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Showing 321 to 340 of 1280 Records
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2022 (10) TMI 961
Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Existence of debt and dispute or not - time limitation - HELD THAT:- Upon perusal of the records, it is evident that the amount was disbursed to the Corporate Debtor. The Corporate Debtor has admitted in paragraph 13 of letter dated 24.09.2016 the fact that he has received an amount of Rs.15,00,000/- vide DD No. 751011 drawn on SBBJ Bank. This indicates that the fact that there was a valid disbursal - the Respondent was under an obligation to enter into an Appointment Letter by signing the Retailership Agreement post receipt of security deposit. Further, Clause 3 of letter dated 24.09.2016 stipulates that the security deposit shall be refunded at the end of 7th year. Since the Respondent has neither entered into an agreement nor refunded the deposit, there is a clear default.
This application was filed on 05.12.2019 and as submitted by Petitioner the date of default is 05.08.2019. Hence, the application falls within the limitation period of three years - the Respondent has defaulted in the payment of the outstanding debt.
The application made by the Petitioner is complete in all respects as required by law. It clearly shows that the Respondent is in default of a debt due and payable, and the default is in excess of minimum amount stipulated under section 4(1) of the IBC, at the relevant time. Therefore, the default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor - Petition admitted - moratorium declared.
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2022 (10) TMI 960
Recovery of Service tax - works contract - Government of Andhra Pradesh has awarded the work of Pranahitha Chevella Lift Irrigation Scheme Link-II Package 7 now renamed as Kaleshwaram Project - Link-II - Package No. 7 - applicability of N/N. 41/2009-Service Tax, dated 23rd October, 2009 and Circular No. 116/10/2009, dated 15th September, 2009 - HELD THAT:- From a perusal of the documents, it is seen that the petitioners have been entrusted with the works of digging up the canal for the purpose of Kaleshwaram Project, as per the Articles of Contract, dated 17-11-2008. As seen from the documents filed by the petitioners, on an earlier occasion, the official respondents duly taking into consideration the exemption granted by the Ministry of Finance, Government of India, vide Notification No. 41/2009-Service Tax, dated 23-10-2009, have released the Service Tax amounts which were earlier recovered from the petitioners’ bills. Admittedly, the Government of India through the Ministry of Finance has issued the notification exempting the payment of Service Tax for certain works done by the Government or on its behalf.
Notification No. 41/2009-Service Tax, dated 23-10-2009 makes it abundantly clear that the same is exempting the Service Tax for the canal works done by the Government or on its behalf i.e., the petitioners.
Admittedly, in this case, there is no dispute that the petitioners have undertaken the work for digging up the canal system for the purpose of Kaleshwaram Project on behalf of the Government, which is admittedly not a commercial activity, and which is chargeable to service tax. Once the Government of India, through the Ministry of Finance, has granted the exemption to the work contracts in respect of canals and once the circular has been issued clarifying the same, the endorsement made by the Director of Works Accounts is without jurisdiction and contrary to the said exemption granted by the Government of India - It is well settled principle of law that any endorsements or orders made by the officials/Departmental Heads cannot override the provisions of the Act/Rules/Circulars.
The official respondents are directed not to recover or deduct any amounts towards Service Tax pursuant to the endorsement of the Director of Works Accounts - Petition allowed.
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2022 (10) TMI 959
Levy of service tax - foreign currency expenditure for the financial year 2012-13 - reverse charge mechanism - validity of SCN - HELD THAT:- In the present case the show cause notice does not specify the category of service under which the demand has been confirmed.
In regard to the period from July 01, 2012 to March 31, 2013 the demand has been proposed under section 66A of the Finance Act which did not exist. This precise issue was considered by a Division Bench of the Tribunal in M/S FRISCO FOODS PRIVATE LIMITED VERSUS COMMISSIONER, CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, DEHRADUN [2021 (11) TMI 428 - CESTAT NEW DELHI] and it was held that the charging section which has been invoked for the period post 2012 does not exist at all and, therefore, there is no question of any ambiguity. Even if there is an ambiguity, it should go in favour of the assessee.
As the demand for both the aforesaid period could not have been confirmed, the impugned order dated 28.07.2015 deserves to be set aside and is set aside - Appeal allowed.
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2022 (10) TMI 958
Area Based Exemption - Relevant date for commencement of commercial production - the date of commencement of commercial production should be treated as 01.01.2006 in terms of the notification dated 10.06.2003 as contended by the Department or it should be treated as 12.06.2006 as contended by M/s. Troikaa Pharmaceuticals (the respondent)? - HELD THAT:- A categorical finding has been recorded by the Commissioner (Appeals) that the ingredients to manufacture the tablets were received by the respondent on 05.06.2016. This finding has not been assailed in the appeal. The date of commercial production, therefore, cannot be before 05.06.2006. The EM also records the date of ‘commencement of commercial production’ as 12.06.2006.
The dates of the two records MFR and BMR as 01.06.2006 is contained in the BPR dated 12.06.2006 of the tablet by bifosa. This was the first batch produced by the respondent on 12.06.2006. The contention of the Department that the date of commercial production should, therefore, be treated as 01.06.2006 and not 12.06.2006 is incorrect as both these documents are prepared as per the standard operating procedure of good practices followed by the respondent which is also prescribed under the Drugs and Cosmetic Rules.
There is no infirmity in the impugned order - The appeal is, accordingly, dismissed.
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2022 (10) TMI 957
Wrongful availment of CENVAT Credit - recovery of credit alongwith interest and penalty - import of non alloy copper coated wire of M.S/non alloy solid wire/welding wire and are carrying out processes like cutting, rewinding, branding, testing and repacking - process amounting of manufacture or not - HELD THAT:- A part of the imported goods has been used for manufacture of the goods cleared on payment of duty and duly reflected in the ER-1 returns filed. The remaining imported goods which were available in stock as such or contained in finished goods have been allowed to be traded by the Revenue.
A detailed calculation needs to be made by the lower authorities to determine how much of the credit amounting to Rs.3,08,58,313/- pertained to the inputs which were used by the appellants for manufacture and clearance of the dutiable goods. To that extent, the amount reversed needs to be restored to the appellants. For the purpose of this computation, the matter needs to be remanded back to the original authority. It is made clear that Section 142(3) of the CGST Act has to be followed strictly.
The concerned officer should consider granting cash refund of any amount due to the appellants - the appeals are partly allowed and the matter remanded back to the original authority.
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2022 (10) TMI 956
Levy of additional sales tax under the provisions of Section 2(a) of the Tamil Nadu Additional Sales Tax Act, 1970 - amendment to Section 2 of the Tamil Nadu Additional Sales Tax Act, 1970 vide amendment in the year 1996, w.e.f. 01.08.1996 - HELD THAT:- In the case of THE STATE OF TAMIL NADU, REP. BY THE JOINT COMMISSIONER (CT) , COIMBATORE VERSUS TVL. BANNARI AMMAN SUGARS LIMITED [2018 (1) TMI 1698 - MADRAS HIGH COURT], though it has been concluded that, the Sales Tax Appellate Tribunal has rightly held that, additional sales tax cannot be levied, since the taxable turnover for the whole year was determined as Rs.43,03,53,904/-, which is below Rs.100 crores in a year, there is no discussion as to why the other two decisions rendered in the cases of PHILIPS INDIA LIMITED VERSUS ASSISTANT COMMISSIONER (CT), FAST TRACT ASSESSMENT CIRCLE II, AND OTHERS [2004 (5) TMI 538 - MADRAS HIGH COURT] National Time Company [2010 (7) TMI 842 - MADRAS HIGH COURT] stand dissented.
The case remanded back to the original Authority to reconsider the demand of additional sales tax under the provisions of the Tamilnadu Additional Sales Tax Act, 1970 - the Respondent Authority are directed to complete the reassessment and pass appropriate orders within a period of three months from the date of receipt of a copy of this order.
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2022 (10) TMI 955
Cancellation of the Registration Certificate of petitioner - cancelled on the premise that the Petitioner has failed to file Goods and Services Tax monthly returns for a continuous period of six months - Certificate was cancelled with effect from 04.02.2020 in view of Section 29 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- This Court has been consistently following the directions issued in the case of TVL. SUGUNA CUTPIECE CENTER VERSUS THE APPELLATE DEPUTY COMMISSIONER (ST) (GST) , THE ASSISTANT COMMISSIONER (CIRCLE) , SALEM BAZAAR [2022 (2) TMI 933 - MADRAS HIGH COURT] and the Revenue/Department has also accepted the said view as evident from the fact that no appeal has been filed in any of the matters, this Court intends to follow the above order of this Court.
This Court feels that the benefit extended by this Court in the earlier orders referred in Suguna Cutpiece Centre's case, may be extended to the Petitioner - Petition disposed off.
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2022 (10) TMI 954
Maintainability of appeal - requirement of pre-deposit - whether the tribunal was justified in law requiring the full amount of tax to be deposited towards pre-deposit? - Section 78 of the Gujarat Value Added Tax Act, 2003 - HELD THAT:- The orders regarding pre-deposit and the extent to which the tribunal may require the assessee to make such pre-deposit, are the issues in the realm of discretion of the tribunal to be exercised subject to considerations based on the facts of each case and the prima facie view of the merits emerging from the record.
The observations of the tribunal satisfies the said requirements to exercise the discretion whereby it thought it fit to direct pre-deposit to the extent of 100%. This court would not substitute its own reasons and for that matter the discretion validly exercised as above by the tribunal - the present Appeal does not raises question of law much less substantial question of law.
Appeal dismissed.
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2022 (10) TMI 953
Anti-competitive agreements - abuse of dominant position in the markets for licensable mobile OS for smart mobile devices and app stores for Android OS - the Commission agrees with the findings of the DG and holds that all licensable smart mobile device OSs are part of the same relevant market - consideration of relevant markets - alleged contravention of various provisions of Section 4 of Competition Act, 2002 - HELD THAT:- No doubt, the DG has been vested with the limited powers of Civil Court as also the power to conduct search and seizure operations, however, it is for the DG to exercise such powers in the manner as deemed appropriate in the facts and circumstances of each case. No party, much less a party under investigation, can dictate as to the mode and manner of investigation to be undertaken by the DG. As previously pointed out, the role of DG during investigation is essentially fact finding in nature by collecting documents and evidence and to present its recommendations to the Commission based on their analysis. While conducting the investigation, it is neither requirement of the law nor any obligation of the investigator to consult each and every affected or interested participant. On careful perusal of the Investigation Report, the Commission is satisfied that the DG has contacted a cross-section of stakeholders including third parties and in this view of the matter, the allegations, and suggestions of bias in investigation as attributed by Google to the DG lack merit and are rejected.
Having perused the investigation report, the Commission is satisfied that while analyzing the allegations and reaching its recommendations, the DG has not relied upon such orders and the same are based upon the documents and evidence gathered during the course of investigation. The reference to the prima facie order as made by the DG in the Investigation Report is only to understand the scope of investigation and such reference, by no stretch of arguments, be construed as swaying the independence of the recommendations made by the DG. In fact, if the argument of Google is taken to its logical conclusion, there can be no independent adjudication by the authority also (in this case, the Commission) after making a prima facie opinion while ordering investigation.
The antitrust investigation is complex in nature and require greater understanding of the subject and so long as the recommendations are made in an independent manner based on material and evidence gathered during investigation, mere reference to such reports for the limited purpose of understanding the issues in itself cannot be said to sway, much less vitiate, the conclusions arrived at by the DG - the Commission is afraid that the submissions of Google are contrary to the express provisions of General Regulations. Unlike civil courts where cross-examination is a matter of course, cross-examination before the DG or the Commission is highly circumscribed by regulatory framework nd can be granted on fulfilling requirements of Regulation 41(5) of the General Regulations.
It is, thus, evident that the Commission or the DG has the discretion to take evidence either by way of Affidavit or by directing the parties to lead oral evidence in the matter. However, if the Commission or the DG, as the case may be, directs evidence by a party to be led by way of oral submissions, the Commission or the DG, as the case may be, if considers necessary or expedient, may grant an opportunity to the other party or parties, as the case may be, to cross-examine the person giving the evidence. Thus, it is only when the evidence is directed to be led by way of oral submissions that the Commission or the DG may grant an opportunity to the other party or parties to cross-examine the person giving the evidence, if considered necessary or expedient. Hence, even when the evidence is led by oral submissions, the Commission or the DG retains the discretion to consider the request for grant of opportunity to the other party or parties to cross-examine the person giving the evidence if the same is considered necessary or expedient.
The Commission delineates the following relevant market(s) in the present matter:
a. Market for licensable OS for smart mobile devices in India
b. Market for app stores for Android smart mobile OS in India
c. Market for apps facilitating payment through UPI in India
The Commission holds Google to be dominant in in the first two relevant markets i.e., market for licensable OS for smart mobile devices in India and market for app store for Android smart mobile OS in India. Further, Google is also found to have abused its dominant position in contravention of the provisions of Section 4(2)(a)(i), Section 4(2)(a)(ii), Section 4(2)(b)(ii), Section 4(2)(c) and Section 4(2)(e) of the Act, as already discussed in the earlier part of this order.
In terms of the provisions of Section 27 of the Act, the Commission hereby directs Google to cease and desist from indulging in anti-competitive practices that have been found to be in contravention of the provisions of Section 4 of the Act - Google, however, is allowed three months from the date of receipt of this order to implement necessary changes in its practices and/or modify the applicable agreements/ policies and to submit a compliance report to the Commission in this regard.
Levy of penalty - HELD THAT:- The Commission takes a serious note of such glaring inconsistencies and wide disclaimers in presenting various data points by Google. The Commission is constrained to observe that despite commanding enormous resources, Google has failed to provide the data in the manner sought by the Commission despite grant of sufficient time, as sought by it. Be that as it may, in the interest of justice and with an intent of ensuring necessary market correction at the earliest, the Commission decides to proceed to quantify the provisional monetary penalties on the basis of the data presented by Google. Accordingly, the Commission decides to take the revenue data of Google’s business operations in India, as submitted by it vide submission dated 06.10.2022, as relevant turnover for computation of quantum of penalty.
Determination of an appropriate amount of penalty to be imposed - HELD THAT:- The Commission is of the view that the ends of justice would be met if a penalty of 7 % of the relevant turnover. Accordingly, the Commission imposes a penalty on Google @ 7 % of its average of the average of relevant turnover for the last three preceding financial years 2018-19, 2019-20 and 2020-21, as provided by Google - the Commission imposes a penalty of Rs. 936.44 crore upon Google for violating Section 4 of the Act. Google is directed to deposit the penalty amount within 60 days of the receipt of this order.
The Commission deems it appropriate to deal with the request of the parties seeking confidentiality over certain documents / data / information filed by them under Regulation 35 of the General Regulations, 2009 (as amended). Considering the grounds given by the parties for the grant of confidential treatment, the Commission grants confidentiality to such documents / data / information in terms of Regulation 35 of the General Regulations, 2009, subject to Section 57 of the Act, for a period of three years from the passing of this order.
Application disposed off.
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2022 (10) TMI 952
Provisional attachment of Bank Accounts - respondent fairly admitted that time period of one year is over - section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- as contemplated in section 83 of the CGST Act, the provisional attachment of the seven bank accounts out of total nine bank accounts, gets automatically come to an end.
Learned advocate for the petitioners makes a grievance that despite one year is over, the banks are not intimated about the seizing of the provisional attachment - the respondents stated that the authorities will intimate the banks concerned in this regard to enable the operation of the bank accounts by the petitioners within one week from today.
In respect of the two bank accounts where the fresh orders of provisional attachment are passed, it will give fresh cause of action in accordance with law - the petitions are disposed of.
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2022 (10) TMI 951
Cancellation of GST registration of the petitioner - maintainability of appeal under Section 107 is to be made within a period of three months from the date of the order impugned - HELD THAT:- It is an admitted position of the petitioner assessee that they have failed to file the returns from the year 2018 up-to the year 2021 meaning thereby that the required amount of GST was also not paid for the aforesaid period. It is also noted that the provisions of Section 29 of the AGST Act, 2017 which provides that if an assessee fails to furnish returns for three consecutive tax periods, it may be a good reason for cancellation of the registration of the assessee concerned. From such point of view, if the petitioner had not submitted the returns for three consecutive tax periods, the act on the part of the departmental authorities in cancelling the registration cannot prima facie be faulted with.
In the circumstance where the petitioner assessee is willing to file the returns and also pay all the tax dues including the interests and penalties etc. that may be leviable, the petitioner may have invoked a wrong provisions of filing an appeal under Section 107 of the AGST Act, 2017 - As the petitioner had acted diligently in seeking to avail the remedy under the law which although it may not have been the appropriate remedy under the circumstance, it would be a good cause for the respondents to consider as to whether the delay in making such application can be suitable condoned.
Petition disposed off.
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2022 (10) TMI 950
Levy of 100% penalty - larger part of transitional credit was allowed - only minor part of the credit was disallowed - transitional period of switching over from the previous sales tax regime to the GST regime - carry forward of credit in terms of Section 140 of CGST Act 2017 - HELD THAT:- There is no doubt that since the larger part of the claim in excess of Rs.6 crore has been upheld in favour of the assessee, the imposition of penalty for the corresponding amount will no longer apply. But the issue now arises as to whether the 100 per cent penalty imposed for the remainder of the claim, to the extent of Rs.30,73,908/-, should also be interfered with.
The assessee refers to Sections 73 and 74 of the Act of 2017. The assessee brings out the distinction between Section 73 and the strict applicability of Section 74 when there is an attempt by the assessee to defraud the revenue by making any misrepresentation or by suppression of material facts - The assessee suggests that since it was a huge sum which had been lost to the assessee, the assessee merely invoked the discretion of the Department in allowing the claim at a later stage since the assessee had not availed of it, whether by mistake or oversight, at the time of claiming refund for the month of June, 2017.
Since the claim of the assessee to the extent of Rs.6,55,99,154/- has been upheld, no question arises of any penalty or interest or other charge being imposed in respect of such amount. The penalty on the balance amount would not be covered under Section 74 of the Act since there was no attempt to defraud the revenue or mislead it or any suppression of material facts. Indeed, since there is no failure to pay any amount, in the strict sense, in this case as the show-cause notice only pertained to a claim that had been made to which the assessee was not entitled, this would not be an appropriate case for imposing any penalty.
Petition is allowed by setting aside the appellate order to the extent that it disallowed the petitioning assessee’s claim of Rs.6,55,99,154/- and by upholding the appellate order to the extent that it rejected the balance claim of Rs.30,73,908/-. Further, the penalty imposed by the appellate order is set aside in its entirety.
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2022 (10) TMI 949
Supply or not - Levy of GST - rate of GST - amount collected by the Applicant company as Notice Pay Recovery from the outgoing employee - amount of Surety Bond forfeited/encashed by the Applicant company from the outgoing contractual employee - nominal & subsidized recoveries made by the Applicant from its employees towards provision of canteen facility by 3rd party service provider to Applicant's employees - amount collected by the Applicant company from its employees in lieu of providing a new identity card (ID Card) - amount collected by the Applicant as liquidated damages for non performance/short-performance/delay in performance - amount forfeited by the Applicant company pertaining to Earnes Money, Security Deposit & Bank Guarantee - amount of Creditors balance unclaimed/untraceable and written off by the Applicant by way of crediting P&L Account.
Notice pay recovery - surety bond forfeiture - HELD THAT:- The amount received as notice pay recovery by the applicant from the employees who leave the applicant company without serving mandatory notice period mentioned in the employment contract is not a consideration for any supply or services. Similarly, the action of surety bond forfeiture by the applicant (which is furnished by the contractual employee at the time of joining) of the employees who leave the company without serving minimum contract period as per the employment contract is also not a consideration per se. These amounts are covered under Schedule HIM and not clause 5(e) of schedule II appended with the CGST Act, 2017. So, it is outside the scope of supply because the said amount recovered by the applicant is in lieu of un-served notice period/non serving the contract period by the employees. It cannot be regarded as a consideration which has been defined in the section 2(31) of the Act - both are excluded from the definition of Supply under the GST Act.
Provision of the canteen facility at its premises by the applicant company for its employees - HELD THAT:- The facility of canteen is being provided by the companies to its employees under the Factory Act, 1948 wherein it is mandatory to the applicant to make provisions of the canteen facility to its employees. There is no independent contract between the applicant and the employees for setting up the canteen facility at the company's premises. It is being undertaken on account of the legal obligation case upon the applicant. So, it is concluded that the said transaction of recovering the part payment of the meals from the staff by the applicant is outside the purview of scope of supply.
Whether the charges for re-issuance of ID card to the employees by the applicant company is an taxable event under the GST Act? - HELD THAT:- It is noticed that the applicant uses the in-house printing facility for the services i.e. re-issuance of identity cards to the employees. Fee of Rs. 100 per card is charged for re-issuance by the applicant form its respective employee for issuance the new identity card. No third party contractor is availed for the printing of Id-cards. The Id-card is reissued in case of loss of the same or the card is in non serviceable condition - the authority is of view that this transaction does not fall under the taxable event under the GST as it's covered under the schedule III(1) appended with the CGST Act, 2017.
Taxability - transaction of liquidated damage charged due to delay in completion of work and forfeiture of Earnest Money/ Bank Guarantee /Security Deposit - HELD THAT:- The authority is of view that the matter stands clarified in the circular dated 03.08.2022 of the Board - the amount received as a compensation due to delay in completion of work will not be taxable due to the reason that it is not recovered on account of any services rendered to another person and instead, is claimed towards damages incurred on account of delay/any other reason as stipulated in the agreement.
Amount forfeited by the Applicant company pertaining to Earnest Money, Security Deposit & Bank Guarantee - HELD THAT:- The forfeiture of amount received as Earnest Money/Security Deposit or release/forfeiture of Bank Guarantee cannot be chargeable - The nature of Earnest Money is equivalent to penalty charged by the tenderer which is similar to the nature of 'liquidated damages' and therefore, cannot be treated to be 'consideration' - The Security Deposit is collected by the Applicant for the reason that if there is any break, deface, injure or destroy any part of building in which they may be working, or any building, road, road kerb, fence, enclosure, water pipe, cables, drains, electric or telephone post or wires, trees, grass or grassland. etc, the same may be adjusted and the balance shall be refunded back to the contractor - Bank Guarantee is also forfeited for the same reasons as Security Deposit is forfeited - thus not taxable.
Taxability - amount written off in the books of account of the applicant as creditors balance - HELD THAT:- The authority is of view that there are no services received or provided by the applicant company in this situations/transactions. So, this transaction of writing off unclaimed amount of the contractors/other creditors is basically an income and not a supply, hence outside the purview of scope of supply under the GST Act - not taxable.
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2022 (10) TMI 948
Exemption u/s 11 - scope and amplitude of the definition “charitable purpose” - primary question which falls for consideration is the correct interpretation of the proviso to Section 2(15) “charitable purpose” includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility - Interpretation of the changed definition of “charitable purpose” (w.e.f. 01.04.2009), as well as the later amendments, and other related provisions of the IT Act - Distinction between business held under Trust [Section 11(4)] and Trust carrying on business [Section 11(4A)] - HELD THAT:- To summarise on the legal position on this - if a property is held under trust, and such property is a business, the case would fall under Section 11(4) and not under Section 11(4A) of the Act. Section 11(4A) of the Act, would apply only to a case where the business is not held under trust. There is a difference between a property or business held under trust and a business carried on by or on behalf of the trust. This distinction was recognized in Surat Art Silk [1979 (11) TMI 1 - SUPREME COURT] which observed that if a business undertaking is held under trust for a charitable purpose, the income from it would be entitled to exemption under Section 11(1) of the Act.
Pure charity in the sense that the performance of an activity without any consideration is not envisioned under the Act. If one keeps this in mind, what Section 2(15) emphasizes is that so long as a GPU’s charity’s object involves activities which also generates profits (incidental, or in other words, while actually carrying out the objectives of GPU, if some profit is generated), it can be granted exemption provided the quantitative limit (of not exceeding 20%) under second proviso to Section 2(15) for receipts from such profits, is adhered to.
The insertion of Section 13(8)144, the seventeenth proviso to Section 10(23C) and third proviso to Section 143(3) (all of which were inserted by Finance Act, 2012, but w.r.e.f. 01.04.2009), further reinforces the interpretation of this Court, of “charitable purpose”. These provisions, form the machinery to control the conditions under which income is exempt. The effect of the seventeenth proviso to Section 10(23C) is to impose the same condition i.e., that that the trade, commerce or business activity or service relating to trade, business or commerce, should be part of the GPU’s activities, to achieve its object of advancing general public utility. The other condition– which is drawn in as part of the exemption condition, is that if such trading or commercial activity takes place the receipts should be confined to a prescribed percentage of the overall receipts. Section 13(8) too reinforces the same condition.
In the opinion of this court, the change intended by Parliament through the amendment of Section 2(15) was sought to be emphasised and clarified by the amendment of Section 10(23C) and the insertion of Section 13(8). This was Parliaments’ emphatic way of saying that generally no commercial or business or trading activity ought to be engaged by GPU charities but that in the course of their functioning of carrying out activities of general public utility, they can in a limited manner do so, provided the receipts are within the limit spelt out in Clause (ii) of the proviso to Section 2(15).
General test under Section 2(15) - As clarified that an assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration (“cess, or fee, or any other consideration”).
In the course of achieving the object of general public utility, the concerned trust, society, or other such organization, can carry on trade, commerce or business or provide services in relation thereto for consideration, provided that (i) the activities of trade, commerce or business are connected (“actual carrying out…” inserted w.e.f. 01.04.2016) to the achievement of its objects of GPU; and (ii) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, as amended over the years (Rs. 10 lakhs w.e.f. 01.04.2009; then Rs. 25 lakhs w.e.f. 01.04.2012; and now 20% of total receipts of the previous year, w.e.f. 01.04.2016);
Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be “trade, commerce, or business” or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of “cess, or fee, or any other consideration” towards “trade, commerce or business”. In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment.
Section 11(4A) must be interpreted harmoniously with Section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in Section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to Section 2(15), has not been breached. Similarly, the insertion of Section 13(8), seventeenth proviso to Section 10(23C) and third proviso to Section 143(3) (all w.r.e.f. 01.04.2009), reaffirm this interpretation and bring uniformity across the statutory provisions.
Authorities, corporations, or bodies established by statute - In clause (b) of Section 10(46) of the IT Act, “commercial” has the same meaning as “trade, commerce, business” in Section 2(15) of the IT Act. Therefore, sums charged by such notified body, authority, Board, Trust or Commission (by whatever name called) will require similar consideration – i.e., whether it is at cost with a nominal mark-up or significantly higher, to determine if it falls within the mischief of “commercial activity”. However, in the case of such notified bodies, there is no quantified limit in Section 10(46). Therefore, the Central Government would have to decide on a case-by-case basis whether and to what extent, exemption can be awarded to bodies that are notified under Section 10(46).
For the period 01.04.2003 to 01.04.2011, a statutory corporation could claim the benefit of Section 2(15) having regard to the judgment of this Court in the Gujarat Maritime Board case[2007 (12) TMI 7 - SUPREME COURT] Likewise, the denial of benefit under Section 10(46) after 01.04.2011 does not preclude a statutory corporation, board, or whatever such body may be called, from claiming that it is set up for a charitable purpose and seeking exemption under Section 10(23C) or other provisions of the Act.
Statutory regulators - The income and receipts of statutory regulatory bodies which are for instance, tasked with exclusive duties of prescribing curriculum, disciplining professionals and prescribing standards of professional conduct, are prima facie not business or commercial receipts. However, this is subject to the caveat that if the assessing authorities discern that certain kinds of activities carried out by such regulatory body involved charging of fees that are significantly higher than the cost incurred (with a nominal mark-up) or providing other facilities or services such as admission forms, coaching classes, registration processing fees, etc., at markedly higher prices, those would constitute commercial or business receipts. In that event, the overall quantitative limit prescribed in the proviso to Section 2(15) (as amended from time to time) has to be complied with, if the regulatory body is to be considered as one with ‘charitable purpose’ eligible for exemption under the IT Act.
Like statutory authorities which regulate professions, statutory bodies which certify products (such as seeds) based on standards for qualification, etc. will also be treated similarly.
Trade promotion bodies - Bodies involved in trade promotion (such as AEPC), or set up with the objects of purely advocating for, coordinating and assisting trading organisations, can be said to be involved in advancement of objects of general public utility. However, if such organisations provide additional services such as courses meant to skill personnel, providing private rental spaces in fairs or trade shows, consulting services, etc. then income or receipts from such activities, would be business or commercial in nature. In that event, the claim for tax exemption would have to be again subjected to the rigors of the proviso to Section 2(15) of the IT Act.
Non-statutory bodies - In the present batch of cases, non-statutory bodies performing public functions, such as ERNET and NIXI are engaged in important public purposes. The materials on record show that fees or consideration charged by them for the purposes provided are nominal. In the circumstances, it is held that the said two assessees are driven by charitable purposes. However, the claims of such non-statutory organisations performing public functions, will have to be ascertained on a yearly basis, and the tax authorities must discern from the records, whether the fees charged are nominally above the cost, or have been increased to much higher levels.
It is held that though GS1 India is in fact, involved in advancement of general public utility, its services are for the benefit of trade and business, from which they receive significantly high receipts. In the circumstances, its claim for exemption cannot succeed having regard to amended Section 2(15). However, the Court does not rule out any future claim made and being independently assessed, if GS1 is able to satisfy that what it provides to its customers is charged on cost-basis with at the most, a nominal markup.
Sports associations - So far as the state cricket associations are concerned (Saurashtra, Gujarat, Rajasthan, Baroda, and Rajkot), this Court is of the opinion that the matter requires further scrutiny, in light of the discussion in paragraphs 228-238 of the judgment. Accordingly, a direction is issued that the AO shall adjudicate the matter afresh after issuing notice to the concerned assessees and examining the relevant material indicated in the previous paragraphs of this judgment. Furthermore, if any consequential order needs to be issued, the same shall be done and resulting actions, including assessment orders shall be passed in accordance with the law under relevant provisions of the IT Act.
Private Trusts - So far as the appeal by assessee-Tribune Trust is concerned, it has been held that despite advancing general public utility, the Trust cannot benefit from exemption offered to entities covered by Section 2(15) as the records reveal that income received from advertisements, constituted business or commercial receipts. Consequently, the limit prescribed in the proviso to Section 2(15) has to be adhered to for the Trust’s claim of being as a charity eligible for exemption, to succeed. Therefore, despite differing reasoning, this court has held that the impugned judgment of the High Court does not call for interference.
Application of interpretation - As noted that the conclusions arrived at by way of this judgment, neither precludes any of the assessees (whether statutory, or non-statutory) advancing objects of general public utility, from claiming exemption, nor the taxing authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The assessing authorities must on a yearly basis, scrutinize the record to discern whether the nature of the assessee’s activities amount to “trade, commerce or business” based on its receipts and income (i.e., whether the amounts charged are on cost-basis, or significantly higher). If it is found that they are in the nature of “trade, commerce or business”, then it must be examined whether the quantified limit (as amended from time to time) in proviso to Section 2(15), has been breached, thus disentitling them to exemption.
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2022 (10) TMI 947
Addition on account of unaccounted production and stock - AO rejected the books of accounts of the assessee and estimated the wastage in production in both the units of the assessee - C.I.T. (A) holding that 'the action of the A.O. of rejecting the books of account without taking into consideration all the facts and figures is not correct" - AO find various discrepancies with regard to consumption of raw material used for production of tiles and noted that the assessee has not shown the correct figure in its books of account and assessee has not made available the correct data of production of tiles - AO rejected the books of accounts of assessee by taking view that assessee failed to show actual per square meter consumption of raw material and failed to disclose actual per square meter consumption of raw material in its account, therefore, correct profit cannot be deduced from the books of account -
HELD THAT:- AO estimated average wastage @ 3% and 2% of gross consumption of raw material for Dora unit and Hoskote unit respectively. Assessing officer adopted average wastage on ad hoc basis without any justification nor any comparable stances was brought on record to adopt such wastage. The Assessing Officer failed to provide any material supporting the working of average rate for both the units. Further, we find that the Assessing officer made addition by computing the revised production by adopting lowest value of consumption ratio as based so as to arrive at a greater production quantity and on such basis worked out the suppressed production of 3348104 square meters from the books of account.
AO applied average rate of closing stock of Rs. 138.10 square meter and computed value of suppressed production of Rs.46,23,73,162/-. We also noted that suppressed production computed by Assessing Officer is without any basis as he adopted ad hoc wastage rate to compute net consumption as against the wastage rate of 4.54% and 4.48% shown by the assessee. And further in order to maximise the value of revised production, the assessing officer arbitrarily adopted the lowest consumption ratio of January, 2009 for Dora unit and February 2009 for Hoskote unit.
Assessing Officer has failed to bring any material to support his working that ratio of waste material, adopted by him is appropriate for taking such base. Thus, working adopted by the Assessing Officer is not only erroneous being not based on scientific basis as he had adopted lowest consumption ratio for the purpose of making addition.
We find merit in the submissions of assessee that even if slight changes in the consumption ratio is made, the entire addition made by AO would be nil as per the working given - We are also in agreement with the submissions of assessee that if the average consumption of all the months is taken and substitute the figures in the working of the AO accepting the wastage ratio used by the AO, the entire addition would be deleted. In such circumstances, we find merit in the submissions of assessee that the method adopted by assessee is more scientific as it takes into consideration all the factors affecting the consumption in a year. Further by taking yearly average, the fact of fluctuation is diluted and it gives a more scientific picture of state of affairs. The Assessing officer adopted only onemonth average, which does not represent a proper sample for working out of consumption for whole year.
We do not find any merits in the grounds of appeal raised by the revenue, and thus, we affirm the order of ld CIT(A), with our additional findings. Grounds of appeals raised by the revenue is dismissed.
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2022 (10) TMI 946
Reopening of assessment u/s 147 - validity of reopening of assessment - addition u/s 68 - notice after expiry of 4 years from the end of the relevant assessment year - HELD THAT:- We find no merit in the submission of learned DR that allegation of failure to disclose fully and truly all material facts can be reasonably inferred from the perusal of reasons recorded for reopening the assessment, when the said allegation was nowhere made by the AO in the said reasons. We find that in appeal before the CIT(A), the assessee specifically raised grounds challenging initiation of reassessment proceedings.
CIT(A), during the course of appellate proceedings, sought remand report from the AO and only after consideration of said report and assessee’s reply thereto, adjudicated on the ground challenging the reassessment proceedings. Once initiation of reassessment proceedings has been challenged by the assessee, all the grounds incidental thereto are available to the assessee to challenge the validity of impugned reassessment proceedings. Therefore, respectfully following the aforesaid decision [2004 (2) TMI 41 - BOMBAY HIGH COURT] we are of the considered view that reassessment proceedings initiated by the AO are not in conformity with the provisions of 1st proviso to section 147 of the Act.
Where 4 years, but not more than 6 years, have elapsed, no notice under section 148 can be issued unless the income chargeable to tax which has escaped assessment is Rs. 1 lakh or more. We find that while dealing with the issue whether failure on the part of the AO to mention the amount of income which has escaped assessment will result in nullifying the notice issued under 148 of the Act, the Hon‟ble Karnataka High Court in Novo Nordisk India (P) Ltd [2018 (9) TMI 352 - KARNATAKA HIGH COURT] as held material aspect for invoking the extended period of limitation under Section 149 (1)(b) not being forthcoming, further proceedings in pursuance to the said notice cannot be sustained. The notice issued being not in conformity with the provisions of the Act, it being the base or the foundation, edifice built upon it, has to fall.
As noted above, it is for the AO to record the reasons clearly and unambiguously and no inference can be drawn there from, thus, respectfully following the aforesaid decisions, we are of the considered view that the impugned reassessment proceedings are also not in conformity with the provisions of section 149(1)(b) of the Act.
Since the requirement of provisions of 1st proviso to section 147 as well as section 149(1)(b) of the Act are not fulfilled in the present case, therefore, the reassessment proceedings under section 147 of the Act are set aside being bad in law. Accordingly, the impugned order passed by the learned CIT(A), inter-alia, upholding the order passed under section 143(3) r/w section 147 of the Act is set aside. As relief has been granted to the assessee on above aspects, other submissions made by learned AR, pertaining to this ground, are rendered academic in nature. As a result, ground no.1 raised in assessee’s appeal is allowed.
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2022 (10) TMI 945
Denial of exemption u/s 11 for want of registration u/s 12A/12AA - Whether CIT(A) has erred in confirming the action of assessing officer in not allowing the exemption claimed by the assessee u/s 11 by wrongly considering the assessee as not registered u/s 12AA of the I.T. Act.? - HELD THAT:- From the third proviso of sub-section (2) of section 12A, it is vivid that when trust is refused for registration then in that situation the trust cannot claim benefit of first proviso to sub-section (2) of section 12A - In the assessee`s case under consideration, the assessee was refused for registration in the year 2012-13 hence assessee is not entitled to claim benefit of first proviso to subsection (2) of section 12A therefore the plea taken by the ld Counsel is not acceptable.
Also argued before us that if exemption is not granted under section 11 of the Act, then in that event the income of the assessee-trust should be computed on commercial principles bases, that is net profit should be taxable. We find merit in the contention of the assessee and noted that net profit of the assessee should be taxable, as if the assessee is doing business in the capacity of association of person (AOP).
The said lis should be remitted back to the file of the assessing officer to examine income and expenditure of assessee. Hence, we set aside the order of ld CIT(A) and remit this issue back to the file of the assessing officer with the direction to examine the Profit and loss account/or income and expenditure account of the assessee and compute the net taxable profit by applying the commercial principles. The assessee is also directed to submit before the assessing officer the Profit and loss account/or income and expenditure account, with supporting evidences and documents. Appeal of the assessee is treated to be allowed for statistical purposes.
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2022 (10) TMI 944
Penalty levied u/s. 271B - failure to get accounts audited - determination of turnover - accommodation entries - reasonable cause for the said failure - assessee had turnover which exceed the limit as per the provisions of Section 44AB but not the commission income - HELD THAT:- Parliament has used the words "may" and not "shall", thereby making their intention clear in as much as that levy of penalty is discretionary and not automatic. The said conclusion is further justified by Section 273B namely “penalty not to be imposed in certain cases”. A careful reading of Section 273B encompasses that certain penalties "shall" be imposed in cases where "reasonable cause" is successfully pleaded. It is seen that penalty imposable u/s 271B is also included therein.
By the said provisions, the Parliament has unambiguously made it clear that no penalty "shall be" imposed, if the assessee "proves that there was a reasonable cause for the said failure". As noticed, if the statutory provision shows that the word "shall" has been used in Section 271B, then the imposition of penalty would have been mandatory. Section 271B as extracted above further throws light on the legislative intent as it specifically provides that no penalty "shall’ be imposed if the assessee proves "that there was reasonable cause for the said failure".
In the facts of the present case, it is seen that the explanations offered by the assessee have been ignored by the Assessing Officer as well as CIT(A) and levied penalty u/s. 271B of the Act. The discretion available u/s. 273B is not exercised by the Lower Authorities. For the reasons stated in the previous paragraph, we have no hesitation in deleting the penalty levied u/s. 271B of the Act. Grounds raised by the Assessee is allowed.
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2022 (10) TMI 943
Estimation of income - bogus purchases - HELD THAT:- We note that the issue is squarely covered by the decision in the case of Pankaj K. Choudhary [2019 (8) TMI 1769 - ITAT SURAT] and there is no change in facts and law, therefore respectfully following the binding precedent, we direct the AO to sustain the addition at the rate of 6% of bogus purchases. Hence, we dismiss the appeal of the assessee and we allow the appeals of the Revenues partly.
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2022 (10) TMI 942
Disallowance of deduction u/s 80IB - want of filing the audit report in Form No.10CCB electronically/online - claim denied for non-filing of the audit report in Form No.10CCB electronically - whether filing of the audit report in Form No.10CCB electronically is not mandatory but directory? - HELD THAT:- Outcome of the denial of deduction under section 80IB of the Act, on the ground of late filing of the return of income, would not be more than the disallowance of deduction made by the AO and consequently it is not the case of enhancement of the assessment, but the disallowance of deduction as made by the Assessing Officer has been further strengthened by the CIT(A) by taking the issue of late filing of the return of income. In any case, since the CIT(A) has not issued any show cause notice to the assessee before taking up this issue and passed the order on the same, therefore, it is a clear case of violation of the principles of natural justice, which renders the impugned order of the ld. CIT(A) not sustainable.
Accordingly, the order of the ld. CIT(A) to the extent of taking up the fresh issue and deciding the same against the assessee is set aside and the matter is remanded to the record of the CIT(A) for deciding the same after giving an opportunity of hearing to the assessee on this issue. It is clarified that the issue with respect to the late filing of the return of income is remanded to the record of the ld. CIT(A) and the remand proceedings before the ld. CIT(A) are confined only on the said issue. Appeal of the assessee is partly allowed.
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