiary value.
It can be foreseen that while the High Court in the specific facts and circumstances (where there was prima facie material against the petitioner) came to the conclusion that mere possession of proceeds of crime and upholding such proceeds as untainted would be sufficient to invoke the provisions of PMLA, however, the ratio of the said judgment may have the potential to have an unintended fallout in a different set of facts. Depending on the facts of the case, such an interpretation may include persons who might have no genuine knowledge and connection with the predicate offence and/ or the tainted money circulated by the actual accused persons and may have to go through the rigours of trial for no fault - Mens rea is a critical ingredient for any criminal offence and therefore requires its presence in any action or consequence which arises out of or in relation to an offence. It is important that to prosecute someone for mere possession of purported proceeds of crime, there should be an equal burden on the prosecution to prove at least a prima facie link to the proceeds of crime as defined under the Act.
Money laundering is understood to encompass a scenario in which an individual commits an offense outlined in the PMLA schedule, leading to the generation of property. This property subsequently qualifies as the proceeds of the crime. Furthermore, the individual engaged in activities such as concealment, possession, or utilization of said proceeds of crime, shall be deemed to have committed the offense of money laundering - the quantification of the Proceeds of Crime involves a multifaceted approach. It begins with the identification of initial assets stemming from criminal activity, subsequently encompassing any assets obtained through these initial proceeds.
Conclusion - It is thus held that in the investigation conducted during the predicate offence, the applicant being the orchestrator of the entire liquor scam in the State of CG, was involved in money laundering and proceeds of crime along with other co-accused therefore, the entitlement of the applicant to get bail under PMLA, 2002, is not acceptable and considering the entirety of the matter, this Court is of the opinion that the applicant is unable to satisfy twin conditions for grant of bail under Section 45 of the PMLA, 2002, as such, it is not a fit case for grant of bail to the applicant for the reasons.
The prayer for bail made by the applicant under Section 483 of the Bhartiya Nagrik Suraksha Sanhita, 2023 (BNSS) read with Section 45 of the PMLA, for the alleged offence punishable under Sections 3 & 4 of the PMLA, 2002 is hereby rejected.
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2025 (3) TMI 1451
Liability of appellants to pay service tax under the reverse charge mechanism on the services rendered outside India by service provider situated abroad - HELD THAT:- The issue is no more res integra as this Tribunal had on the same issue involving the same Appellant for earlier periods, in M/S. SUNDARAM INDUSTRIES LTD. VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, MADURAI [2023 (6) TMI 591 - CESTAT CHENNAI] decided the issue in favor of the Appellant.
Conclusion - The appellant is not liable for the service tax demand, as the services are performed outside India and fall under the exclusion provided by Rule 3(ii).
Appeal allowed.
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2025 (3) TMI 1450
Scope of service and declared service - whether the supply of food and beverages in the cinema complex falls within the definition of ‘service’ and ‘declared service’ in terms of Section 65B(44) and Section 66E of the Finance Act, 1994? - HELD THAT:- The issue is no longer res integra and has been decided in the case of the appellant themselves in the case of M/s. PVR Limited, Shri Nitin Sood, Shri Ajay Bijli and Shri Brijesh Arora Vs. CST, New Delhi [2023 (12) TMI 81 - CESTAT NEW DELHI] holding that the supply of food and beverages in the cinema hall does not involve any service element and is merely transaction of sale. The period involved in the said order was from 2013-2014 to 2015 and the present appeal involves the subsequent period from 2015-16 to June, 2017. The facts and the issue being same, the present appeal is squarely covered by the aforesaid decision of this Bench.
Conclusion - The sale of food and beverages in cinema complexes, when limited to pre-packaged or reheated items without additional service elements, is not a "service" under the Finance Act.
There is no reason to differ with the aforesaid order - Appeal allowed.
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2025 (3) TMI 1449
Entitlement to exemption under N/N. 12/2012-CE for goods supplied against International Competitive Bidding (ICB) and to Mega Power Projects - reversal of an amount equal to 6% of the value of exempted goods under Rule 6 of the Cenvat Credit Rules, 2004 - HELD THAT:- In the instant case, there is no dispute that the goods have been supplied against International Competitive Bidding. Therefore, it is prudent to examine if these goods, when imported in India, are exempt from duties of customs and the additional duty leviable under sub-Section 1 of Section 3 of the Custom Tariff Act, 1975.
It is not in dispute that the goods have been supplied by the appellant to Mega Power Project(s) as certified by the Joint Sectary to the Government of India in the Ministry of Power. We find that the lower authority have ruled that the Electrical Power Cables are not covered under Chapter Heading 98.01 of the Customs Tariff Act, hence, these are not exempt from basic Customs Duty as well as Additional Customs Duty. This reasoning seems incorrect as the Central Excise Tariff Act does not have any corresponding Tariff entry as it exists in Customs Tariff Act, 1985. This issue has already been decided by the Tribunal in the case of Cords Cable Industries Pvt. Ltd. Vs. Commissioner of C. Ex., Jaipur-I [2016 (9) TMI 1126 - CESTAT NEW DELHI], wherein it was held that electrical wires, cables supplied to Mega Power Projects are fully exempt under the corresponding Central Excise Notification read with Customs Notification.
However, Condition No. 93 to the Notification No. 12/2012-CUS dated 17.03.2012, also prescribes certain requirements to be fulfilled, for availment of the exemption from Customs Duty as well as Additional Customs Duty. These conditions are factual in nature as to whether Power Purchasing State has constituted the Regulatory Commission with full powers to fix Tariffs and whether the Power Purchasing States have undertaken to carry out distribution reforms as laid down by the Ministry of Power. It also needs to be seen whether procurement Certificates have been issued by the designated Authorities as per Sr. No. (b) and (c) of the Condition No. 93. The documents submitted along with appeal, do not contain all the relevant details which are to be seen in the matter.
It is fit to remand the matter to the adjudicating authority to see fulfilment of Condition No. 93 of Notification No. 12/2012-CUS dated 17.03.2012. If these Conditions are satisfied, then the appellant will not be required to reverse an amount as demanded by the department. The Bench directs the Appellant to produce relevant documents/Certificates in respect of supplies involved in the case before the adjudicating authority within one month for determining whether the Condition No. 93 of the said Customs Notification is satisfied in the case. The adjudicating authority also directed to decide the issue within 3 months from the date of production of above documents, as the matter is quite old.
The appeals are disposed off by way of remand to the adjudicating authority.
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2025 (3) TMI 1448
Cenvat Credit on the Goods Transport Service (GTS) for outward transportation of cement from the depot to the buyer's premises on a FOR (Free on Road) basis - Extended period of limitation - HELD THAT:- It is not in dispute in this present appeal that wherever the sale has been on FOR basis, as evidenced from record, the credits have allowed and it has not been disputed by the Department any further. However, in the case of Rs. 3,44,228/-, the appellant could not produce sufficient documents to satisfy the Adjudicating Authority that the ex-depot sales were also in the nature of FOR or that they were essentially FOR sale. The documents being cited as evidence before this Bench to prove that sales were on FOR basis pertains to the month of April as pointed by the Learned AR and that also is not very categorical as to whether the sale was on FOR basis or otherwise. There is no other corroborative evidence that it is on FOR basis.
The Adjudicating Authority has gone through various case laws as well as evidence adduced by the appellant at para 22 and observed that the documents furnished by the assessee related to the clearance of final products directly through the factory to the buyers premises and that they have not produced any documents / information evidencing (i) the sale from Depot/Premises of Consignment Agent to the customer’s premises was on FOR destination basis, (ii) transfer of property at buyer’s premises and (iii) inclusion of the freight charges in the assessable value and payment of Excise duty on the said freight charges. Therefore, essentially, the Adjudicating Authority has held that the Assessee had clearly failed to determine place of removal with reference to the points of sale and therefore the credit taken at outward freight on transportation of finished goods were clearly beyond the place of removal in relation to sale ex-depot.
Extended period of limitation - HELD THAT:- The show cause notice has not adduced any substantive ground to invoke the ingredients required for invoking the extended period.
Conclusion - While on merit the demand is sustainable in the impugned order as the appellant have clearly failed to bring on record the evidence substantiating that sales were on FOR basis even in the case of ex-depot, however, as far as invocation of extended period is concerned, that it is not sustainable. Therefore, while on merit it is upheld, but on limitation, the demand is not sustained. Since, the entire demand is barred by limitation, the appeal to the extent of setting aside the demand and penalty by Adjudicating Authority is set aside on this count itself.
Appeal allowed.
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2025 (3) TMI 1447
Denial of utilization of CENVAT Credit for payment of duty during the defaulted period in terms of Rule 8(3A) of Central Excise Rules, 2002 - levy of interest and penalty - HELD THAT:- Hon’ble High Court in [2024 (7) TMI 814 - CALCUTTA HIGH] has held that matter should be kept pending and is to be taken only after the Special Leave to Appeal No. 16523/2015 is decided by the Hon’ble Apex Court. However, during the course of hearing, it has been brought to the knowledge of the Bench that the Hon’ble Supreme Court has already disposed of the matter and the Department has already withdrawn the appeal.
The issue in the case of Indsur Global Ltd. has already been decided by the Hon’ble Supreme Court. In these circumstances, it is found that the issue is presently not pending before the Hon’ble Supreme Court. Thus, in our view, there is no bar in taking up the issue for a decision based on the available documents.
Considering the fact that the provisions of Rule 8(3A) of Central Excise Rules, 2002 have been declared ultra vires by the Hon’ble Gujarat High Court in the case of Indsur Global Ltd. and also by the Hon’ble Punjab and Haryana High Court in the case of Sandley Industries [2015 (10) TMI 2455 - PUNJAB & HARYANA HIGH COURT], the CENVAT Credit cannot be denied to the appellant for utilization in payment of duty during the defaulted period. Thus, there is no infirmity in utilization of CENVAT Credit for payment of duty during the defaulted period.
Conclusion - Since the denial of utilisation of CENVAT Credit by invoking Rule 8(3A) of the Central Excise Rules, 2002 has been declared ultra vires by Courts, utilisation of CENVAT Credit during the impugned period by the appellant was not irregular. Accordingly, no amount can be demanded from the appellants either for using the CENVAT accruals of subsequent months or for using the CENVAT account for payment of duty during the said period for the alleged contravention of Rule 8(3A) of the Central Excise Rules, 2002.
The demand confirmed in the impugned order by denying the payment made by the appellant through CENVAT Credit is not sustainable and accordingly, the same is set aside - Since the demand raised against the appellant does not survive, the question of demanding interest or imposing penalty does not arise.
Appeal allowed.
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2025 (3) TMI 1446
Levy of composition rate of tax on construction contract - covered by Part “B” of the Notification dated 30th February 2006 or not - whether the contract entered into by the Respondent herein with M/s. Sahara Hospitality Ltd was a works contract which fell within the Notification dated 30th November 2006? - HELD THAT:- The MSTT, after carefully going through and analyzing the context of the documents available before it, came to the conclusion that the works contract executed by the Respondent, was basically air conditioning work in a centralized Air Conditioned building mostly inside the building. All the wiring, cabling had to be concealed. It had to be done along with civil work, if a new building was being constructed, or if the work was being given along with other repairs and maintenance of the building. Finally, the said work had to be completed before finishing, plastering and civil work of the building. In a nutshell, the MSTT came to the conclusion that the work was basically going hand in hand with the civil work and the completion of the civil work was dependent on the completion of the air conditioning work. It is on this basis that the Tribunal came to the conclusion that the works carried out by the Respondent (the Appellant before the MSTT) had a direct nexus with the ongoing construction work of M/s. Sahara Hospitality Ltd, and therefore, the contract entered into by the Respondent with M/s. Sahara Hospitality Ltd was squarely covered under the Notification dated 30th November 2006.
The Tribunal, being the last fact finding authority, has come to the conclusion that the work carried out by the Respondent was going on hand in hand with the civil work of M/s. Sahara Hospitality Ltd and completion of civil work was dependent on the completion of the air conditioning work. Once this is the case, the order of the MSTT in so far as it relates to applying the Notification dated 30th November 2006 to the works contract executed by the Respondent with M/s. Sahara Hospitality Ltd does not give rise to any substantial question of law.
Even as far as the penalty is concerned and which was deleted by the impugned order, is correctly done so because if the principal challenge succeeds there is no question of any penalty being levied on the Respondent.
Conclusion - Works contracts ancillary to building construction, executed before completion, fall within the Notification's scope, qualifying for a reduced tax rate. Service tax is excluded from the total contract value under the MVAT Act.
Appeal dismissed.
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2025 (3) TMI 1445
Dishonour of Cheque - legally recoverable debt or not - grant of leave to appeal against the acquittal of accused.
Leave to Appeal Against Accused No. 4, Sumit.
Provisions for grant of leave - HELD THAT:- When there is judgment of acquittal, Court should be slow in interfering. Because presumption of innocence is reinforced. When the acquittal judgment is challenged on certain grounds, substance of those grounds is to be tested. However, standard of inquiry (expected for testing those grounds) to be carried out at the stage of grant of leave and that inquiry carried out while deciding the appeal, finally differs. Same standard of inquiry cannot be carried out at the stage of grant of leave.
Meaning of the phrase “in charge of and responsible to the company for conduct of business of the company” - HELD THAT:- There are certain other Acts which holds Company responsible or guilty. The list of few of the Acts given in para no. 19 of the said judgment. Such as the Prevention of Food Adulteration Act, the Drugs and Cosmetics Act, the Employees Provident Fund Act, Payment of Gratuity Act and so on. But for understanding the meaning of the phrase, we have to bank on the provisions of Companies Act. There is reference of the provisions of Sections 5, 291 and few of the definition clauses in the Companies Act. The list of such persons is also enumerated therein. The Managing Director is such kind of post which falls in that category.
Necessary averment in the complaint - HELD THAT:- Mere bald statement is not sufficient. One cannot presume every director is supposed to know about the transaction. However, category of Managing Director, Joint Managing Director or a director who has signed the cheque stands excluded. They will certainly liable and there need not be specific pleading “in charge of and responsible” in the complaint. In Gunmala Sales Private Ltd. [2014 (12) TMI 1116 - SUPREME COURT], this principle is further elaborated. Any particular director may produce incontrovertible or unimpeachable evidence to show his disconnection to the transaction. The High Court can quash such proceeding. That is why there is further necessity of pleading necessary averment with particular details - The complainant is supposed to know only generally as to who were in charge of the affairs of the company. Other administrative matters would be within the special knowledge of the company.
When it can be said there is consent, connivance or neglect - HELD THAT:- In present case, the evidence is already adduced. Every party has opened his cards. The principles are still applicable. But evidence has to be seen.
Evidence - HELD THAT:- Mere averments are not sufficient. It needs to be substantiated. There will be onus on the accused, only when the complainant will discharge initial burden. It is for the complainant to prove, accused no. 4 was involved in the transaction in either of the capacity. The Accused no. 4 is described as Vice President of Finance and Taxation. The correspondence which is referred above was in between the accused no. 4 and Morries. This correspondence relates to the previous cheques and not to the present 16 cheques. On the basis of that correspondence, it can certainly be said that accused no. 4 is aware about some transaction. But this is not enough, to hold him vicariously liable. Something more is required. The Complainant ought to have adduced certain evidence to show his complicity in the manner laid down under Sections 141 (1) and 141 (2) of the Negotiable Instruments Act. The learned Additional District Judge has correctly appreciated the evidence, and he rightly acquitted the accused no. 4. So, no case for grant of leave is made out. This is such type of acts, wherein the detailed scrutiny is not required. But at the threshold, we can decide the issue of vicarious liability.
Leave to Appeal Against Accused No. 2, Anubhav
It is true there are no documents showing incurring of expenses by Morries on account of professional expenses to advocates and other expenses (except debit note), but it is matter of record that rate of interest is subsequently enhanced by Debt Recovery Tribunal. It is very well true the evidence has to be appreciated on the basis of the documents produced and also on the basis of documents which could have been produced but not produced. The learned Appellate Judge has given more stress on the documents which are neither mentioned nor produced. The cross-examination of the witness also needs to be considered. It is admitted fact that accused has not given any evidence.
This Court is required to ascertain the correctness of the findings by the Appellate Court while acquitting the accused no. 2. It needs to be seen whether the findings on the point non proof of the liability is correct or not. The documents which are already on record are to be given weightage or documents which are not produced are to be given weightage. This has to be considered in totality of the evidence on the basis of the cross-examination. No doubt the Complainant by examining the Chartered Account has offered an explanation for not showing the amount in income tax returns. It is also true that Constitutional Courts have opined in certain judgments that reflecting the amount in income tax returns has got different connotation and it cannot be the factor to disbelieve the claim of the Complainant.
Conclusion - The evidence against Anubhav warranted further examination, while the evidence against Sumit did not justify granting leave to appeal.
Leave to prefer an appeal is refused against the accused no. 4-Sumit - Leave to prefer an appeal against accused no. 2-Anubhav is granted - appeal admitted.
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