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2023 (11) TMI 1373
Enforceability of treaty - Necessary notification not issued by the Government for brining the treaty into force - Most Favoured Nation (MFN) - Indian treaties with countries that are members of the Organisation for Economic Cooperation and Development (‘OECD’) - protocol for changing terms or conditions in treaty - lowering of rate of taxation at source on dividends, interest, royalties or fees for technical services (‘FTS’) - bilateral treaties in question are between India and Netherlands, France, and Switzerland, respectively - whether there is any right to invoke the MFN clause when the third country with which India has entered into ‘DTAA’ was not an OECD member yet (at the time of entering into such DTAA) - whether the MFN clause is to be given effect to automatically or if it is to only come into effect after a notification is issued?
HELD THAT:- As assessee, fairly concedes that the issue raised in the above captioned matters is covered by the judgment of the Supreme Court in titled AO vs Nestle SA [2023 (10) TMI 981 - SUPREME COURT] as held a notification u/s 90(1) is necessary and a mandatory condition for a court, authority, or tribunal to give effect to a DTAA, or any protocol changing its terms or conditions, which has the effect of altering the existing provisions of law.
The fact that a stipulation in a DTAA or a Protocol with one nation, requires same treatment in respect to a matter covered by its terms, subsequent to its being entered into when another nation (which is member of a multilateral organization such as OECD), is given better treatment, does not automatically lead to integration of such term extending the same benefit in regard to a matter covered in the DTAA of the first nation, which entered into DTAA with India. In such event, the terms of the earlier DTAA require to be amended through a separate notification u/s 90.
The interpretation of the expression “is” has present signification. Therefore, for a party to claim benefit of a “same treatment” clause, based on entry of DTAA between India and another state which is member of OECD, the relevant date is entering into treaty with India, and not a later date, when, after entering into DTAA with India, such country becomes an OECD member, in terms of India’s practice.
Reasoning and findings in the impugned orders cannot survive they are set aside.
However, says that he has instructions to convey to the court that he would be carrying the issue further in appeal. As far as this court is concerned, it is bound by the judgment of the Supreme Court. Therefore, the above-captioned writ petitions are closed. Pending applications shall also stand closed.
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2023 (11) TMI 1372
Demand of differential amount of tax, arising from reduction in the rate of tax - recovery notices issued by the respondents complied with the principles of natural justice or not - HELD THAT:- The issue decided in M/S PARDEEP ELECTRICALS AND BUILDERS PVT. LTD. VERSUS UOI TH. SECRETARY DEFENCE AND OTHERS. [2023 (11) TMI 1369 - JAMMU AND KASHMIR HIGH COURT] where it was held that the petitioner is liable to refund the differential amount of service tax arising from the reduction of the rate from 18% to 12% effective after the last date for receipt of tenders. The recovery notices must comply with principles of natural justice.
The cases of the petitioners in these petitions are squarely covered by the above judgment and, therefore, what is said in the said judgment shall apply, on all fours, to these cases as well.
Petition dismissed.
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2023 (11) TMI 1371
Monetary amount involved in the application - Rejection of petitioner’s application u/s 13(10) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) read with Rule 11 of the Security Interest (Enforcement) Rules, 2002 - rejected on the ground that the same was less than ₹ 10,00,000 and was therefore, not within the pecuniary jurisdiction of the learned Debts Recovery Tribunal III - whether the Debts Recovery Tribunal constituted under the RDB Act, exercises any original jurisdiction for the recovery of debts under the SARFAESI Act? - HELD THAT:- In terms of Section 179 of the IBC, the Debts Recovery Tribunal is also the Adjudicating Authority for individuals and firms. Thus, to clothe the Debts Recovery Tribunal with the jurisdiction to adjudicate insolvency of individuals and firms, Section 249 of the IBC amended certain provisions of the RDB Act as set out in the Fifth Schedule to the IBC. This included amendment to Sub-section (4) of Section 1 of the RDB Act by introducing the opening words “save as otherwise provided”. The import of the said words was to carve out an exception to the clause regarding the pecuniary jurisdiction of the Debts Recovery Tribunal. Thus, to the extent that the Debts Recovery Tribunal is expressly conferred jurisdiction, it would exercise the same notwithstanding, the pecuniary threshold specified under Sub-section (4) to Section 1 of the RDB Act.
Whether the pecuniary jurisdiction of a Debts Recovery Tribunal under the RDB Act would also apply for an application made under Section 13(10) of the SARFAESI Act? - HELD THAT:- There is no provision in the RDB Act or the SARFAESI Act, that specifies the Debts Recovery Tribunal, to which an application is required to be made under Section 13(10) of the SARFAESI Act. Section 17(1A) of the SARFAESI Act, specifies the Debts Recovery Tribunal to which an application under Section 17(1) of the SARFAESI Act may be made; however, there is no such similar provision for making an application under Section 13(10) of the SARFAESI Act.
RDB Act (then known as Recovery of Debts Due to Banks and Financial Institutions Act, 1993) was held to be unconstitutional by this Court in Delhi High Court Bar Association & Anr. v. Union of India, Secty. Department of Economic Affairs [1995 (3) TMI 506 - DELHI HIGH COURT] on various grounds including that the enactment did not enable a defendant to claim any set off or make any counter claim against a bank or a financial institution.
The remedy under Section 13(10) of SARFAESI Act cannot be considered as a remedy independent of the RDB Act. An application under Section 13(10) of the SARFAESI Act is required to be made in a manner as prescribed – in the form annexed as Appendix VI to the SIE Rules – and is required to be accompanied with the requisite fee as prescribed under the Debts Recovery Tribunal (Procedure) Rules 1993. However, for all intents and purposes, this application is an Original Application under Section 19(1) of the RDB Act and is required to adjudicated as such.
Conclusion - The Debts Recovery Tribunal exercises original jurisdiction under the Recovery of Debts and Bankruptcy Act, 1993, and appellate jurisdiction under the SARFAESI Act, with pecuniary limits applying only to the original jurisdiction.
Petition dismissed.
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2023 (11) TMI 1370
Challenging the Assessment Order passed u/s 148A(d) - as argued respondents while proceeding u/s 148 were required to issue notice u/s 148A and provide an opportunity of hearing to the assessee and reopening has been initiated by the Jurisdictional Assessing Officer.
HELD THAT:- As in KANKANALA RAVINDRA REDDY VERSUS THE INCOME TAX OFFICER AND 2 OTHERS [2023 (9) TMI 951 - TELANGANA HIGH COURT] the preliminary objection raised by the petitioner is sustained and all these writ petitions stands allowed on this very jurisdictional issue. We are inclined to allow the present writ petition also on similar terms. Accordingly, the present Writ Petition stands allowed on the objection of the petitioner that the proceedings have not been drawn in accordance with the amended provision but under the unamended provision which is otherwise not sustainable.
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2023 (11) TMI 1369
Demand of differential amount of tax, arising from reduction in the rate of tax - recovery notices issued by the respondents complied with the principles of natural justice or not - grievance of petitioner is that, had they been put on notice before issuing the demand notices, they could have pointed out that the amount of tax as demanded by the respondents from them was not due even after reduction of rates, if calculated properly - HELD THAT:- In the instant case, the Government issued SRO-GST-06 (Rate) on 21.09.2017 in exercise of powers conferred by subsection (1) of Section 9, subsection (1 ) of Section 11, subsection (5) of Section 15 and subsection (1) of Section 15 of the Act of 2017 and made amendments in SRO-GST-2 (Rate) notification dated 22.08.2017 and reduced the rate of service tax on the works contract from 18% to 12%.
From a reading of SRO dated 21.09.2017, it clearly transpires that the amendments effected were prospective in nature and came into force only w.e.f 21.09.2017. It is, thus, abundantly clear that the service tax came to be reduced from 18% to 12% much after the submission of bid by the petitioner and the last date fixed for receipt of tenders in question. That being the admitted factual position emerging, the above quoted provisions of the contract were to take effect. Since there was decrease in the percentage rate of tax directly related to the contract value with reference to the prevailing rate on the last due date for receipt of tenders, as such, the differential amount was liable to be refunded by the petitioner to the respondents.
The plea of learned counsel for the petitioner, that the rate of service tax from 18% came to be reduced to 12% on 05.08.2017 when the GST Council met and took a decision for reduction of rate of tax, is totally baseless and misconceived.
The plea of the petitioner that the rate of service tax which was taken into account by the petitioner at the time of submission of bid was 12% and not 18% will lose its significance in view of the clear stipulation in the contract agreement that the rates quoted by the petitioner shall be inclusive of the taxes directly related to contract value as prevailing on the last due date for receipt of tenders. It is in reference to this date the respondents were to determine increase or decrease in percentage rates of taxes directly related to contract value. The consequences of increase and decrease were clearly stipulated in special condition No. 49 of the contract agreement.
Conclusion - The petitioner is liable to refund the differential amount of service tax arising from the reduction of the rate from 18% to 12% effective after the last date for receipt of tenders. The recovery notices must comply with principles of natural justice.
Petition dismissed.
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2023 (11) TMI 1368
Dismissal of application filed by the appellant / defendant to set aside the ex parte decree - delay in service of summons - after coming to know about the ex parte decree, appellant preferred the application to set aside the ex parte decree - no delay in approaching the court - HELD THAT:- In the suit, the respondent / plaintiff has taken all efforts to serve summons on the appellant / defendant. It is settled law that if the notice is sent to the correct and last known address of the defendant, the same has to be deemed to be served, whether it is actually served or not.
In the present case, summons have been served to the correct and last known address of the appellant. It is not the case of the appellant that summons have been sent to a wrong address. Further, the appellant has not informed about their change of business place. In such circumstances, it can be inferred that summons have been duly served on the appellant, but they failed to contest the suit. Therefore, the application filed by the appellant in the year 2019 to set aside the ex parte decree dated 24.04.2009, after a decade, was rightly dismissed by the learned Judge, by the order impugned herein, which need not be interfered with, at the hands of this court.
Appeal dismissed.
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2023 (11) TMI 1367
Reopening of assessment u/s 147 - limitation period - procedural requirements mandated under the newly introduced Section 148A - HELD THAT:- In normal cases, no notice shall be issued if three years have elapsed from the end of the relevant assessment year. Notice beyond the period of three years from the end of the relevant assessment year can be issued where the AO would not be in possession of books of accounts or other documents or evidence which would reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment, amounts to or is likely to amount to fifty lacs rupees or more for that year.
In such cases, notice can be issued beyond the period of three years but not beyond the period of 10 years from the end of the relevant assessment year. Notice under Section 148 of the Act can be issued when there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of an assessee for the relevant assessment year. The specified authority for approving inquiries, providing an opportunity for passing orders under Section 148 of the Act and for issuance of notice u/s 148 of the Act is the Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year or Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year.
The object behind Section 148A as is evident from the findings in the fountainhead decision of GKN Driveshafts (India) Ltd. [2002 (11) TMI 7 - SUPREME COURT] is to enable the assessee to be informed of the reasons and information suggesting that income chargeable to tax has escaped assessment and, therefore, in turn to empower the assessee to prepare and file an effective reply and thereafter the Assessing Officer to pass an order under Section 148A(d), followed by issuance of notice under Section 148 of IT Act.
Considering the aforesaid, normally, the writ Court should not interfere at such premature stage when the proceedings initiated against the assessee are yet to be concluded by the statutory authorities.
This Court refrains to interfere with the order(s)/notice impugned. Pertinently, the question of going into the veracity and genuineness of the material/evidence forming the opinion of the Assessing Officer suggesting that income of petitioner/assessee has escaped assessment ought not to be gone into while exercising writ jurisdiction under Article 226 or supervisory jurisdiction under Article 227 of the Constitution of India.
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2023 (11) TMI 1366
Classification of Roasted Areca Nuts / Betel Nuts intended to be imported - to be classified under Chapter 8, which includes edible fruits and nuts, or under Chapter 20, which covers preparations of vegetables, fruits, nuts, or other parts of plants? - HELD THAT:- The processes mentioned in Chapter 8 include chilling, steaming, boiling, drying and provisionally preserving. It does not specifically include the process of roasting. Here it is important to understand the difference between the processes of moderate heat treatment & dehydrating/drying referred in chapter 8 and processes of dry roasting, oil-roasting and fat-roasting referred in chapter 20. The terms dry-roasting, oil roasting and fat-roasting however are not defined in the Customs Tariff Act, 1975 - Chapter 20 of the Tariff covers the Preparations of vegetables, fruit, nuts or other parts of plants. As per Chapter Note 1 (a) to Chapter 20, the Chapter does not cover vegetables, fruits or nuts prepared or preserved by the processes specified in Chapters 7, 8 or 11. Therefore, vegetable, fruit or nut products or preparations made other than by the processes specified in Chapters 7, 8 or 11 are classifiable in Chapter 20. The processes specified in Chapters 7, 8 or 11 mainly include freezing, steaming, boiling, drying, provisionally preserving and milling. Therefore, any vegetable, fruit, nut or edible parts of a plant which is prepared or preserved by any other process than these are liable to be classified under Chapter 20.
While examining the scope of CTH 2008, it is found that as per HSN Explanatory Notes, heading 2008 covers fruit, nuts and other edible parts of plants, whether whole, in pieces or crushed, including mixtures thereof, prepared or preserved otherwise than by any of the processes specified in other Chapters or in the preceding headings of this Chapter. Specifying what is included in this heading, the explanatory note states that almonds, ground nuts, areca (or betel) nuts and other nuts, dry-roasted, oil-roasted or fat-roasted, whether or not containing or coated with vegetable oil, salt, flavours, spices or other additives. Dry-roasting, oil-roasting & fat-roasting, as a process, are very much a part of chapter heading 2008 by virtue of HSN Explanatory Notes. It is also pertinent to observe that none of these processes are mentioned in the chapter note 3 to Chapter 8 of the Customs Tariff Act, 1975 as well as HSN Explanatory Notes to Chapter heading 0802.
The Honourable High Court of Madras in its recent judgement on 01.08.2023 [2023 (8) TMI 492 - MADRAS HIGH COURT], has upheld the classification of Roasted Betel Nuts under CTH 2008 19 20.
Conclusion - The Roasted areca/betel nuts fall under Custom Tariff Heading 2008, specifically under CTI 2008 19 20 "Other roasted nuts & seeds" of Chapter 20 of the First Schedule of the Customs Tariff Act, 1975.
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2023 (11) TMI 1365
Challenge to impugned order - appellable order or not - appropraite forum or not - HELD THAT:- Though the aforesaid impugned order is appellable order under the statete before the Tribunal but since the said forum is not available at present this writ petition is being entertained and the issues involved in this writ petition cannot be adjudicated without calling for affidavits from the respondents.
Let the respondents file affidavit in opposition within four weeks; reply thereto, if any, to be filed by the petitioner within two weeks thereafter - There shall be no coercive steps for recovery of the demand in question arising out of the impugned order of the appellate authority concerned if petitioner pays further 20% of the disputed amount of tax within a period of ten days from date.
List the matter for final hearing in the monthly list of February, 2024.
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2023 (11) TMI 1364
Deduction u/s 10A - telecommunication expenses excluded from export turnover and total turnover - HELD THAT:- CIT (A) in first appellate proceedings has directed the AO to reduce telecommunication charges from export turnover and total turnover while computing deduction u/s 10A. The contention of the assessee is that export turnover does not include telecommunication charges.
It is no more res-integra that freight, telecommunication charges, or insurance charges attributable to the delivery of the Computer Software outside India are to be excluded from export turnover as well as total turnover.
As in the case of CIT vs. HCL Computer Technologies Ltd [2018 (5) TMI 357 - SUPREME COURT] has in an explicit manner held that if freight, telecommunication charges and insurance charges are excluded only from export turnover and not the total turnover it would give absurd result as Total Turnover = Export Turnover as defined in Explanation 2(iv) of section 10A of the Act + Domestic Sale Profits.
Allowing a revised computation of long-term capital gains, which was based on a revised sale consideration of land - HELD THAT:- It is a well settled principle that only the real income of assessee can be taxed. Department cannot tax the income that has never accrued to or received by the assessee. The Hon'ble Apex Court in the case of CIT vs. Shoorji Vallabhdas & Company, [1962 (3) TMI 6 - SUPREME COURT] held, “Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which liability to tax is attracted, viz. the accrual of its income or its receipt; but the substance of the matter is income, if income does not result, there cannot be a tax, even though in book-keeping an entry is made about a hypothetical income, which does not materialize.” The aforesaid principal laid down as been reiterated in the case of Hemal Raje Shete [2016 (4) TMI 1082 - BOMBAY HIGH COURT] and Dinesh Vazirani [2022 (4) TMI 746 - BOMBAY HIGH COURT]. Thus in an undisputed facts of the case we find no merit in ground.
Allowing interest u/s. 244A on the refund arising out of excess self- assessment tax paid by the assessee - HELD THAT:- For refund arising out of self-assessment tax paid there is no dispute. As in the case of Stockholding Corporation of India [2014 (11) TMI 899 - BOMBAY HIGH COURT] has held that tax paid on self-assessment would fall u/s. 244A(1)(b) of the Act that is a residual clause. The said section clearly mandates that the Revenue would pay interest on the amounts refunded for the period commencing from the date payment of tax is made to the Government exchequer upto the date when refund is granted. Hence, the assessee is eligible for interest on refund on excess amount paid on self assessment tax. We find no error in the findings of CIT (A) on this issue, hence, ground No. 4 of appeal is dismissed.
TP adjustment - software development services - Comparable selection - Sasken Network Systems Ltd - HELD THAT:- TPO selected the said company as comparable. One of the filters applied by the TPO for rejection of comparable was Related Party Transaction >4%. Assessee referring to the P&L Account of Sasken Network Systems Ltd. has pointed that the RPT of the said company is more than 8%. Hence, the said company was excluded by the CIT (A) from the list of comparable.
Four Soft Ltd. - The said company was excluded by the CIT (A) for the reason that the RPT of the said company was>5%. The submissions made by the assessee before the CIT (A) shows that the RPT of the company is 22.69%.
Thirdware Solutions Limited - CIT (A) rejected the company from the list of comparables on the ground that no segmental data is available. In support of the findings the assessee has drawn our attention to the extracts of the financials of the company. A perusal of the same reveals that the company has revenue from sale of licenses, services, export and subscription. However, no segmental profits were reflected by the company.
Tata Elxsi Limited - CIT (A) has excluded the company from the list of comparable as RPT is >4%. Assessee has drawn our attention to the extracts of P&L Accounts for the year ended 31/03/2005 of Tata Elxsi Limited at page 668 of the paper book to contend that RPT of the said company is >5.74%.
Flextronics Software Systems Ltd.- The said company has also been rejected by the CIT (A) on the ground of RPT filter >4%. As per the findings of the CIT (A) the RPT of the said company for the relevant Assessment Year is 5.23%
Infosys Technology Limited - The said company has also been rejected by the CIT (A) on the ground that RPT is >4%. The ld.Counsel for the assessee has drawn our attention to the extract of the Annual Report of the company to contend that RPT to cost is 5.26%.
Exensys Software Solutions Ltd. - CIT (A) has excluded the said company from the list of comparables as an exceptional event had happened during the relevant period. During the relevant period, another company Holool India Ltd. was amalgamated with Exensys Software Solutions Ltd. w.e.f. 01/04/2004, which had purportedly significant impact on the financial results of company for the year ended 31/03/2005.
Larsen & Toubro Infotech Ltd. - The said company was excluded from the list of comparable by the CIT (A) as it had RPT of >4%. The ld. Counsel for the assessee pointed that the RPT of the said company is 4.35%.
The reasons given for rejecting the aforesaid companies by the CIT (A) could not be controverted by the Department. In the absence of any contrary material, we find no reason to interfere with the findings of CIT (A) in excluding the said companies from the list of comparable.
Inclusion of ASM Technologies Ltd. and Subex Systems Ltd., Blue Star Infotech Ltd.,Goldstone Technologies Ltd.,Megasoft Ltd., Mphasis BFL Ltd.as functionally similar.
Allowing depreciation and working capital adjustment -Depreciation adjustment is not an alien concept. The Tribunal in the case of Egan Communication Pvt. Ltd. [2008 (6) TMI 299 - ITAT PUNE-A] allowed adjustment for depreciation, where the rates of depreciation adopted by the tested party and the comparable companies were different.
As regards working capital adjustment the assessee had carried out the adjustment to eliminate interest component in working capital. No contrary material is placed before us by the Revenue to support the argument against allowing of working capital adjustment.
Disallowance with respect to secondment of employees to AEs -We find that the Co-ordinate Bench in assessee's own case in preceding year i.e. AY 2004-05 in ITA No. 5653/Mum/2009 [2023 (4) TMI 889 - ITAT MUMBAI] approved the approach of the CIT (A) in considering Indian salary of employees. We see no reason to interfere with the findings of CIT (A) on this issue, hence, ground No. 6 in the appeal by the Revenue is dismissed.
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2023 (11) TMI 1363
Order of Cancellation of registration u/s 12AB(4) passed without DIN number - HELD THAT:- Circulars of the Board are binding on the ld. tax authorities. Reliance in this regard can be placed on the judgement of Geep Industrial Syndicate [1987 (2) TMI 34 - DELHI HIGH COURT]
As with regard to the subsequent validation of the order, it comes up that although this proposition is also not sustainable and the reasons have been elaborately discussed in the case of Abhinav Chaturvedi [2023 (8) TMI 378 - ITAT DELHI], still, for sustaining this argument, there should have been some material to show that at any stage the DIN was generated and even if it was generated at all, since the DIN is not scribed on the order itself, the order cannot be considered to be a valid order.
Taking up the attempt of the DR to distinguish the facts on the principle of sub silentio, we are of the considered view that the same has no application to the present facts and circumstances. The point under consideration is purely a question of law arising out of non-compliance of a mandatory Circular of the Board and judgement of Brandix Mauritius Holdings Ltd.[2023 (4) TMI 579 - DELHI HIGH COURT] holds the field without any exception for a distinction on facts or any other principle of interpretation. In the light of the aforesaid, we are inclined to allow the additional ground and set aside the impugned assessment order being non est. Appeal of the assessee is allowed.
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2023 (11) TMI 1362
Violation of principles of natural justice - challenge to show-cause cum demand notice on the ground that reply to the pre-show-cause notice was not properly considered and discussed and dealt with while issuing the impugned show-cause notice - HELD THAT:- It is not a case that where no opportunity to file any objection for personal hearing was given to the petitioner. Sufficiency o the reason recorded in the impugned show-cause notice cannot be appreciated by the writ Court when the petitioner still has been given ample opportunity to file reply/objection to the impugned show-cause notice which the petitioner did not avail.
Petition disposed of by extending the time to file reply by the petitioner to the impugned show-cause notice dated 18th September, 2023 and also to take all the points raised in this writ petition, to be filed within fifteen days from date and if petitioner files the reply to the same, the same shall be considered and disposed of in accordance with law and by passing a reasoned and speaking order and after giving opportunity of hearing to the petitioner.
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2023 (11) TMI 1361
TP adjustment - power purchased and consumed by the appellant company from its captive power generation units, for the purpose of computing deduction u/s. 80IA - HELD THAT:- This issue is no longer the res integra. As decided in the case of DCIT vs M/s. India Cements Ltd. [2021 (12) TMI 390 - ITAT CHENNAI] has considered an identical issue, where the Tribunal by following the decision of Reliance Industries Ltd [2019 (2) TMI 178 - BOMBAY HIGH COURT] held that, for the purpose of computing deduction u/s. 80IA of the Act, towards power generated from captive power generation units and consumed by other units, the rate at which the power distribution companies supplied powers to consumers should be adopted instead of the rate at which the power generating companies supplied power to power distribution companies.
We are of the considered view that there is no error in the reasons given by the ld. CIT(A) to delete additions made by the AO/TPO towards transfer pricing adjustment, in respect of deduction claimed u/s. 80IA of the Act, for windmill division. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue.
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2023 (11) TMI 1360
Estimating the gross commission income on total purchase and sales turnover - HELD THAT:- As in the case of Sanjay Kumar Choudhary (HUF) & Ors. [2021 (12) TMI 1414 - ITAT SURAT] this Tribunal has sustained the addition only on sales / commission and not on both the elements i.e. purchase and sales, therefore we direct the AO to estimate the addition at the rate of 0.05% of the total sales turnover of the assessee and the same should be sustained.
Therefore, we direct the AO to compute the estimated addition on sales at the rate of 0.05% on sales in case of other assessees also, namely Saffron Gems Pvt. Ltd., Tanman Jewels Pvt. Ltd. and Nobal Jewels Pvt. Ltd. This way, the assessee’s appeal is partly allowed in above terms.
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2023 (11) TMI 1359
Seeking grant of bail - Money Laundering - illegal appointments of primary teachers in West Bengal - twin conditions as per Section 45 of the PMLA Act satisfied or not - HELD THAT:- The nature and gravity of accusation in a case while deciding an application for bail assumes importance as the Court has to consider the manner of commission of the offence, the harm or likely harm which may be extended to the victim and the harm or likely harm which may be caused to the society and its values.
In the instant case, there was not even an FIR by the State Police or the State agencies and it was on the direction of the Hon’ble High Court that the CBI initiated the investigation wherein the main thrust of allegations related to the primary teachers’ job which have been purchased in lieu of huge amount of money and extraneous consideration extended to the ineligible candidates to get appointment as Assistant Teachers in primary schools.
Having regard to the issue relating to which the investigation of the case is being continued, the number of victims being involved, and the accused person being an influential person, whose means, position are beyond question at the State administrative level as also the education department, his release, will have an impact at this stage of the investigation when an outer limit of 31st December, 2023 has been fixed by the Hon’ble Division Bench to conclude the investigation, which is being carried on by the E.D.
The prayer for bail of the present petitioner is rejected.
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2023 (11) TMI 1358
Unexplained cash credit u/s. 68 and unexplained expenditure u/s. 69 - receipt of accommodation entry by way of bogus LTCG/STCG - HELD THAT:- AO based on the information available on Actionable Information Monitoring System (AIMS), as per the investigation conducted by the Kolkata Investigation Directorate that the assessee was said to be one of the beneficiaries of accommodation entry by way of bogus LTCG/STCG.
The assessee has declared income from house property, business, capital gains and income from other sources and had declared gain on sale of shares during the year under consideration which is exempted u/s. 10(38) - AO held the same to be penny stock and made an addition on the same. CIT(A) upheld the addition on lack of evidence in support of the assessee’s claim.
From the above observation, we deem it fit to provide the assessee with one last opportunity to present her case before the first appellate authority on the principles of natural justice - Appeal filed by the assessee is allowed for statistical purpose.
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2023 (11) TMI 1357
Dishonour of cheque - funds insufficient - vicarious liability of petitioner, as an Independent Non-Executive Director - Section 141 of the NI Act - HELD THAT:- Section 138 of NI Act casts criminal liability on a person who issues a cheque towards discharge of a debt or liability as a whole or in part and the cheque is dishonoured by the bank on presentation. Section 138of NI Act creates criminal liability in case of dishonour of a cheque.
Section 141 of NI Act extends criminal liability in case of a company to every person who at the time of the offence, was in charge of and was responsible for the conduct of the business of the company. A company is a juristic person and every person who at the time of commission of offence is in charge and responsible for the conduct of the business of the company is liable for the offence stated to be committed by the company. The criminal liability arises when the offence was committed and not on the basis of merely holding a designation or office in a company. Section 141 of the NI Act mandates that a person is criminally liable when at the time of commission of offence was in charge and responsible for the conduct of the business of the company and person connected with the company may not fall within the ambit of section 141 of the NI Act.
The Supreme Court in SMS Pharmaceuticals Ltd. V Neeta Bhalla & another, [2005 (9) TMI 304 - SUPREME COURT] held that 'the liability arises on account of conduct , act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable.'
The Supreme Court in Siby Thomas V M/s Somany Ceramics Ltd. [2023 (10) TMI 487 - SUPREME COURT] referred decision in S.P. Mani and Mohan Dairy V Dr. Snehalatha Elangovan, [2022 (9) TMI 846 - SUPREME COURT] and observed that it is the primary responsibility of the complainant to make specific averments in the complaint, so as to make the accused vicariously liable.
It is accepted legal proposition in view of law laid down by the Supreme Court in above referred decision that it is the primary responsibility of the complainant to make specific averments in the complaint so as to make the accused vicariously liable. If the basic averment is made in the complaint under section 138 of NI Act that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed then Magistrate can issue process against such Director. The complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused company for conduct of its business and mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient.
Section 141 of the NI Act provides for a constructive liability which is created by a legal fiction. The section 141 of the NI Act being a penal should receive strict construction and compliance. It the accused played insignificant role in affairs of the company may not be sufficient to attract the constructive liability under Section 141 of the NI Act - Had the petitioner not responsible for affairs of the accused no 1, it can only be established and proved in accordance with law during the trial of the complaint under section 138 of NI Act. The petitioner cannot be absolved from his liability qua the cheque in question by pleading that he was independent non-executive director of the accused no 1. The nomenclature of the petitioner in certain documents submitted by the petitioner and required to be proved in accordance with law does not mean that the petitioner was a non-functional director of the accused no1.
It is also relevant to mention that the petitioner never challenged his summoning for offence punishable under section 138 of the NI Act and only challenged impugned order whereby the trial court judicially opined about existence of prima facie case against him.
Conclusion - The complaint contained sufficient averments to proceed against the petitioner under Section 138 read with Section 141 of the NI Act. The petitioner's designation as an Independent Non-Executive Director did not absolve him of liability, given the allegations in the complaint.
There is no legal and factual infirmity in the order passed by the trial court and impugned order passed by the revisional court - Petition dismissed.
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2023 (11) TMI 1356
Penalty u/s 271(1)(c) - estimation of income on bogus purchases - AO disallowed 50% of such purchases - CIT(A) restricted to 5% of gross turnover - HELD THAT:- Addition was certainly bases on estimation made by the AO and modified by the ld. CIT(A).
As in the case of Bombaywala Readymade Stores [2014 (11) TMI 1099 - GUJARAT HIGH COURT] held that “whether since no income had been filed by assessee and income was assessed on estimate basis by revenue, no penalty u/s 271(1)(c) could be levied for concealment of income.”
Thus, we find that no penalty is leviable on the assessee, when the addition on account of impugned purchases was estimated merely on the basis of estimation, therefore, direct to delete the penalty levied u/s 271(1)(c). In the result, ground of appeal raised by the assessee is allowed.
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2023 (11) TMI 1355
Addition u/s 68 - Denial of claim u/s 10(38) - disallowing the assessee’s claim of exempted long term capital gains u/s 10(38) - bogus capital gain income so earned through rigging of shares - HELD THAT:- Since the company, namely, M/s. Kappac Pharma Ltd. was a regular listed company at the recognized stock exchange of India, the trading in shares of the said company was done like any other scrip and the events happened post facto to the transactions done by the assessee’s mother or the assessee itself does not prove that the assessee has routed her unaccounted money through sale of shares of which long term capital gain arose.
It is a fact that the price rigged up from 13.50 in 2009 to Rs. 680/- in F.Y. 2013-14. It was submitted by the assessee that in the stock market in the commercial terms, it is well known that the prices of the scrip are flown with the winds and the sentiments irrespective of the fundamentals of the scripts. In that view of the matter, price of the scrip though went substantially high after shares were purchased, doesn’t automatically mean that the transaction of the assessee in the said scrip is not genuine. The same cannot be, therefore, said to be doubtful mainly on surmises, conjunctures and on presumption basis without any supportive documents in the hands of the Revenue. There was no role to play by the assessee in inflation of sale price as alleged or at all with the connivance with the brokers and the price at which shares were sold were neither genuine price.
There was no material and/or evidence brought on record by the Revenue in order to establish that the company has indulged in providing accommodation entries and the prices were rigged and the mother of the assessee or the assessee was involved in rigging of the price of shares. The case of the Revenue has been dealt with on entirely unsubstantiated suspicions is wholly unjustified and bad in law.
As scrip was subscribed by the mother of the assessee way back in F.Y. 2009-10 which was acquired by the assessee as gift from her.
It appears that the holding period is more than 55 months in case of the assessee before us too which facts cannot be brushed aside and therefore, the judgment passed by the Jurisdictional High Court in the case of PCIT vs. Jagat Pravinbhai Sarabhai Tax [2023 (1) TMI 44 - GUJARAT HIGH COURT] seems to be applicable.
We have carefully considered the judgment passed in case of M/s. Affluence Commodities Pvt. Ltd [2023 (4) TMI 1052 - ITAT AHMEDABAD] wherein deletion of addition under Section 10(38) of the Act in respect of the LTCG out of the sale of scrip of M/s. Kappac Pharma Ltd. was upheld.
As upholding the genuineness of the scrip of M/s. Kappac Pharma Ltd., we do not find any reason for addition made by the Revenue which is found to be solely on the basis of surmises and conjunctures and without any cogent document in the hands of the Revenue. The same is, thus, hereby deleted. Decided in favour of assessee.
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2023 (11) TMI 1354
Rectification u/s 254 beyond period of limitation - Tribunal jurisdiction to condone delay in filing of Miscellaneous Application u/s. 254(2) - HELD THAT:- The sub-section (2) of section 254 mandates that the Tribunal at any time within six months from the end of the month in which the order was passed can rectify any mistake apparent from the record, if the mistake is brought to its notice by the assessee or Assessing Officer.
Tribunal order dated 21/09/2021 was dispatched to the assessee through Registered Post A.D on 16/11/2021 and was received by the assessee on 17/11/2021, as per the acknowledgement available on record.
In the case of Daryapur Shetkari Sahakari Ginning and Pressing Factory [2020 (12) TMI 84 - BOMBAY HIGH COURT] has held that the period of limitation prescribed in section 254(2) of the Act would commence from the date when the order comes to the knowledge of affected party. In the present case, if limitation for filing of Miscellaneous Application is calculated as per the aforesaid decision of Hon’ble Jurisdictional High Court, the period of six months commence from 17/11/2021 i.e. when the order was received by the assessee. Accordingly, the limitation for filing of appeal expired by the end of May, 2022. The present Miscellaneous Application has been filed on 26/08/2022 i.e. after almost three months of expiry of limitation.
Tribunal has no jurisdiction to condone delay in filing of Miscellaneous Application u/s. 254(2) of the Act. [Re. Karuturi Global Ltd. [2019 (7) TMI 939 - KARNATAKA HIGH COURT]].
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