TMI Tax Updates - e-Newsletter
January 11, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Export of services or not - services rendered for foreign companies (which do not have any business place/agency in India) in India - services provided in respect of goods that are being exported - place of supply of services - In the instant case, the location of the recipient is outside India however the location where the services are actually performed in respect of goods is in the Country. Therefore the place of supply of services provided by the applicant are within the Country and hence liable to SGST & CGST in the State of Telangana. - AAR
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Income Tax:
Refund of adjustments made in excess of 20% of the disputed tax demands - s per mandate of law as well as the fact that refunds have been adjusted against outstanding tax demand by the Authority without invoking Section 245 of the Act and/or without following the due procedure prescribed - the petitioner is entitled to refund of adjustments made in excess of 20% of the disputed tax demands. - HC
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Income Tax:
Revision u/s 263 by CIT - Addition u/s 68 - Applicability of section 115BBE for set off of claim - the amendment brought in by financial year 2016 in this regard is inserted with from 01.04.2017 and assessee is entitled to claim set off against income determined under section 115BBE of the Act till the AY 2016-17. Hence, even if the section referred by the Ld.CIT is invoked the assessee will still be eligible for the set off as referred above and the income would be the same as assessed by the AO in the original assessment. This proposition is neither rebutted by Ld.CIT nor by the revenue before us. - Revision order set aside - AT
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Income Tax:
Deduction u/s 80IA on the enhanced expenditures made to sub-contractors - The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. The assessee is also eligible to claim for deduction u/s 80IA on the profit earned from its business. - AT
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Income Tax:
Additions towards addmission of Unaccounted receipts - to be assessed to tax on gross basis, or as held by the ld.CIT(A), only the profit element embedded in the total receipts is required to be taxed. - AO has specifically asked the assessee to give details of expenditure which were not incorporated in the books. He asked for flat-wise details of work done along with relevant measurement sheets/bills. - No such things were submitted by the assessee. To be more specific, there should be corresponding details of unaccounted expenditure. - CIT(A) wrongly deleted the additions - Order of AO sustained - AT
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Income Tax:
Deduction claimed u/s. 80JJA - Proof of manufacturing activities carried out by the assessee - Hon'ble Bombay High Court on similar set of fact, wherein bagasee/bagas was held as waste for manufacturing fuel briquettes. Therefore, we do not find any merit in the grounds of appeal raised by Revenue. - AT
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Income Tax:
Reopening of assessment u/s 147 - The assessee has filed her return of income. AO has not made any analysis on what the assessee has claimed, how prima-facie the claim of the assessee could be bogus on the basis of the information supplied by the Investigation Wing and therefore an income appears to have been escaped! Section 147 nowhere authorizes the Assessing Officer to reopen an assessment for verification of the claim made by the assessee. - AT
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Income Tax:
Penalty levied u/s 271B - tax audit report - In our view, strained relationship with the earlier CA would constitute reasonable cause. The tax authorities have pointed out time gap in getting a tax audit report from a new CA - As a known fact that it might have taken some time to severe relationship with the earlier CA. However, the fact remains that the tax audit report has been filed with the AO before completion of assessment. The tax authorities have mentioned about non-filing of tax audit report electronically. We notice that the provisions of sec.44AB do not mention about the same. Hence non-filing of audit report electronically cannot be the reason for imposing penalty u/s 271B. - AT
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Income Tax:
Deduction u/s 35(2AB) - Expenditure which was not eligible for weighted deduction u/s 35(2AB) - scientific research and development expenditure - such R&D expenditure though not eligible for weighted deduction u/s 35(2AB) but is allowable as deduction u/s 37(1) of the Act to the extent of amount of expenditure incurred by the assessee. - AT
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Customs:
Classification of goods - Smart Plug - Observing that Smart Plug is designed to primarily function as an electrical switch but is significantly more than a simple switch, it is excluded from Heading 85.36; and would be correctly classifiable under Heading 85.37, and more specifically sub-heading 8537 10 00. - AAR
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Corporate Law:
Oppression and mismanagement - It is admitted fact that the major portion of the equity shares (2/3rd) are held by the 1st and 3rd petitioners and the 2nd Respondent holds only 1/3rd of the total shares - Therefore, the petitioners themselves are still the majority shareholders who are in control of or concerned with the management and operation of the company and have already exercised their voting powers for self-remedy i.e., by removing the Respondents from the board and appointing new Additional Directors. In no way the petitioners have been oppressed by the Respondent Company. - if the relief sought for in this Company Petition is granted, that will only ruin the Company and adversely affect all the shareholders. - Tri
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Indian Laws:
Validity of arbitration award - Implementation Agreement - The interpretation of the relevant clauses of the Implementation Agreement, as arrived at by the learned Sole Arbitrator, are both, possible and plausible. Merely because another view could have been taken, can hardly be a ground for the learned Single Judge to have interfered with the arbitral award. In the given facts and circumstances of the case, the Appellate Court has rightly held that the learned Single Judge exceeded his jurisdiction in interfering with the award by questioning the interpretation given to the relevant clauses of the Implementation Agreement, as the reasons given are backed by logic. - SC
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Indian Laws:
Disciplinary proceedings against the officer of CGST / Central excise department - trap/transaction - enquiry officer exonerated both of them against petitioners, employees of department of CGST and Central Excise - Upon considering the provisions of P.C. Act, it cannot be held that chances of conviction of petitioners in the criminal trial involving the same facts are totally bleak. We are unable to hold that the nature of findings mentioned in the order of disciplinary authority forms any legal impediment for proceeding with the criminal case. - HC
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Service Tax:
Levy of Service Tax - Life Insurance Services - The phrase “any person” cannot be read in isolation, but will have to be read along with the entire definition as per the said section. The expression "any person" was inserted in Section 65 (105) (zx) by the Finance Act, 2006 to levy service tax on re-insurance activities carried by Life Insurance Company. Re-insurance is nothing but the services provided by the insurance company to mitigate the risk of the insurer while providing the insurance cover to insured - From the nature of charges, we are not in position to find any nexus between these charges and the life insurance services provided by the appellant to the policy holders, or to any other person as reinsurer. - AT
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Service Tax:
Valuation of service tax - wharfage charges under Port Service - In the present case, there is no dispute that the gross amount charged by EBTL to ESTL is equivalent to 20% of notified rate of wharfage charges and there is no additional consideration therefore, the amount charged by EBTL to ESTL is the sole consideration therefore, the value determined in the present case is strictly in accordance with Section 67 of the Act. - the gross amount charged by EBTL to ESTL being sole consideration will alone be liable to service tax and no any other amount which is otherwise not existing. - AT
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Service Tax:
Levy of service tax - Consulting Engineers Services - reimbursement of expenses - export of service or not - The demand on account of reimbursement of expenses to their employees working in the overseas branches does not constitute any remuneration in lieu of a service received by the appellants - the demand on account of services alleged to have been rendered by the overseas branches to the appellant is set aside. - AT
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Central Excise:
CENVAT Credit - scope of definition of input service - outward transportation of the goods - place of removal - In present case, the buyer was retaining the right even to reject the goods with the cumulative reading of definition of place of removal under Rule 4 of Central Excise Rules with the definition of inputs as already discussed above, the buyer’s place in the present case is held to be the place of removal. Accordingly, it is held that GTA services availed by the appellant till the buyers place are eligible input service for availment of Cenvat Credit - AT
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VAT:
Levy of excise duty on the liquor destroyed in fire - Demand raised against the writ petitioner company (respondent herein) towards loss of excise revenue because of destruction of liquor in fire - As noticed, the incident in question had not been because of any forces of nature and cannot be said to be an ‘act of God’. - Even if the present case is taken to be that of inadvertence or of unintentional omission on the part of the respondent company, it would fall within the definition of “negligence” for the purpose of Rule 709 of the Excise Manual. - SC
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VAT:
Validity of Arbitral Award - neglected to furnish the Form-Cs within the time prescribed resulting in a sales tax assessment - penalty imposed under the ‘Take or Pay/Supply or Pay’ Clause - HPCL had delayed in filing its counter claim, which was filed along with its sur-rejoinder after the pleadings were complete. The application to make an amendment was moved at the stage of final hearing of the claims. Undeniably, the same was at a much belated stage. Thus, the decision of the Arbitral Tribunal to deny HPCL’s request to amend the claim cannot be faulted. - HC
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VAT:
Constitutional Validity of amendment to the Industrial Policy Resolution 2007 (IPR 2007) - Opposite Parties do not deny that Petitioner No.1 fulfils the triple test under the IPR 2007 and has made an eligible fixed capital investment of ₹ 183.75 crores. There can be no doubt that there is a vested accrued and crystallized right in favour of Petitioner No.1 in terms of paragraph 18.4 of IPR 2007 to avail the incentives. That is why the sanction order dated 6th June 2017 was issued in the first place. No valid justification has been provided by the Opposite Parties for retrospectively cancelling the said sanction order and that too well over a year after it was issued. - HC
Articles
Notifications
DGFT-
50/2015-2020 - dated
10-1-2022
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FTP
Amendment in Export Policy of Enoxaparin (formulation and API) and Intra-Venous Immunoglobulin (IVIG) (formulation and API)
GST - States-
03/GST-2 - dated
4-1-2022
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Haryana SGST
Amendment of Notification No.71/ST-2, dated 27.07.2018 under the HGST Act, 2017
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02/GST-2 - dated
4-1-2022
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Haryana SGST
Amendment of Notification No.36/ST-2, dated 30.06.2017 under the HGST Act, 2017
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01/GST-2 - dated
4-1-2022
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Haryana SGST
Amendment of Notification No.35/ST-2, dated 30.06.2017 under the HGST Act, 2017
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22/2021 – State Tax - dated
24-12-2021
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Jharkhand SGST
Seeks to rationalize late fee for delay in filing of return in FORM GSTR-7
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21/2021 – State Tax - dated
24-12-2021
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Jharkhand SGST
Seeks to amend Notification S.O. No. 3– State Tax, dated the 03rd January, 2018
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39/2021—State Tax - dated
6-1-2022
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Maharashtra SGST
To appoints the 1st day of January, 2022, as the date on which the provisions of sections 2, 3 and 8 to 16 of the Maharashtra Goods and Services Tax (Amendment) Act, 2021 shall come into force
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38/2021-State Tax - dated
6-1-2022
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Maharashtra SGST
To notify 1st day of January, 2022, as the date from which the provisions of sub-rule (2), sub-rule (3), clause (i) of sub-rule (6) and sub-rule (7) of rule 2 of the Goods and Services Tax (Eighth Amendment) Rules, 2021, shall come into force
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20/2021—State Tax (Rate) - dated
6-1-2022
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Maharashtra SGST
Seeks to amend Notification No. 21/2018-State Tax (Rate), dated the 27th July, 2018
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19/2021—State Tax (Rate) - dated
6-1-2022
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Maharashtra SGST
Seeks to amend Notification No. 2/2017-State Tax(Rate), dated the 29th June, 2017
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18/2021—State Tax (Rate) - dated
6-1-2022
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Maharashtra SGST
Seeks to amend Notification No. 01/2017-State Tax (Rate), dated the 29th June, 2017
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (1) TMI 355
Permission for withdrawal of application - Provisional attachment of Bank Accounts - section 83(1) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- At this stage, the learned counsel for the petitioner seeks some time to obtain instructions. Having done so, she states that she would like to withdraw the petition with liberty to pursue alternative remedies as may be available in law, before the appropriate forum. The petition, along with pending application, is dismissed as withdrawn. Liberty granted.
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2022 (1) TMI 354
Export of services or not - services rendered for foreign companies (which do not have any business place/agency in India) in India - services provided in respect of goods that are being exported - place of supply of services - HELD THAT:- The recipient of services provided by the applicant is a foreign buyer of Indian goods. The applicant performs services in relation to goods located or under manufacture in the territory of India on behalf of the foreign buyer. The liability to tax in this situation is governed by the place of supply rules as enumerated under Section 13 of the IGST Act, 2017. This Section deals with place of supply of services where location of supplier or location of recipient is outside India - In the instant case, the location of the recipient is outside India however the location where the services are actually performed in respect of goods is in the Country. Therefore the place of supply of services provided by the applicant are within the Country and hence liable to SGST CGST in the State of Telangana.
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Income Tax
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2022 (1) TMI 353
Refund of adjustments made in excess of 20% of the disputed tax demands - HELD THAT:- As per mandate of law as well as the fact that refunds have been adjusted against outstanding tax demand by the Authority without invoking Section 245 of the Act and/or without following the due procedure prescribed under the said Section inasmuch as no notice or opportunity of pre-decisional hearing had been provided to the petitioner prior to such adjustment of refund, this Court is of the opinion that the petitioner is entitled to refund of adjustments made in excess of 20% of the disputed tax demands.
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2022 (1) TMI 352
Disallowance of 5% of the expenses claimed under the head marketing expenses and provisions - HELD THAT:- There is no reason given for restricting the disallowance to 5% of the expenses claimed and thereby arriving at the figure for the AY in question, except stating that the disallowance sustained by CIT (A) is on the lower side . ITAT could have followed the approach for the AY 1993-94 where the disallowance was restricted to around 1.5% of the expenses claimed by the Assessee, and which was upheld by the ITAT itself. Having considered the entire matter, the Court is of the view that the Income Tax liability of the Appellant as a result of the disallowance should be restricted to 50% of liability arising from the impugned order of the ITAT. It is ordered accordingly. With the Appellant assessee already having paid 50% of the said liability pursuant to the interim order passed by this Court, no further amount will be required to be paid by the Assessee. The impugned order of the ITAT stands modified in the above terms and the question of law framed is answered accordingly.
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2022 (1) TMI 351
Deduction u/s 80P - Receipt of loans and advance given to the employees/non-members - HELD THAT:- CIT(A) has relied upon the decision of Hon ble Jurisdictional High Court in the case of CIT Vs S.B.V. Bank Ltd. [ 2008 (9) TMI 112 - HIGH COURT RAJASTHAN] which is a binding precedent. Though the Hon ble Supreme Court had admitted the SLP filed by the assessee in the said case, however, no stay was granted by the Hon ble Supreme Court against the decision of the Hon ble High Court, therefore, so long the decision of the Hon ble High Court is in operation and holds the field, the same is binding on this Tribunal. Hence, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue and we uphold the same. Depreciation @ 10% to building-put in use by the assessee co-operative bank in its day to day work - HELD THAT:- There is no dispute that in the return of income, the assessee has claimed ₹ 5.00 lacs being provision for building fund which was disallowed by the A.O. on the ground that this provision is not allowable and secondly it is capital expenditure. The assessee has not disputed the fact that this is a capital expenditure and therefore, the assessee has raised an alternate plea of allowance of depreciation on building which is duly reflected in the balance sheet of the assessee. Since the A.O. is otherwise bound to consider and allow the depreciation on the fixed assets which are eligible for depreciation as per Explanation (5) to Section 32 of the Act, therefore, non-consideration of the claim of depreciation on the part of the A.O. as well as on the part of the ld. CIT(A) is not justified and contrary to the provisions of Section 32 of the Act. This issue of depreciation is to be considered after verifying the eligible assets and the satisfaction of the conditions of Section 32 of the Act being an asset has been brought into existence and used in the business of the assessee or at least ready to use for the business of the assessee. Accordingly, in the facts and circumstances of the case, this issue is set aside to the record of the A.O. to consider and decide the same after giving an opportunity of hearing to the assessee.
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2022 (1) TMI 350
Addition u/s 36(1)(iii) - assessee has not challenged the alternate addition u/s 36(1)(iii) before the first appellate authority - CIT(A) deleted the addition u/s 14A for the reason that the assessee has not earned any exempt income for the relevant assessment year - HELD THAT:- We find that the assessee has raised ground before the CIT(A) that investments are made in subsidiary and are out of commercial expediency. The assessee has also placed judicial pronouncements in support of its claim. Therefore, the CIT(A) is not justified in sustaining the addition u/s 36(1)(iii) of the I.T.Act without disposing of the assessee s grounds on merits. Hence, we deem it appropriate to restore this issue to the files of the CIT(A) in the interest of justice and equity. The CIT(A) is directed to afford a reasonable opportunity of hearing to the assessee before he dispose of this issue. It is ordered accordingly. Interest on delayed payment of service tax - AO held the same is not an allowable expenditure u/s 36 nor 37 as interest payable is not permissible for deduction u/s 37 of the I.T.Act since it is a default committed by the assessee in discharge of its statutory obligation - HELD THAT:- Separate sections govern the penal and interest consequences on delay in payment of service tax. This being the case, interest on delay in payment of service tax cannot be held to be penal in nature. The payment of interest is automatic when there is a delay in payment of taxes. Unlike penalty provisions, interest on delayed payment is not the discretion of the Officer. It has to be paid by the assessee and there is no option of waiver of the same by the Tax Officer. Therefore, the payment of interest is compensatory in nature and not in the nature of penalty or fine, disallowable u/s 37 of the I.T.Act. The Hon ble Apex Court in the case of Mahalakshmi Sugar Mills Co v. CIT reported in [ 1980 (4) TMI 1 - SUPREME COURT] had examined the issue of disallowance of statutory interest on the ground that the same was penal in nature. The Hon ble Apex Court reversing the judgment of the Hon ble Delhi High Court held that interest payable on arrears of cess is in reality part and parcel of the liability to pay cess. As in KAYPEE MECHANICAL INDIA PVT. LTD. [ 2014 (4) TMI 829 - GUJARAT HIGH COURT] held that the interest payment is an expenditure deductible u/s 37 The Delhi Tribunal in the case of CIT v. Messee Dusseldorf India (P) Ltd. [ 2009 (12) TMI 1034 - ITAT, DELHI] had held that interest paid for delayed payment of service tax is compensatory in nature and has the same character as service tax and therefore allowable as a deduction. In view of the above judicial pronouncements, we hold that the interest on delayed payment of service tax is compensatory in nature and not penal in nature. Therefore, we direct the A.O. to allow deduction - Decided in favour of assessee.
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2022 (1) TMI 349
Revision u/s 263 by CIT - Admissibility of deduction under section 80P(2)(a)(i) - application of principle of doctrine of merger - HELD THAT:- When the original assessment order under section 143(3) was challenged before the first appellate authority, and first appellate authority has decided the issue and passed order in favour of the assessee, consequently, the assessment order gets merged with the appellate order. Further, even the Revenue has not preferred any appeal against the appellate order, and therefore, issue in dispute attained finality. We also find that clause (c) of Explanation 1 to Section 263(1) has clarified that when the subject matter of revision is in appeal before the CIT(A), the CIT has no power to revise the same. CIT is competent to revise an order of assessment passed by the AO in all the matters except those which have been considered and decided in appeal. CIT can exercise revisional powers only on issue which are not before the ld.CIT(A). This is because powers of the CIT(A) are co-terminus to that of the CIT. The case on hand is clearly in violation of the Explanation 1 to section 263(1), therefore, applying principle of doctrine of merger, exercise of power under section 263 in the present case is bad in law and liable to be quashed. Also on merit, the dispute is covered in favour of the assessee by the decision of Jafari Momin Vikas Co-op. Credit Society Ltd. [ 2014 (2) TMI 28 - GUJARAT HIGH COURT] wherein, the Hon ble High Court examined applicability of section 80P(2)(a)(i) read with section 80P(4) of the Act and the CBDT Circular No.133 of 2007 dated 9.5.2007 clarifying scope of section 80P(2) in respect of cooperative credit society. The circular clarified that Delhi Co-op Urban Thrift and Credit Society Ltd. is not a cooperative bank, but a credit cooperative society, and section 80P(4) of the Act would not be applicable to it. Thus we quash order of the ld.Pr.CIT passed under section 263 of the Act, and thus allow the main ground of appeal of the assessee.
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2022 (1) TMI 348
Disallowance of expenditure incurred by the assessee towards legal fees - allowable revenue expenditure - HELD THAT:- The assessee is being granted patents for the one of its process in United States. A US based company filed suit against the appellant in July, 2008 for infringement of the patents rights. The assessee was also made a parity to the suit. It impacted adversely sale of assessee s product. Therefore, to defend the suit the assessee engaged a law firm in US. The total fees paid on that account - Ultimately, the patent suit resulted into a settlement agreement and the assessee paid settlement amount to the plaintiff. This sum was also paid by legal firm which in turn was paid to USA entity who filed the suit against the appellant. Further, a sum of ₹ 1,86,118/- is fees paid for routine maintenance of Patents. Therefore, all these above expenditure have been incurred by the assessee for the protection of its business and intellectual rights. These expenditure has been incurred mostly on account of defending the right of the assessee, therefore the same cannot held to be an expenditure which resulted into any endure benefit to the assessee. Any expenditure incurred by the assessee company for protection of IPR rights and for normal maintenance of its intellectual property are revenue expenditure. Further, the increase in the sales resulting into the higher profit could not be the reasons to hold that such expenditure are capital in nature. In fact the better protection of the intellectual property rights of the property would naturally result into higher profits and turnover but that does not make such expenditure as capital expenditure - appeal of AO is dismissed to hold that expenditure incurred by the assessee towards legal fee is Revenue in nature. - Decided in favour of assessee.
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2022 (1) TMI 347
Revision u/s 263 by CIT - Addition u/s 68 - Applicability of section 115BBE for set off of claim - HELD THAT:- Undoubtedly the amended provisions of section 263 provide that the Ld.CIT is within his powers assume the jurisdiction, if the AO s order is passed without making enquiries or verification, which should have been made. In this connection, it is clear that the said explanation will come to the aid of the Ld.CIT, if he can point out what enquiry was required, which has not been done by the AO. Here, we note that all the necessary enquiries have been done by the AO. Ld.CIT has himself made certain enquiries and the details were provided to him. It is not the case of Ld.CIT that any defect was noted in this connection. Hence, the direction given by the Ld.CIT in this case is simply to make further roving enquiries, which is totally unsustainable in law. The case laws referred above duly support this proposition. As noted that the alternate submission of the assessee that even if the AO reassess the income pursuant to direction under section 263 and as the amount involved is assessed under section 68, only effect will be that the income offered under business income would now be assessed under section 68 as income from other sources. It has been submitted that after set off of other losses the assessed income of the assessee would be the same as in the original assessment order. Hence, it is plea that when there is no change in income assessed the order of AO cannot be said to be prejudicial to the interest of revenue. The Ld.CIT has tried to respond to the submission by observing that as per section 115BBE income tax shall be collected at that of 60%, when the total income of the assessee includes such as the one here i.e under section 68 et cetera and that no deduction in respect of any expenditure or allowance or set off of loss shall be allowed to the assessee in computing as income referred here. Now, the assessment year under consideration is assessment year 2015-16, the CBDT circular referred by counsel of the assessee clearly provides that the amendment brought in by financial year 2016 in this regard is inserted with from 01.04.2017 and assessee is entitled to claim set off against income determined under section 115BBE of the Act till the AY 2016-17. Hence, even if the section referred by the Ld.CIT is invoked the assessee will still be eligible for the set off as referred above and the income would be the same as assessed by the AO in the original assessment. This proposition is neither rebutted by Ld.CIT nor by the revenue before us. It is a settled law that after the exercise of revisionary jurisdiction the income assessed remains the same, it cannot be said that the order of the AO is prejudicial to the interest of revenue. Hence, Ld.CIT s jurisdiction will not be valid. Hence, invocation of section 263 jurisdiction by the Ld.CIT is also not sustainable on this count also. - Decided in favour of assessee.
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2022 (1) TMI 346
Revision u/s 263 by CIT - exemption u/s 10(26AAB) - HELD THAT:- Allowing the claim for exemption u/s 10(26AAB) by discussing the nature of the claim made by the assessee of the assessment order. This facts would clearly show that the AO had examined the claim/considered the information/explanation filed during the course of assessment proceedings took a view that claim of the assessee u/s 10(26AAB) is allowable. Nor can it be said that the AO did not consider the provisions of section 10(26AAB) - the order cannot be termed as erroneous for want of enquiry on the issue which is sought to be revised by the ld. Pr.CIT. The ratio of decision of Jurisdictional High Court in the case of CIT vs. Nirav Modi [ 2016 (6) TMI 1004 - BOMBAY HIGH COURT] ; MOIL Ltd. vs. CIT, [ 2017 (5) TMI 258 - BOMBAY HIGH COURT] , Idea Cellular Ltd. vs. DCIT, [ 2008 (2) TMI 146 - BOMBAY HIGH COURT] is squarely applicable to the facts of present case. The very premise of the order of ld. Pr.CIT is wrong. There is nothing on record to say that the view taken by the Assessing Officer is unsustainable under the law - in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] clearly held that when the Assessing Officer adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the AO is unsustainable in law. Therefore, the assessment order cannot be termed as erroneous and prejudicial to the interests of the Revenue - Pr.CIT was not justified in exercising the power of revision u/s 263 of the Act and, accordingly, the order of the ld. Pr.CIT passed u/s 263 is hereby set-aside. Thus, the issue raised in grounds of appeal by the assessee stands allowed.
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2022 (1) TMI 345
TP Adjustment - ALP determination - international transaction of rendering software services to its AE - rejecting the assessee s allocation of Costs and determination of the PLI from services AE and services non-AE segments - rate charged to AEs and non-AEs was different as was reflected from sample invoices does not justify rejection of the separate determination of operating profit from different segments - HELD THAT:- Though the assessee mentioned in its Transfer pricing study report that the purchase of software was considered for benchmarking the Service segment, but the transaction of purchase of software was not taken into consideration at the time of benchmarking the transaction. A mere wrong mention in the Transfer pricing study report about the inclusion of purchase of software does not place the case of the Revenue at a better pedestal when factually the purchase of software was not considered by the assessee for benchmarking. As evident that the reasons ascribed by the authorities below for rejecting the segmental profitability are not tenable. The corollary is that the segmental profitability, as determined by the assessee, was correct, as per which OP/OC from services to AR at 18.04% is better than OP/OC from non-AE services at 13.44% showing the international transaction at ALP. There is another dimension of the case. The assessee rendered similar Services both to the AEs and non-AEs. Even if we ignore the separate segmental profitability and consolidate the service segment consisting of both the AEs and non-AEs as one unit, the combined PLI comes to 14.72%, as has been noted with tabulation in the objection raised by the assessee before the DRP showing OP/OE at 19.04% from services (AEs) and 14.33% from services (non-AEs) and aggregate at 14.72%. As against this combined margin from Services, the mean margin of the comparables taken by the AO in the order giving effect to the DRP s directions, is 13.13%. The assessee s combined margin is also better than that of the comparables, which makes the international transaction at ALP. DRP adduced one more reason that the assessee did not consider purchase of software in the services segment which ought to have been considered, as was initially stated in the Transfer pricing study report. Software products were purchased by the assessee from its AE at ₹ 36.00 lakh and it was sold at ₹ 1.55 crore, thereby giving profit of ₹ 1.19 crore. If this profit is also included in the operating profit of consolidated Service segment, the profit margin so considered earlier will further push up rather than reducing it. Viewed from any angle, it is clear that the international transaction of rendering software services to its AE is at ALP. We, therefore, order to delete the transfer pricing adjustment of ₹ 1.73 crore.
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2022 (1) TMI 344
Revision u/s 263 by CIT - allowability of depreciation of Intangible Asset-USA asset - as per CIT AO not examined the allowability of depreciation of intangible asset - HELD THAT:- As in the present case, the AO has not made any enquiry, examination or verification of allowability of claim of depreciation of Intangible Asset. Therefore, it is a clear case of no enquiry and thus, when the AO has not made any opinion by way of proper and sufficient enquiry then the allegation of change of opinion cannot be held as sustainable - there is no deliberation by the AO on this issue while passing the assessment order. We reach to a logical conclusion that Pr. CIT was right in holding that the assessment order is erroneous and prejudicial to the interest of the Revenue being passed without making any verification/examination on the issue of allowability of depreciation of Intangible Asset-USA asset, which was acquired by the assessee company on merger of its subsidiary situated at USA. Therefore, we are compelled to hold that ld Pr. CIT was correct, justified and reasonable in directing the AO to redo the assessment after thorough examination of the issue of claim of depreciation on Intangible asset-USA asset after giving an opportunity to the assessee. Appeal of the assessee is dismissed.
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2022 (1) TMI 343
TDS u/s 194J - interconnection usages charges (IUC) - taxability of roaming charges - Fees for Technical Services (FTS) - HELD THAT:- As relying on M/S. TATA TELESERVICES (MAHARASHTRA) LIMITED VERSUS ASSTT. COMMISSIONER OF INCOME TAX, TDS 3 (1) , MUMBAI VICE-VERSA [ 2016 (6) TMI 174 - ITAT MUMBAI] and M/S. VODAFONE SOUTH LTD., [ 2016 (8) TMI 422 - KARNATAKA HIGH COURT] the said payments are not liable for deduction of tax at source u/s. 194J - payment made by the telecom company to another Company for utilization of network cannot be termed as Technical service as accessing the network during calls is a fully automatic process and did not require any human intervention. There are no Technical services involved during the process of telecom/data traffic flow and hence such payments cannot be termed as Fees for Technical Services and therefore, no TDS was deductible on such payments -Decided in favour of assessee. Deductibility of TDS on discount extended to its pre-paid distributors on distribution of pre-paid talk time - HELD THAT:- Ld.CIT(A) has passed an unclear and somewhat self-contradictory order. On the issue, he initially observes about Hon ble Karnataka High court decision being in favour of the assessee. Thereafter, he observes that some of the revenue s contentions have been accepted by the Hon ble High court. Thereafter, he observes that in accordance with the Hon ble High Court directions certain information was required from the assessee. After the receipt of information, he does not examine the same himself. He seeks for a remand from the AO. We find considerable cogency in the submission of the ld counsel that the details were submitted before ld CIT(A), who has not examined the same himself but has asked for the remand from the AO and he accepted the AO s remand. He noted that the assessee could not explain accounting in the books as books were not available and benefit of doubt cannot be given to the assessee. It is evident that the details were duly submitted before ld CIT(A). What stops ld CIT(A) from giving a finding himself instead of relying upon the report on the same by the AO which were duly objected by the assessee is not understood. Hence we deem it appropriate that the matter may be remanded to the file of the AO. Appeals by the assessee stand allowed for statistical purpose.
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2022 (1) TMI 342
Deduction u/s 80IA on the enhanced expenditures made to sub-contractors - allowability of inflated expenditure by way of payment to sub-contractors - assessee submitted that the AO has made the addition on the ground that the assessee has inflated its expenditure by way of payments to sub-contractors and, therefore, the same was disallowed u/s 37(1) - HELD THAT:- AO has made the addition only on the basis of inflated expenditure by way of subcontract payments, which is in the nature of disallowance u/s 37(1) of the Act. On the above order of the AO, we find that nowhere mentioned that it is other than the business expenditure of the assessee - As observed from the arguments and paper book submitted by the assessee, the amounts received by the sub-contractors have been offered as their turnover and the turnovers had been accepted by the revenue authorities. Therefore, it clearly shows that the payments made by the assessee to sub-contractors is a business expenditure of the assessee. As per Board s Circular No. 37/2016 dated 02/11/2016 at times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. The assessee is also eligible to claim for deduction u/s 80IA on the profit earned from its business. The issue before us is also regarding the enhancement of the profit of the assessee which is covered by the said Circular quoted supra and, therefore, the assessee is eligible to claim deduction u/s 80IA of the Act - we set aside the order of the CIT(A) and direct the AO to allow the assessee s claim of deduction u/s 80IA of the Act on the enhanced expenditure towards the payment to sub-contractors, which was disallowed by the AO and confirmed by the CIT(A) in all the appeals under consideration. We allow the grounds raised by the assessee with regard to inflated expenditure by way of sub-contract payments in all the appeals under consideration.
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2022 (1) TMI 341
Disallowance of employees contribution of PF and ESI deposited belatedly but before due date of filing of return of income u/s 139(1) - whether the amendment brought to Section 36(1)(va) as well as 43B of the Act is applicable retrospective or from assessment year 2021-22 as it is specifically stated in the memorandum of Finance Bill, 2021? - HELD THAT:- As decided in case of M/s Kogta Financial (India) Ltd [ 2022 (1) TMI 250 - ITAT JAIPUR] admittedly and undisputedly, the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) - D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case, the impugned assessment year is assessment year 2018-19 and therefore, the said amended provisions cannot be applied in the instant case. The addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of the employees s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted - Appeal of the assessee is allowed.
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2022 (1) TMI 340
Additions towards addmission of Unaccounted receipts - to be assessed to tax on gross basis, or as held by the ld.CIT(A), only the profit element embedded in the total receipts is required to be taxed. - HELD THAT:- As documentary evidence exhibiting acceptance of unaccounted receipts was found. This was admitted by the director of the assessee-company, therefore, cumulative setting of these two aspects, it suggests that there was unaccounted receipts. AO is not harping upon statement of the Director only, which otherwise without oath. The assessee never disputed the discovery of unaccounted receipts. It disputed quantum of income embedded in those receipt. Therefore, these case laws do not help the assessee. This fact has been recognized by two letters written by the assessee-company and as referred by the AO. As far as the proposition that entire extra-collection should not be termed as profit of the assessee-company, rather profit embedded in such receipts is required to be assessed as income is concerned, we are of the view that there is no dispute with regard to the proposition that whenever unaccounted receipts unearthed during any investigation, then the gross receipts are not to be taxed. But this situation is applicable only when simultaneously some evidences are being found exhibiting unaccounted expenditure. AO has specifically asked the assessee to give details of expenditure which were not incorporated in the books. He asked for flat-wise details of work done along with relevant measurement sheets/bills. In other words, the assessee must have maintained details for controlling overall expenditure. Those details might not be part of regular books of accounts, but they may goad the AO to estimate what is the nature of work; how much expenditure probably would have been incurred by the assessee; even under estimation. No such things were submitted by the assessee. To be more specific, there should be corresponding details of unaccounted expenditure. CIT(A) proceeded on altogether different analogy and estimated that unaccounted expenditure might not have been incurred by the assessee against this unaccounted receipts, and therefore, only profit element ought to be worked out. To this effect, there is no evidence produced by the assessee rather before filing of return. As again admitted of taxability of gross amount. - We reverse finding of the ld.CIT(A) and restore that of the AO. - Decided in favor of Revenue.
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2022 (1) TMI 339
Addition on account of Client Code Modification - Addition on ground as assessee has shifted its profit to other clients or shifted loss to its sister concerns as alleged by the Special Auditors appointed by the Department - Assessee submitted that the assessee company is into such business wherein, various, i.e., more than thousands of orders are received and executed during the business hours of a single day and correspondingly the price of security/ shares etc., also fluctuates with every nano second, therefore practically it can be understood that, the punching of orders by the employees is always in a haste - CIT(A) deleted the addition on the ground that the volume of Client Code Modification occurred are within the permissible limit allowed by SEBI and the Exchange/SEBI has not found any violation of rules and regulations related to CCM and the CCM transactions are falling within the prescribed limit of less than 1% - HELD THAT:- We do not find any infirmity in the order of the CIT(A) on this issue. We find, identical issue had come up before the Tribunal in the case of group company, namely, M/s Jaypee Financial Services Ltd. [ 2019 (12) TMI 820 - ITAT DELHI] as held the assessee is not a member of any exchange and cannot execute CCM and the transactions on account of CCM done by the group concerns are not found to be false or untrue and since SEBI or the stock exchange has not taken any action treating the transactions to be non genuine and volume of CCM occurred are within the permissible limit allowed by the SEBI, therefore, we are of the considered opinion that there is no perversity in the order of the CIT(A) deleting the addition. Accordingly the same is upheld and the grounds raised by the revenue are dismissed. - Decided in favour of assessee. Addition u/s 36(1)(iii) on interest - Assessee could not establish that the interest bearing fund borrowed by it is wholly and exclusively used in business - assessee could not establish the diversion of interest bearing fund to Shri Gaurav Arora and M/s Arora Timber Ltd., free of interest - HELD THAT:- Since the facts of instant case are identical to the facts of the cases decided by the Tribunal in the case of sister concerns of the assessee [ 2020 (1) TMI 858 - ITAT DELHI] , therefore, respectfully following the same, we uphold the order of the CIT(A) on this issue and the grounds raised by the Revenue are dismissed. Addition u/s 14A r.w. Rule 8D - HELD THAT:- It is an admitted fact that the assessee company has not earned any exempt income or dividend income during the year, a fact brought on record by the AO himself. It has been held by the Hon ble Delhi High Court in the case of Cheminvest Ltd[ 2015 (9) TMI 238 - DELHI HIGH COURT] that in absence of any exempt income, disallowance under Section 14-A of the Act of any amount was not permissible. Also see MCDONALD'S INDIA PVT. LTD. [ 2018 (11) TMI 1057 - DELHI HIGH COURT] - Decided in favour of assessee. Deemed dividend addition u/s 2(22)(e) - advances in the nature of loan and advance has been received by the assessee from M/s Jaypee Capital Services Ltd. and the assessee company has more than 10% shareholding in Jaypee Capital Services Ltd. - CIT(A) deleted the addition made by the AO holding that the transactions in the client ledger account are transactions entered in the ordinary course of business and are relating to sale/purchase of shares/currency/derivatives only - HELD THAT:- The account of the assessee is a running account, i.e., on every day there are transactions of receipt and payment and, therefore, the payments made against the business transactions are outside the purview of section 2(22)(e) - See SHRI GAURAV ARORA [ 2019 (3) TMI 1289 - ITAT DELHI] - The various decisions relied on by the ld. Counsel for the assessee also support his case to the proposition that the word advance which is in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of the provisions of section 2(22)(e) of the Act. In this view of the matter and in view of the detailed reasoning given by the CIT(A) on this issue, we do not find any infirmity in his order. Accordingly, the same is upheld and the ground raised by the Revenue on this issue is dismissed.
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2022 (1) TMI 338
Deduction claimed u/s. 80JJA - Proof of manufacturing activities carried out by the assessee - whether 'bagas' used by assessee as raw material for preparation of final product, purchased from other parties can be considered as waste for manufacturing bio-mass fuel or not? - HELD THAT:- We find that on similar set of fact, the Hon'ble Bombay High Court in the case Smt. Padma S. Boara [ 2012 (12) TMI 666 - BOMBAY HIGH COURT] while considering the question of law whether Tribunal was justified in allowing deduction u/s 80JJA on the profit derived from business of manufacturing fuel briquettes from 'bagas'. Hon'ble Bombay High Court on similar set of fact, wherein bagasee/bagas was held as waste for manufacturing fuel briquettes. Therefore, we do not find any merit in the grounds of appeal raised by Revenue. Further keeping in view that we have affirmed the order of ld. CIT(A) on merit, therefore, discussions of the contention of ld. DR for the revenue about the applicability of exception clause of para 10(c) of CBDT Circular have become academic. Accordingly, order of Ld. CIT(A) is affirmed resultantly the appeal of Revenue stands dismissed.
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2022 (1) TMI 337
TP Adjustment of business support services - comparable selection - Functional dissimilarity - HELD THAT:- Axis Integrated Systems Limited was not a valid comparable in view of the fact that the entity level profitability taken by the TPO is incorrect. There was lack of segmental information. Financials of the company do not provide detailed description of the business operations of the company. Further, as per website extracts, Axis Integrated Systems Limited is engaged in providing consultancy with regard to Directorate General of Foreign Trade. Therefore, we hereby direct the Assessing Officer to exclude this comparable. Killick Agencies and Marketing Limited being functionally different and dissimilar to the assessee. We, therefore, direct the Assessing Officer/TPO to exclude this company from the list of comparables. Just Dial Limited operates a local search engine which assists general public in finding information pertaining to nearby area. Further, no segmental data is available and the company owns significant intangible assets in the form of goodwill, application development and unique phone numbers. We, therefore, hold that this is not a valid comparable and direct the Assessing Officer/TPO to exclude this company from the list of comparables. TDS u/s 194J/194H - Disallowance under section 40(a)(ia) of the Act on account of trade offers provided to distributors - HELD THAT:- As decided in own case [ 2020 (8) TMI 825 - ITAT DELHI] and [ 2020 (8) TMI 825 - ITAT DELHI] there is absence of a principalagent relationship and benefit extended to distributors cannot be treated as commission under Section 194H of the Act. As regards to applicability of Section 194J of the Act, the Assessing Officer has not given any reasoning or finding to the extent that there is payment for technical service liable for withholding under Section 194J. Marketing activities have been undertaken by HCL on its own. Merely making an addition under Section 194J without the actual basis for the same on part of the Assessing Officer is not just and proper. The Ld. DR s contention that discounts were given by way of debit notes and the same were not adjusted or mentioned in the invoice generated upon original sales made by the assessee, does not seem tenable after going through the invoice and the debit notes. In fact, there is clear mentioned about the discount for sales promotion. Thus, on both the account the addition made by the Assessing Officer does not sustain. - Decided in favour of assessee Disallowance on account of trade price protection paid to distributors - allowable revenue expenditure u/s 37 or not? - HELD THAT:- As decided in own case [ 2020 (8) TMI 825 - ITAT DELHI] it is market practice that if there is any change in prices of handsets by competitors, change in life of mobile model, change in market demand of particular model which affects the sales, the distributor is protected by the Trade Price Protection. This is actually a commercial expediency in modern day technological changes which are very fast and vast. Besides, Trade Price Protection is offered to distributors on handsets which have not been subject to trade offers/discounts - so far as the instant year is concerned, we have already noted in the earlier paragraph that the requisite confirmations were filed before the Assessing Officer. Thus, this expenditure is allowable as revenue expenditure under Section 37(1). Disallowance of marketing expenditure incurred on account of issuance of handsets on Free of Cost ( FOC ) basis - HELD THAT:- As decided in own case [ 2020 (8) TMI 825 - ITAT DELHI] the assessee is engaged in manufacture, import and sale of mobile handsets. The assessee has given mobile handsets to its employees, dealers, sale personnel etc. for free of cost and thus no longer owned the said handsets. Thus, the said cost was rightly taken as business expenditure by the assessee and was rightly reduced from the inventory. This issue is decided in favour of the assessee. Deduction towards amount of education cess and secondary and higher education cess paid - HELD THAT:- We find that this issue is no more res-integra as has been decided in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal following the judgment of the Hon ble Bombay High Court in the case of Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] Therefore, respectfully following the same, we hereby direct the Assessing Officer to delete the disallowance.
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2022 (1) TMI 336
TDS u/s 194H - guarantee fee paid to the bank - Addition u/s 40a(ia) - HELD THAT:- The assessee in the case before us could not have been saddled with any obligation to deduct tax at source on the bank guarantee fee that was charged by the bank for rendering banking services in the normal course of its business i.e standing as a guarantee to third parties qua the contractual obligations of the assessee. As in the case M/S. NAVNIRMAN HIGHWAY PROJECT PVT. LTD. [ 2019 (10) TMI 656 - ITAT DELHI] as bank guarantee commission partook the character of interest u/s 2(28A) of the Act and as such, exemption provided u/s 194A(3)(iii) qua such payment was available to the assessee, therefore, no obligation on the said count too was cast upon the assessee to deduct tax at source on the said amount. Backed by its aforesaid observations, the Tribunal had vacated the disallowance u/s 40(a)(ia) that was made by the department by holding the assessee as being in default for not having deducted tax at source on the amount of bank guarantee fee u/s 194H. Also see KOTAK SECURITIES LIMITED VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, TDS CIRCLE 2(1), MUMBAI [ 2012 (2) TMI 77 - ITAT MUMBAI] Both the lower authorities had erred in treating the assessee as being in default for not having deducted tax at source on the amount of bank guarantee fee u/s 194H of the Act. Accordingly, de-hors any obligation on the assessee to deduct tax at source on the amount of bank guarantee fees within the meaning of section 194H of Act, no disallowance of the aforesaid amount could have been made u/s 40(a)(ia) - Decided in favour of assessee.
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2022 (1) TMI 335
Addition u/s 14A r.w.r. 8D - enhancing the book profits u/s 115JB for Addition u/s 14A r.w.r. 8D - HELD THAT:- When the own funds of the assessee exceed the investments, the presumption is that the assessee made the investment from out of their own funds, though all the funds are held in the same account. Record does not reveal the quantum of the investment which yielded exempt income. We therefore, restore the issue to the file of the learned Assessing Officer to consider only such investments which yielded the tax free income, but not the entire investments. Further in Vireet Investments Private Limited [ 2017 (6) TMI 1124 - ITAT DELHI] , it is held by the Special Bench of the Tribunal that the disallowance made under section 14A of the Act read with Rule 8D of the Rules cannot be considered for the purpose of enhancing the book profits under section 115JB of the Act. Learned Assessing Officer will take note of it. Accordingly, ground No. 1 is allowed and ground No. 2 is allowed for statistical purpose. Addition invoking the provisions of section 50C - scope of amendment in section 50C - HELD THAT:- Coming to the retrospective nature of the amendment to section 50C of the Act by inserting the proviso, we find that in the case of CIT vs. Shri Vummudi Amarendran [ 2020 (10) TMI 517 - MADRAS HIGH COURT] as held that the amendment made by the Finance Act, 2016 inserting proviso to section 50C is clarificatory in nature and therefore, had the retrospective application.. Same was the view taken by the Tribunal in the case of ITO vs. Modipon [ 2015 (1) TMI 609 - ITAT DELHI] ,SH. ALOK SWARUP, [ 2020 (9) TMI 921 - ITAT DELHI] and AMIT BANSAL [ 2018 (11) TMI 1699 - ITAT DELHI] Thus we hold amendment in section 50C by inserting proviso is curative and retrospective in nature and has to be given effect thereof in this case.
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2022 (1) TMI 334
Disallowance of expenses shown as payable in the balance sheet - assessee has shown statutory liabilities on account of TDS payable, on account of EPF contribution and on account of Profession Tax - HELD THAT:- The AO is directed to allow the payment in the year in which the payments have actual been made after due verification. The assessee is directed to furnish necessary evidences in support of its claim. Remuneration to partners which included bonus - AO was of the opinion that the deed neither quantifies the amount of bonus nor does it explain how to decide on the quantum of bonus - HELD THAT:- There is no dispute that there is a specific provision in the partnership deed in respect of payment of remuneration to partners. It is also not in dispute that bonus paid to partners is part of the remuneration. This means that the total allowance of the remuneration to partners has to be judged in the light of the provisions contained section 40(b) of the Act. The AO is directed to verify whether the overall remuneration including bonus is within the permissible limit of the relevant provisions of section 40 (b) of the Act and if found so the same should be allowed. Disallowance of Vehicle Expenses, Depreciation on Car,Telephone Expenses, Depreciation on Telephone, Travelling Expenses andConveyance Expenses - HELD THAT:- Disallowances have been made on ad-hoc basis without pointing out any specific defect in the accounts. However, personal usage of vehicle/ telephone cannot be ruled out. We find that the CIT(A) has restricted disallowance to 5% on account of vehicle expenses and depreciation on car and has further restricted the disallowance on account of mobile phone expenses only to the personal usage of four persons, we do not find any error or infirmity in the findings of the CIT(A). Thus ground accordingly dismissed.
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2022 (1) TMI 333
Disallowance u/s 14A r.w.r. 8D - Inclusion/exclusion of investments which could yield dividend - whether AO is justified in considering the entire investment for the purpose of computing the disallowance u/r 8D(2)(iii) or he should have considered only such investments as yielded dividend as pleaded by the assessee? - HELD THAT:- The assessee has been dealing with the government securities markets including treasury Bills and other debt instruments like PSU Bonds, interest Rate Derivatives and other money market instruments. It has been the case of the assessee that the dividend yielding securities were purchased in the regular course of business without any further efforts. No direct expenses were said to have been incurred by the assessee in dealing with the shares for the purpose of earning dividend nor any interest component is involved in dealing with such shares which are admittedly stock-in-trade. As held by the ld. CIT(A), this issue is no longer res integra and is squarely covered by the decision of Hon ble jurisdictional High court in the case of Acb India Ltd. [ 2015 (4) TMI 224 - DELHI HIGH COURT] wherein it is held that while calculating the disallowance u/s. 14A read with Rule 8D(2)(iii) only those investments which could yield dividend should be taken into account and not those investment which could not earn any dividend during the year. Mere fact that the assessee received the dividend has no role to play in computing the disallowance u/s. 14A read with Rule 8D except to limit the disallowance to the quantum of dividend - we find the grounds of appeal of the Revenue to be devoid of merits and accordingly, the same are dismissed. Consequently, the appeal of the Revenue is liable to be dismissed.
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2022 (1) TMI 332
Reopening of assessment u/s 147 - eligibility of reasons to believe - disallowing of loss - HELD THAT:- The assessee has filed her return of income. AO has not made any analysis on what the assessee has claimed, how prima-facie the claim of the assessee could be bogus on the basis of the information supplied by the Investigation Wing and therefore an income appears to have been escaped - Section 147 of the Act nowhere authorizes the AO to reopen an assessment for verification of the claim made by the assessee. AO is required to analyze the information possessed by him within the light of information supplied by the assessee in the return of income, and thereafter he has to form a prima facie opinion that such and such income appears to have escaped from assessment. In the reasons he has nowhere even mentioned what is the loss or gain claimed by the assessee in such transactions. The assessee has filed her return of income. AO has not made any analysis on what the assessee has claimed, how prima-facie the claim of the assessee could be bogus on the basis of the information supplied by the Investigation Wing and therefore an income appears to have been escaped! Section 147 nowhere authorizes the Assessing Officer to reopen an assessment for verification of the claim made by the assessee. AO is required to analyze the information possessed by him within the light of information supplied by the assessee in the return of income, and thereafter he has to form a prima facie opinion that such and such income appears to have escaped from assessment. In the reasons he has nowhere even mentioned what is the loss or gain claimed by the assessee in such transactions. In the present case, there is no prima-facie opinion formed by the Assessing Officer before issue of notice under Section 148 of the Act; therefore, the reopening of the assessment is bad in the eyes of law. - Decided in favour of assessee.
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2022 (1) TMI 331
Income from other sources - payments made to Prestige Property Management and Services Ltd. for providing service to the tenants was claimed as a deduction - disallowance of maintenance charges on a 'proportionate basis, in the same proportion as the rent to the total rent and maintenance charges collected from 2 parties - HELD THAT:- Maintenance charges collected by the Assessee from the tenants is shown as income from other sources and the payment made to PPMSL is reduced and the difference offered to tax under the head income from other sources. U/s.57(iii), deduction of expenditure incurred in earning income under the head other sources has to be allowed as a deduction. There is no basis to conclude that the amounts paid by the tenant of 7th and 8th floor is attributable to the entire property and therefore part of the same which is not attributable to 7th and 8th floor maintenance should be disallowed proportionately. The amounts collected from the two tenants was paid over by the Assessee to PPMSL and in such circumstances, was to be allowed as expenditure, when admittedly services were rendered by PPMSL. We find no legal or factual basis to support the disallowance made by the revenue authorities - Decided in favour of assessee.
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2022 (1) TMI 330
Penalty levied u/s 271B - tax audit report was not obtained and furnished before the due date for filing return of income - Proof of Reasonable cause - HELD THAT:- Under sec. 273B of the Act, the penalty u/s 271B shall not be imposable, if the assessee proves that there was reasonable cause for the failure to comply with the provisions of sec.44AB. The approach to be adopted on levy of penalty u/s 271B has been explained by Hyderabad Special Bench of ITAT in the case of ACIT vs. Gayatri Traders [ 1996 (4) TMI 157 - ITAT HYDERABAD-B] In the instant case, it is an admitted fact that the assessee did not have good relationship with its auditors before the end of the financial year. It has filed complaint against its earlier auditor in July, 2014. Subsequently, it has engaged another CA and furnished audit report before the completion of the assessment. Thus the delay in filing tax audit report has occurred due to strained relationship with its earlier auditor. We notice that the tax authorities have taken the view that the assessee should have appointed new CA immediately after knowing misdeeds of earlier CA. However, provisions of sec.273B exempts from levying of penalty, if the assessee proves that there was reasonable cause. If the cause shown by the assessee appeals or satisfies any reasonable mind, then the same shall constitute reasonable cause. In our view, strained relationship with the earlier CA would constitute reasonable cause. The tax authorities have pointed out time gap in getting a tax audit report from a new CA - As a known fact that it might have taken some time to severe relationship with the earlier CA. However, the fact remains that the tax audit report has been filed with the AO before completion of assessment. The tax authorities have mentioned about non-filing of tax audit report electronically. We notice that the provisions of sec.44AB do not mention about the same. Hence non-filing of audit report electronically cannot be the reason for imposing penalty u/s 271B. There was reasonable cause for the assessee in not filing the tax audit report in time. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to delete the penalty levied u/s 271B - Decided in favour of assessee.
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2022 (1) TMI 329
Employees contribution towards ESI/PF failure to pay the employee s contribution of PF/ESI within the prescribed due dates as per Section 36(1)(va) - Scope of amendment - HELD THAT:- In the instant case, admittedly and undisputedly, the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case, the impugned assessment year is assessment year 2019-20 and therefore, the said amended provisions cannot be applied in the instant case. See SHRI GOPALAKRISHNA ASWINI KUMAR VERSUS THE ASSISTANT DIRECTOR OF INCOME TAX, BENGALURU [ 2021 (10) TMI 952 - ITAT BANGALORE] Addition by way of adjustment while processing the return of income u/s 143(1) amounting to ₹ 79,644/- made by the CPC towards the deposit of the employees s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee.
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2022 (1) TMI 328
Exemption u/s 11 - rejecting the registration u/s 12AA(l)(b)(ii) - as per AO appellant society has not been able to produce the books of accounts for verification of object and activities of the trust - Appellant had introduced the unaccounted money into the trust income as donation and the appellant society is not carrying out any activity of charitable nature - HELD THAT:- It is pertinent to note that the CIT(Exemption) has given a finding that no details were filed by the assessee/applicant establishing that the Foundation is for charitable purpose, but the record shows otherwise. Therefore, we are of the view that the CIT(Exemption) should take into account the cognizance of the evidence and decide the application u/s 12AA of the applicant Foundation/assessee as per law. Needless to say, the applicant be given opportunity of hearing by following principles of natural justice. Therefore, the appeal of the assessee is partly allowed for statistical purpose.
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2022 (1) TMI 327
Deduction u/s 35(2AB) - scientific research and development expenditure - denial of deduction as approving authority has not approved the research and development expenditure of the assessee approving authority has not approved the research and development expenditure of the assessee - HELD THAT:- Assessee has in house research and development Center which has been recognized and approved for deduction u/s 35(2AB) since FY 2004-05 as per CBDT letter dated 29.09.2004. The assessee has been continuously granted deduction up to Assessment Year 2013-14 We find that there is no such amendment made in the income tax to this effect for Assessment Year 2014-15 and therefore, same cannot be imputed in the Act. Further, w.e.f. 01.04.2016, the income tax Rules has been amended and Form No. 3CL has been introduced which is required to be uploaded along with return of income. Further, Form No. 3CL in para 3 is also required to state amount of expenditure claimed by the assessee by to be certified by an accountant‟ but this applicable from 01.04.2016. In view of the above facts and perusal of the order of the ld CIT(A) we do not find any infirmity in the claim of the assessee for deduction u/s 35 (2AB) of scientific research and development expenditure amounting to ₹ 468.98 lakhs. - Decided in favour of assessee. Addition u/s 37(1) - Expenditure not eligible for weighted deduction u/s 35(2AB) - HELD THAT:- We find that such R D expenditure though not eligible for weighted deduction u/s 35(2AB) but is allowable as deduction u/s 37(1) of the Act to the extent of amount of expenditure incurred by the assessee. The assessee should have been allowed deduction of above sum as normal allowable expenditure u/s 37 (1) of the act . The ld CIT(A) did not deal with this aspect. In view of this, we direct the ld AO to allow the assessee deduction u/s 37(1) of the Act at a sum of ₹ 8.41 lakhs. Accordingly, appeal of the assessee is allowed.
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Customs
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2022 (1) TMI 326
Interest on delayed refund of excess duty paid - provisional assessments - violation of principles of unjust enrichment - HELD THAT:- There are no doubt whatsoever on the non-applicability of interest for the provisional assessments undertaken before the amendment in Section 18 in 2006. Therefore, to this extent, the impugned orders do not survive and are liable to be set aside. Moreover, it is found that the approach of the learned Commissioner (Appeals) is in violation of the principle of judicial discipline. As no stay was granted as on that date against the order of the Tribunal, the learned Commissioner (Appeals) was bound by the decision of the Tribunal. Applicability of bar of unjust enrichment in respect of provisional assessments before 2006 - HELD THAT:- Karnataka High Court in the MANGALORE REFINERY AND PETROCHEMICALS LTD. VERSUS COMMISSIONER OF CUSTOMS, MANGALORE [ 2015 (5) TMI 768 - KARNATAKA HIGH COURT] have set the matter to rest holding that bar of unjust enrichment is not applicable to the cases of provisional assessments before the amendment in 2006. Refund of duty paid on import of spare parts before 2003 - HELD THAT:- The learned counsel for the appellants has categorically submitted that there was no case where they have imported at a price higher than the price at which the independent /unrelated entities have imported the spare parts. Therefore, the observations of the SVB order are superfluous and not applicable as far as the imports in 2002 or before are concerned. Therefore, there are no basis in the conclusions arrived at in Order-in-Original and Order-in-Appeal. Appeal disposed off.
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2022 (1) TMI 325
Classification of goods - Smart Plug - classifiable under CTH 8537 10 00 - Echo Sub rightly classifiable under CTH 8518 21 00 or not - benefit of Serial Number 490 of Notification No. 50/2017-Customs, dated 30-6-2017. Classification of Smart Plug - HELD THAT:- Observing that Smart Plug is designed to primarily function as an electrical switch but is significantly more than a simple switch, it is excluded from Heading 85.36; and would be correctly classifiable under Heading 85.37, and more specifically sub-heading 8537 10 00. Eligibility of smart plug to claim the benefit of Serial Number 490 of Notification No. 50/2017-Customs, dated 30-6-2017 - HELD THAT:- The relevant entry in the said Notification No. 50/2017-Customs provides for concessional rate of basic customs duty of 7.5% for all goods falling under Heading 85.37. Therefore, smart plug classifiable under Heading 85.37 is eligible for the benefit of concessional rate of duty under the said Notification No. 50/2017-Customs. Classification of Wireless Speaker Device with Model No. P5B83L (Echo Sub) - HELD THAT:- It is a single loudspeaker with a single drive unit mounted in their enclosure. Noting that a sub-woofer is a speaker that is designed to only reproduce low frequencies, also known as the bass, it is found that Echo Sub would merit classification as a speaker under Heading 85.18; and since it is a single loudspeaker, mounted in their enclosure, the appropriate classification would be under sub-heading 8518 21 00.
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Corporate Laws
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2022 (1) TMI 324
Oppression and mismanagement - Seeking to declare the petitioners as directors of the said company and allow the petitioners to take charge as the directors of the company - seeking direction to respondents not to restrain the petitioners from the company premises - seeking direction to 2nd and 3rd respondents not to take any action restraining petitioners taking charge as directors of the said company - seeking direction that the appointment of respondents 2nd and 3rd as null and void - seeking to allow the petitioners to perform all the duties as directors of the said company - Section 241 242 of the Companies Act, 2013. HELD THAT:- The majority shareholders are expected to exercise their voting powers to self-remedy, before relying on any statutory provisions to protect themselves from oppression by the minorities. The statutory relief for shareholder s oppression is available to majority shareholders who are not in control of the management of the company and who, for any given reason, are unable to control the board. The remedy for shareholders oppression is also available to majority shareholders, the court would only exercise its powers to remedy, in instances where the majority shareholders are unable to rectify the oppression themselves. The shareholders must show that there exist some special circumstances rendering their majority shareholding powerless, against the oppressor. In the instant petition, petitioners themselves admitted that they are majority shareholders who stated that they are facing oppression and mismanagement from the Respondents. It is admitted fact that the major portion of the equity shares (2/3rd) are held by the 1st and 3rd petitioners and the 2nd Respondent holds only 1/3rd of the total shares - Therefore, the petitioners themselves are still the majority shareholders who are in control of or concerned with the management and operation of the company and have already exercised their voting powers for self-remedy i.e., by removing the Respondents from the board and appointing new Additional Directors. In no way the petitioners have been oppressed by the Respondent Company. Regarding the buying up, as a matter of fact, the petitioners are ready to sell the shares in the Company as per share purchase agreement entered between the 1st 3rd Petitioners and the 2nd respondent. Therefore, this Tribunal directs the petitioners to follow the agreement executed by them with the 2nd Respondent. The respondents are directed to honour the agreement for the sale of shares executed between the petitioners and Respondents on 15.01.2019 and direct the respondents to purchase the 66,667 equity shares of 1st Petitioner for Rupees One crore and 66,666 Equity Shares held by the 3rd Petitioner for a sale consideration of Rupees Ninety-Six Lakh - petition disposed off.
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2022 (1) TMI 323
Sanction of Scheme of Arrangement - Section 230-232 of Companies Act. 2013 and other applicable provisions of the Act read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- This Bench holds that depending on the facts and circumstances of each case, the NCLT has the powers to dispense with the meetings of shareholders and others by using judicial discretion. Various directions with regard to holding, convening and dispensing with various meetings issued - directions regarding issuance of various notices also issued - the scheme is approved. Application allowed.
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Insolvency & Bankruptcy
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2022 (1) TMI 322
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The Financial creditor submits that, the total amount is in default amounting to ₹ 1,85,19,027/- inclusive of interest of 17% p.a. as on 22.07.2021. It is noticed from the petition that, the Corporate Debtor also admitted the amount of 1,85,19,027/- inclusive of interest of 17% p.a. as on 22.07.2021 in its reply. There are no objection on record against the application filed for initiation of CIRP against the corporate debtor. The debt and default is constituted, and default amount is more than the threshold amount. Hence, the application filed by the Financial Creditor is complete in all respect - application filed under Section 7 of I B Code, 2016, presented by Amit Punjabi, Financial Creditor/ Applicant against GAMBS India Private Limited, Corporate Debtor for initiating corporate insolvency resolution process is admitted - moratorium declared.
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2022 (1) TMI 321
Liquidation of the Corporate Debtor - Whether the Adjudicating Authority is competent to recall the order of initiation of CIRP? - HELD THAT:- The Appellant has failed to convince that the Respondent No. 1 has committed any act of deliberate deception with the design of securing some unfair or undeserved benefit by taking undue advantage of another. The Appellant has not shown any false document which was filed in support of the Petition under Section 7 of the IBC. Thus, the Appellant has failed to make out a case that the Respondent No. 1 has obtained order dated 15.03.2019 by practicing fraud. We are unable to convince with the argument that Hon ble Supreme Court in JIGNESH SHAH ANOTHER VERSUS UNION OF INDIA ANOTHER [ 2019 (9) TMI 1121 - SUPREME COURT] laid down that the provisions of Limitation Act would be applied to the IBC proceedings. Section 238-A of IBC inserted w.e.f. 06.06.2018 which provides that the provisions of Limitation Act shall, as far as may be, apply to the proceedings or Appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal. Therefore, we find no force in the argument - Admittedly, the issue of limitation is mixed question of fact and law, therefore, we are unable to convince with the argument of Ld. Sr. Counsel that such issue can be raised at any stage even before the Higher Court. In the facts of present case the Adjudicating Authority is not competent to recall the order of initiation of CIRP. Whether the liquidation order suffers from material irregularity? - HELD THAT:- Admittedly, in this matter even after extended period beyond 180 days no resolution plan had been received. Therefore, CoC with 92.29% voting share passed the resolution for liquidation of the Corporate Debtor. Therefore, the RP filed the Application before the Adjudicating Authority for order of Liquidation - The Appellant has not filed any objection before the Adjudicating Authority in regard to the Application filed by the RP for seeking order of liquidation. The order of liquidation can be set aside only when there is any material irregularity. The Appellant has failed to point out any material irregularity - there are no ground to interfere in the order of liquidation. It is informed that in compliance of the order of liquidation the factory premises of the Corporate Debtor has already been auctioned and possession has been handed over to the auction purchaser - appeal dismissed.
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PMLA
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2022 (1) TMI 320
Seeking grant of Bail - Jurisdiction - predicate offence under Official Secrets Act - petitioner contends that the offences punishable under the Official Secrets Act not being the Scheduled Offences under the PMLA, ECIR recorded by the respondent and the arrest made pursuant to that as also the complaint filed is without any jurisdiction - Proviso to Section 45 of the PMLA - HELD THAT:- Indubitably, offences punishable under the Official Secrets Act are not in the list of Scheduled Offences under the PMLA. Whether the charge sheet filed in the predicate offence is for offences punishable under Sections 3/4/5 of Official Secrets Act read with 120B IPC or for Section 120B IPC substantively or whether in the absence of any charge sheet under Section 411 IPC having been filed by the Special Cell, Delhi Police, the respondent/Enforcement Directorate could have recorded the above-noted ECIR for offences punishable under Sections 3 4 of the PMLA on the ostensible ground that since Section 120B IPC is a Schedule Offence and the Enforcement Directorate had jurisdiction to investigate into offence of money laundering pursuant to the offences under Sections 3/4/5 of Official Secrets Act would be a matter to be dealt by the learned Trial Court at the stage of charge. It may be noted that the charge sheet filed by the Special Cell does not note the offence punishable under Section 411 IPC. Even in the complaint filed by the respondent before the learned Trial Court, Section 411 IPC being the predicate offence has not been mentioned. Considering that the predicate offence, if any, against the petitioner is under Section 120B IPC and Section 411 IPC only and the proceeds of the crime which are alleged to be laundered are a sum of ₹48,20,788.50 paisa and that the petitioner has been in custody now for nearly six months, this Court deems it fit to grant bail to the petitioner. It is directed that the petitioner be released on bail on fulfilment of the conditions imposed - application allowed.
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Service Tax
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2022 (1) TMI 319
Refund of service tax - rejection on the ground that services were not exported, no nexus between services availed vis a vis services rendered as well as missing/ ineligible invoices - time limitation - HELD THAT:- The relevant Circular No. 141/10/2011-TRU dated 13.05.2011 on which learned Commissioner (Appeals) had placed heavy reliance but a comparison at his order at page 11 12 vis-avis the content of para 3 4 of the said Circular dated 13.05.2011 would clearly indicate that he had applied the provisions partly without thoroughly examining the clarification made in that Circular in its entirety. It is needless to mention here that appellant s claim is to be supposed to be determined in terms of Circular No. 111/05/2009 dated 24.02.2009. Basing on which this Tribunal has passed several orders including in the case of the COMMISSIONER OF SERVICE TAX-VII MUMBAI VERSUS M/S. ABBOTT HEALTHCARE PVT. LTD. [ 2019 (12) TMI 232 - CESTAT MUMBAI] and M/S BLACKSTONE ADVISORS INDIA PVT. LTD. VERSUS COMMISSIONER OF C.G. ST. -MUMBAI SOUTH [ 2019 (11) TMI 1459 - CESTAT MUMBAI] . Moreover, as could be noticed during hearing of the appeal and subsequent filing of proof on 29.10.2011 by way of additional evidence, appellant had filed an application for rectification of mistake in the order passed by the Commissioner (Appeals) in forming an opinion that appellant is a subsidiary of Foreign Institutional Investors (FIIs) without having any existence of its own, besides other grounds and it was not dealt with by the Commissioner (Appeals). Going by para 4 of the said Circular dated 13.05.2011, it can be said that such an opinion of holding the appellant as passive holding/subsidiary company or associated enterprise has a bearing on determination of its eligibility as an export service provider and without hearing the appellant on this score, no opinion should have been formed by the Commissioner (Appeals). This is a fit case which is required to be remanded back to the Commissioner (Appeals) to re-examine the appellant s eligibility to get refunds in respect of those 4 items after reexamination of the Circular dated 13.05.2011 and its applicability in the case of appellant disregarding the place of provision of service Rule, 2012 that came into force after the claim period - appeal allowed by way of remand.
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2022 (1) TMI 318
Levy of Service Tax - Life Insurance Services - agency processing fees (examination fees, license fees) - back dating, altering charges - lapse charges - look in charges - policy reinstatement charges - HELD THAT:- From the analysis of the definitions of the Life Insurance Services as per Section 65 (105) (zx) and various clarifications issued by the Board it is quite evident that the charges which are towards the risk cover and managing investment for the policy holders, are part of the value of such taxable services provided by the appellant. The argument advanced by the revenue that the scope of definition of taxable service as defined by the Section 65 (105) (zx), do not limit the provision of the taxable service under the said category to the policy holder but is applicable to the services provided by the appellant to the applicant for insurance license because of use of phrase any person is without any substance. The phrase any person cannot be read in isolation, but will have to be read along with the entire definition as per the said section. The expression any person was inserted in Section 65 (105) (zx) by the Finance Act, 2006 to levy service tax on re-insurance activities carried by Life Insurance Company. Re-insurance is nothing but the services provided by the insurance company to mitigate the risk of the insurer while providing the insurance cover to insured - From the nature of charges, we are not in position to find any nexus between these charges and the life insurance services provided by the appellant to the policy holders, or to any other person as reinsurer. In absence of any such nexus such charges cannot be added to the value of taxable services provided by the appellant under the category of life insurance services. Appeal allowed - decided in favor of appellant.
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2022 (1) TMI 317
Valuation of service tax - wharfage charges under Port Service - when GMB charged wharfage charges at the rate of 20% of the notified rate to EBTL and the same was charged on actual by M/s. EBTL to M/s. ESTL, the EBTL on the transaction between EBTL and ESTL required to charge the service tax on 100% of the notified rate including 80% rebate given by GMB to EBTL or on the 20% of the notified rate on which the service tax was discharged is correct or otherwise? - invocation of extended period of limitation. HELD THAT:- In the present case, admittedly the respondent raised invoices for services charge for wharfage charges under Port Service at the rate of 20% of the notified rate as per GMB, however, other than this there is no other amount flowing in the form of money or in any form from ESTL to EBTL therefore, the case of the respondent does not fall under clause (II) of Section 67(1) of the Finance Act, 1994. It is pertinent to note that the entire case of the revenue is that there is a capital expenditure incurred by EBTL and on that account 80% rebate was given by GMB. The transaction which is under question in the present case is not between GMB and EBTL but it is between EBTL and ESTL, in this transaction the capital expenditure incurred by the EBTL is not relevant for the purpose of charging wharfage charges by EBTL to ESTL - the entire foundation of the case that 80% rebate given by GMB to EBTL on account of the capital expenditure incurred by the EBTL is not relevant for the transaction which is between EBTL and ESTL. Rule 3 of the Service Tax (Determination of Value) Rules, 2006 shall be applicable only in case were the value is not ascertainable. In the present case, the value for the service i.e. wharfage charges is clearly ascertained as per the invoice issued by EBTL to ESTL. Therefore, Rule 3 as whole not applicable in the facts of the present case. Without prejudice, even if clause (b) is applied, the cost of service to the respondent was only charged to ESTL therefore, the value of service charged by EBTL to ESTL is not less than the cost for such taxable service. In the present case, there is no dispute that the gross amount charged by EBTL to ESTL is equivalent to 20% of notified rate of wharfage charges and there is no additional consideration therefore, the amount charged by EBTL to ESTL is the sole consideration therefore, the value determined in the present case is strictly in accordance with Section 67 of the Act. In the present case, neither it is a case of any extra consideration flowing from service recipient to the service provider nor there is any proof of such extra consideration therefore, the gross amount charged by EBTL to ESTL being sole consideration will alone be liable to service tax and no any other amount which is otherwise not existing. The appellant has discharged service tax correctly on the 20% of the wharfage charges charged to the M/s. ESTL. Time Limitation - HELD THAT:- The audit report dated 7.9.12 conveyed to the respondent by Jurisdictional Superintendent vide his letter dated 1.2.2013 had in Para 1 specifically referred to clause 22 of the License Agreement dated 25.3.2010 with GMB and had pointed out similar short payment of service tax on part of GMB on wharfage charges on an identical ground that the service tax was paid on concessional rate granted to them by GMB and not on the full rate. These establish that the copy of agreement dated 25.3.10 entered into by the respondent with GMB along with all its enclosures was submitted to the department and clause 22 which is subject matter of the present dispute was very much in the knowledge of the department as similarly short levy in GMB was pointed out earlier - the invocation of the longer period for demand is absolutely incorrect and not sustainable. The impugned order does not suffer from any infirmity and therefore, is sustained - decided against Revenue.
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2022 (1) TMI 316
Levy of service tax - Consulting Engineers Services - reimbursement of expenses - export of service or not - HELD THAT:- The amounts incurred by the head office towards the salaries etc. of the employees working in their branches can by no stretch of imagination be equated to any service rendered to them by the respective branches. In the case of M/S. KUSUM HEALTHCARE PVT. LTD. VERSUS C.C.E., ALWAR [ 2018 (7) TMI 919 - CESTAT NEW DELHI] , it was held that the legal fiction created in proviso to Section 66A for consideration of branch as a separate establishment is certainly not for the purposes of demanding service tax on the services alleged to have been rendered by the branch to the head office. In fact, going through the records of the case, it is found that the payments made by the appellants are none other than the recurring expenses like salary, travelling allowance, rent, telephone charge etc. It has not been brought on record if any other payments for any other service alleged to have been rendered were made. The demand on account of reimbursement of expenses to their employees working in the overseas branches does not constitute any remuneration in lieu of a service received by the appellants - the demand on account of services alleged to have been rendered by the overseas branches to the appellant is set aside. Other demand of about ₹ 78 lakh and ₹ 7 lakh - appellant submits that the demand and duty has been paid before the issue of SCN and as such no penalty can be imposed - HELD THAT:- In order to verify the competing claims of the appellant and the Revenue, the matter needs to go back to the original authority for verifying the records and arrive at the actual duty and interest payable. Further, it is found that no penalties can be imposed at this count. The appeal is partly allowed by way of remand
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Central Excise
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2022 (1) TMI 315
Refund claim - deduction of net excise duty paid or total amount of duty paid, from the sale value of goods - deduction of freight outward from the sale Value - as per explanation given in Para 6 (5) of N/N. 1/2010-CE dared 6.2.2010, only excise duty, value Added Tax and other indirect taxes are required to be excluded - HELD THAT:- In appellant s own case for earlier period in KANGARO INDUSTRIES LIMITED VERSUS CCE, JAMMU [ 2017 (11) TMI 90 - CESTAT CHANDIGARH] , this Tribunal after considering the issue in detail held that when an amount of duty is refunded to the assessee, under N/N. 1/2002-CE, the same has to be deducted from the excise duty paid by the appellant while arriving at actual value addition - regarding deduction of outward freight it was held that It is settled law that in the context of Section 4(3)(C) when the goods are on FOR destination sales and the freight is paid by the seller and the goods are to be insured by the seller, then the seller cannot claim deduction of freight and insurance from sale price - also, in the balance sheet for 2011-2012, the freight outward is shown under selling and distribution expenses. Hence, the freight outward is includible in the sale value. Appeal allowed - decided in favor of appellant.
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2022 (1) TMI 314
Entitlement to Interest - Reversal of CENVAT Credit under protest - case of appellant is that amount reversed has to be treated as deposit and the appellant is entitled for interest from the date of debit till the date of its realisation under Section 35FF of Central Excise Act - HELD THAT:- There is mistake of law in the impugned order-in-appeal dated 28.08.2020, as the applicable section for interest is Section 35FF and not Section 11BB. Accordingly, taking noticed that Division Bench of this Tribunal in M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) [ 2021 (5) TMI 870 - CESTAT ALLAHABAD] , wherein interest on pre-deposit (made during investigation) have been enhanced from 6% to 12%, following the ruling of the Apex Court in SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] . Thus, the impugned order is set aside so far interest issue is concerned. The Adjudicating Authority is directed to grant interest @ 12% per annum from the date of deposit till the date of refund. Such interest should be granted within a period of two months from the date of receipt or service of the copy of this order - appeal allowed - decided in favor of appellant.
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2022 (1) TMI 313
CENVAT Credit - scope of definition of input service - outward transportation of the goods - place of removal - place of buyer or factory of the appellant or not - supply of goods to buyers on FOR basis - HELD THAT:- From the definition of Input Service it becomes clear that all services received by the manufacturer directly or indirectly in relation to the manufacture of final products upto the place of removal are admissible for availment of Cenvat Credit on the Service Tax paid for such services. Accordingly, the definition of place of removal acquires importance. The Hon'ble Apex Court in the case of ESCORTS JCB LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-II [ 2002 (10) TMI 96 - SUPREME COURT] has held that the place of removal has to be determined with reference to the point of sale‟. Section 19 of Sale of Goods Act says that the property in goods stands transferred only when it is intended to be so transferred . In the present case, the goods are being cleared by the appellants to their buyers on FOR basis and all liabilities in respect of transportation of goods or even damage to goods were on account of the appellants/manufacturer. It is the appellants who were liable for safe delivery of goods up to their customer s door steps. Thus, present becomes the case were the service of GTA was availed for the goods to be supplied to buyers at their door steps under FOR delivery system was taken. These admitted facts are sufficient to hold that the sale in the present case gets complete only at the door steps of buyers. It becomes clear that when the goods are cleared on FOR basis the freight paid on outward transportation would definitely qualify as input service, and thus shall be admissible for Cenvat. In present case, the buyer was retaining the right even to reject the goods with the cumulative reading of definition of place of removal under Rule 4 of Central Excise Rules with the definition of inputs as already discussed above, the buyer s place in the present case is held to be the place of removal. Accordingly, it is held that GTA services availed by the appellant till the buyers place are eligible input service for availment of Cenvat Credit - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (1) TMI 312
Levy of excise duty on the liquor destroyed in fire - Demand raised against the writ petitioner company (respondent herein) towards loss of excise revenue because of destruction of liquor in fire - fire incident that took place in a godown of the distillery of the respondent company - whether demand of excise duty on the liquor lost in fire is authorised by law and has rightly been raised as per the applicable provisions of the Act of 1910, the Excise Manual and the Rules of 1969? - HELD THAT:- A comprehensive look at the relevant provisions of law makes it clear that so far as IMFL is concerned, no provision is made in the Excise Manual for any wastage allowance in relation to the bottled sprit, but, in terms of Rule 7(11) of the Rules of 1969, an allowance up to 1% on the total quantity of spirit stored during a month may be allowed for actual loss in bottling and storage. Any allowance for any wastage or loss beyond the same remains, obviously, impermissible - Rule 7(11) of the Rules of 1969 is required to be taken into account for the legal consequences that so far as the bottled spirit is concerned, the licencee remains responsible for payment of duty on any kind of wastage in excess of 1%. Coupled with this provision, Rule 709 of the Excise Manual makes it clear that the distillery remains responsible for safe custody of the stock of spirit and remains liable to make good any loss of revenue caused to the Government by their negligence. The demand in question cannot be said to be unauthorised but, its validity would depend on answer to the question as to whether negligence could be imputed on the respondent company in terms of Rule 709 of the Excise Manual. Whether the fire incident in question had been an event beyond human control and no negligence could be imputed on the respondent company? - HELD THAT:- The fire incident in question had not taken place due to operation of any forces of nature. It has also not been the case that the fire was a result of any mischief by any person. Noticeably, the fire that started around 12:55 p.m. on 10.04.2003 could be brought under control by the firefighters only by 5:00 a.m. on 11.04.2003. When all the relevant factors are cumulatively taken into account, we find it difficult to accept that the fire and the resultant loss had been beyond the control of human agency so as to be termed as inevitable accident. Obviously, the fire had not generated on its own and, with appropriately laid fire proof electrical installations as also firefighting measures, the incident was an avoidable one or at least the loss could have been minimised. The fault of negligence need not always be of active negligence or of gross negligence, but it may also be of an inadvertent negligence or of a passive negligence. It does not require much of discussion to say that the goods in question, being highly inflammable, required extra and excessive care for their safe custody; and any laxity or slackness in that regard was impermissible. To put it differently, what was required for ensuring safe custody of the goods in question was that of heightened safeguard measures with foresight - Even if the present case is taken to be that of inadvertence or of unintentional omission on the part of the respondent company, it would fall within the definition of negligence for the purpose of Rule 709 of the Excise Manual. In the given set of facts and circumstances, we are unable to endorse the approach and views of the High Court, where it had basically proceeded on the premise as if the incident in question was referable to an act of God . - The criticism of Excise Commissioner s order dated 11.07.2006 by the High Court, while taking the observations and findings therein being of surmises and conjectures, is also required to be disapproved. What the Excise Commissioner had observed in the order dated 11.07.2006 had been of his inferences, which were deduced out of the facts and circumstances of the case and in true application of the principles of res ipsa loquitur - there are no hesitation in disapproving the order of the High Court and in endorsing the views of the Excise Commissioner in the order dated 11.07.2006. What would be the effect of the fact that the respondent company had taken insurance coverage only of the value of liquor (and not that of excise duty thereupon) and then, had received the insurance claim towards the value of liquor? - HELD THAT:- Admittedly, the respondent company had taken insurance coverage of the value of liquor and indeed received such value of liquor from the insurer. However, respondent company did not take insurance coverage of the excise duty payable over such value of liquor. The appellants contend that when the distiller has received value of liquor, on the principles of equity and fair play, the corresponding excise duty ought to be made available to them - the liability of the respondent company in this matter is rather fortified from the facts that it had taken insurance coverage of the value of liquor and indeed received such claim from the insurer. Further, failure to insure the risk of excise duty liability cannot extricate the respondent from that liability. In the scheme of law applicable, when duty of excise is upon the goods and the taxable event is the production or manufacture of the liquor, the liability to pay excise duty had arisen as soon as the liquor was manufactured. Thereafter, when the liquor got destroyed in fire but its value was recovered from the insurer, in our view, these events shall answer to the broad expression issue of an excisable article for sale from a warehouse for the purpose of proviso to Section 29(e) of the Act of 1910 - receiving of insurance claim over the value of goods by the respondent related back to the date of fire and the respondent became liable to pay excise duty at the rate which was in force on the date of fire, which would be deemed to be the date of issue from the warehouse. In the facts of the present case, where excise duty became payable on manufacture of liquor, it was obviously expected of the respondent company, as a reasonable and prudent distiller, to take all necessary steps to safeguard not only the liquor and value thereof but also the corresponding interest of the Government, i.e., the excise revenue. The Excise Commissioner had been rather justified in drawing inference that the respondent company, after having secured the value of goods for its purpose, might not have been conscious and alert in taking all the necessary care to guard against any loss to the Government due to any mishap like fire. The submission, that insurer would not have made payment of insurance claim if there was any negligence on the part of the respondent company, has its own shortcomings. The terms of fire insurance policy have not been placed on record and it cannot be deduced as to what were the terms and conditions of that policy under which insurer had acted in accepting the claim of the respondent company. Secondly, what was not treated as negligence by the insurer for the purpose of insurance claim would not ipso facto become a proposition binding on the appellants as regards loss of revenue because of loss of liquor in fire. Such a contention of the respondent could only be rejected. The demand raised by the appellants against the respondent company, of excise duty on the liquor lost in fire, is authorised by law and has rightly been raised as per the applicable provisions of the Act of 1910, the Excise Manual and the Rules of 1969. The fire incident in question cannot be said to be that of an event beyond human control and the High Court has been in error in holding that no negligence could be imputed on the respondent company. The fact that the respondent company had taken insurance coverage only of the value of liquor (and not that of excise duty thereupon) and then, had received the insurance claim towards the value of liquor also operates against the respondent company and fortifies the conclusion about negligence of the respondent company. This appeal deserves to succeed and the writ petition filed by the respondent company deserves to be dismissed.
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2022 (1) TMI 311
Validity of Arbitral Award - neglected to furnish the Form-Cs within the time prescribed resulting in a sales tax assessment - penalty imposed under the Take or Pay/Supply or Pay Clause - award of amount claimed by DSM on account of sales tax paid to the Sales Tax Authorities - whether the impugned award is vitiated by patent illegality as the Arbitral Tribunal has entered into an award in favour of HPCL for recovery of the amounts of penalty claimed in terms of Clause 3 of the Initial Agreements (Take or Pay/Supply or Pay Clause) and, in favour of DSM under a similarly worded clause in the Fifth Agreement? - HELD THAT:- An amount equivalent to 10% of the basic rate would be payable for undelivered quantity, which falls short of the threshold of 90% of the ordered quantity. DSM was also entitled to receive penalty at the same rate for un-indented quantity that falls short of the said threshold. The clause also expressly records that it was a true estimate value of damage/loss. It is clear from the plain language of the said clause that it is in the nature of providing liquidated damages - Undisputedly, DSM would not be liable to pay any amount under the aforesaid clause if it was entitled to suspend the supplies on account of non-supply/delay in providing the Form-Cs. It is also not disputed that DSM had called upon HPCL to indemnify it for any loss that it may incur on account of delay or deficiency in providing the Form-Cs but HPCL had failed to provide any such indemnity. It is undisputed that HPCL was either required to furnish the Form-Cs or to pay the sales tax to DSM on such supplies as a part of the consideration. Failure to pay such sales tax or provide the requisite Form-C would in fact amount to a failure on the part of HPCL to pay full consideration for the supply of ethanol by DSM. There are only two reasons discernable from the impugned award for such rejection. First, that DSM had also claimed damages under Clause 3 of the Initial Agreements; and second, that the provisions of Clause 3 of the Initial Agreements could not be ignored. Since DSM had failed to supply the minimum 90% of the un-indented ordered quantity, it was liable to pay damages under Clause 3 of the Initial Agreements - HPCL had neither pleaded that it was not feasible to establish the loss nor had led any material to establish that it had suffered loss on account of non-supply of ethanol by DSM. There is also no pleading to the effect that ethanol was otherwise not readily available or available at a price higher than as agreed between DSM and HPCL. DSM s contention that HPCL had failed to establish any loss was contested on an erroneous premise that HPCL was not required to establish the same. HPCL had delayed in filing its counter claim, which was filed along with its sur-rejoinder after the pleadings were complete. The application to make an amendment was moved at the stage of final hearing of the claims. Undeniably, the same was at a much belated stage. Thus, the decision of the Arbitral Tribunal to deny HPCL s request to amend the claim cannot be faulted. The impugned award is set aside - Petition disposed off.
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2022 (1) TMI 310
Default in payment of tax dues - Constitutional Validity of action of the respondents in forfeiting an amount of ₹ 61,80,000-00 paid by the petitioner Gupta Metallics towards 15% of the price for purchase of the auctioned land pursuant to Gazette Notification dated 18.12.2002, if the balance amount was not paid within 30 days from the date of sale - seeking a direction to the first respondent not to forfeit the said amount of ₹ 61,80,000/- - HELD THAT:- Commissioner of Commercial Taxes had written to the then Principal Secretary to the Government of Andhra Pradesh (Revenue Department) on 14.12.2011 seeking guidance from the Government whether to confirm the auction sale by collecting the balance 85% of sale price. The Principal Secretary, vide Memo dated 04.02.2012 informed the Commissioner of Commercial Taxes that as per Section 16 of the Andhra Pradesh General Clauses Act, 1957 and Section 22 of the Andhra Pradesh Value Added Tax Act, 2005, if any dealer fails to pay the tax due or fails to pay any tax assessed or penalty levied within the time prescribed, he shall pay, in addition to the amount of such tax or penalty that may be calculated at the rate of one percent per month for the period of default. Therefore, Commissioner of Commercial Taxes was requested to take necessary action and to confirm the sale by collecting the balance 85% of the tax dues and interest from 10.02.2003 till actual payment of the tax dues. Gupta Metallics had not paid the remaining 85% of the sale price within the prescribed period, in contravention of paragraph No.3 of Form No.7 Notice dated 07.12.2002 as well as in terms of Section 36 of the Revenue Recovery Act. That being the position, the auction sale had failed. The question as to whether the 15% deposit made by Gupta Metallics pursuant to the auction sale held on 10.01.2003 is liable to be forfeited or not and if not, whether it should be refunded to Gupta Metallics or to the secured creditor (Asset Reconstruction Company) since Gupta Metallics is facing proceedings under the Recovery of Debts and Bankruptcy Act, 1993 as well as under the SARFAESI Act, should be left to the Commissioner of Commercial Taxes to take a decision - since the auction has failed, there is no legal impediment for the Commercial Taxes Department in accepting the proposal of Vinedale Distilleries to clear the outstanding tax dues together with interest by taking a reasoned decision. This is because the right of Vinedale Distilleries to redeem the property by paying the outstanding dues would subsist till the property is auction sold. Commissioner of Commercial Taxes Department, Telangana, shall take a decision as to whether 15% of the sale price deposited by Gupta Metallics on 10.01.2003 is liable to be forfeited or not? - If the decision is in the negative, the Commissioner shall take a further decision as to whether the said amount should be refunded to Gupta Metallics or to the secured creditor represented by the Asset Reconstruction Company? - Let the above decisions be taken by the Commissioner of Commercial Taxes within a period of eight weeks from the date of receipt of a copy of this order after affording an opportunity of hearing to Gupta Metallics as well as to the Asset Reconstruction Company. Petition disposed off.
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2022 (1) TMI 309
Constitutional Validity of amendment to the Industrial Policy Resolution 2007 (IPR 2007) - principal ground of challenge is that the said amendment to the heading of paragraph18.4 of the IPR 2007 has been made effective retrospectively from 1st July 2017 with a view to preventing Petitioner No.1 from availing the State Goods and Service Tax (SGST) reimbursement - HELD THAT:- In the case on hand, without cancelling the eligibility certificate and thrust sector certificate, the Opposite Parties have recalled the sanction order by the impugned cancellation order dated 6th October, 2018. Admittedly, the Opposite Parties recognized expanded cement manufacturing unit of Petitioner No.1 as eligible for the production incentives as a downstream industrial unit under the thrust sector . Opposite Parties do not deny that Petitioner No.1 fulfils the triple test under the IPR 2007 and has made an eligible fixed capital investment of ₹ 183.75 crores. There can be no doubt that there is a vested accrued and crystallized right in favour of Petitioner No.1 in terms of paragraph 18.4 of IPR 2007 to avail the incentives. That is why the sanction order dated 6th June 2017 was issued in the first place. No valid justification has been provided by the Opposite Parties for retrospectively cancelling the said sanction order and that too well over a year after it was issued. In the present case, no material whatsoever has been placed on record by the Opposite Parties to establish that the impugned resolution retrospectively amending the heading to paragraph 18.4 of IPR 2007 is in public interest - there was no justification in singling out cement manufacturing units for denial of the SGST reimbursement. The Court sets aside the order dated 6th October 2018 issued by the Director of Industries withdrawing the earlier order dated 6th June 2017 granting Petitioner No.1 the exemption. The Court also sets aside the resolution dated 18th August 2020 retrospectively amending IPR 2007 - Petition allowed.
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2022 (1) TMI 308
Classification of goods - rate of tax applicable to the furniture sold by the dealer - taxable at 5% or 13.5%? - HELD THAT:- In the case on hand the Tribunal, without referring to the Rules of Interpretation of Schedules under KVAT Act, has independently considered and recorded a finding in favour of the dealer that the dealer is entitled to rate of tax at 5% on the furniture sold under the head 'woodmarquetry'. The judgment of the Supreme Court in RECKITT BENCKISER (INDIA) LTD. VERSUS COMMISSIONER, COMMERCIAL TAXES AND OTHERS [ 2008 (4) TMI 489 - SUPREME COURT] has taken note of an omission on the part of this Court while disposing of a matter, where the Rules of Interpretation ought to have been considered but not considered while disposing of the case in the reported judgment and, after taking note of the review involved, set aside the judgment of this Court, remitted the matter to this Court for consideration and disposal afresh. In the circumstances of this case, the adjudication of the CESTAT cannot be treated as the conclusive circumstance in favour of the dealer. The dealer now claims rate of tax at 5% payable on a particular type of furniture sold by the dealer. The dealer will have to establish as a matter of fact and the fact so established in a sequential way corresponds to the HSN Code described in Customs Tariff Act, 1975 - Matter remitted to Tribunal for consideration and disposal afresh in accordance with law.
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Indian Laws
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2022 (1) TMI 307
Validity of arbitration award - Implementation Agreement - Disallowance of the pre-claim interest i.e., interest from the date when expenses were incurred by UHL, till the date of lodging the claim - HELD THAT:- This Court is in agreement with the Appellate Court that Clause 1 of the Implementation Agreement could not have been read in isolation and when read in conjunction with the second recital and Clause 2.2 of the Implementation Agreement, it is apparent that the MoU was made a part and parcel of the Implementation Agreement. In view of the above, the view taken by the learned Sole Arbitrator that the MoU forms a part of the Implementation Agreement - All the points of dispute between the parties regarding performance of the contractual obligations including claims for damages and expenses incurred by UHL either arising from the MoU dated 10th February, 1992, or under the Implementation Agreement dated 22nd August, 1997, were referable to arbitration in accordance with Clause 20 forming a part of the Implementation Agreement. The interpretation of the relevant clauses of the Implementation Agreement, as arrived at by the learned Sole Arbitrator, are both, possible and plausible. Merely because another view could have been taken, can hardly be a ground for the learned Single Judge to have interfered with the arbitral award. In the given facts and circumstances of the case, the Appellate Court has rightly held that the learned Single Judge exceeded his jurisdiction in interfering with the award by questioning the interpretation given to the relevant clauses of the Implementation Agreement, as the reasons given are backed by logic. In the instant case, the State of H.P. had terminated the Implementation Agreement five months prior to the stipulated period by adopting a distorted interpretation of Clause 4 of the Implementation Agreement, which was impermissible - Appeal allowed in part.
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2022 (1) TMI 306
Disciplinary proceedings against the officer of CGST / Central excise department - trap/transaction - enquiry officer exonerated both of them against petitioners, employees of department of CGST and Central Excise - HELD THAT:- A careful reading of para 39 of RADHESHYAM KEJRIWAL VERSUS STATE OF WEST BENGAL [ 2011 (2) TMI 154 - SUPREME COURT] , makes it clear that even as per the majority view, the Court opined that the question of contravention of provision of the Act is a relevant factor which needs to be considered while examining the claim of delinquent employee/accused that upon his exoneration in the departmental inquiry, criminal proceedings deserves to be jettisoned. It is important to note that the provisions of the Act for the instant case means provisions of P.C. Act. Indisputably, P.C. Act is a special enactment. A conjoint reading of Section 7 and Explanation d appended to it shows that the provision deals with public servant taking gratification other than legal remuneration and the eventualities when such an act of public servant can be brought to the purview of Section 7 of P.C. Act - Section 20 of P.C. Act creates legal presumption where public servant accepts any undue advantage. Upon fulfilling certain requirements by the prosecution, a legal presumption is created against the government servant - The heading of section itself suggests that a presumption is created by law makers against public servants accepting gratification other than legal remuneration. Upon considering the provisions of P.C. Act, it cannot be held that chances of conviction of petitioners in the criminal trial involving the same facts are totally bleak. We are unable to hold that the nature of findings mentioned in the order of disciplinary authority forms any legal impediment for proceeding with the criminal case. It cannot be held that exoneration of petitioners in the departmental inquiry draws such an iron curtain on the case of prosecution because of which prosecution cannot be permitted to proceed with the criminal case. Hence, no interference is warranted on the FIRs and on the criminal cases by this Court. It is deemed proper to clarify that discussion made was aimed to decide the question whether finding in the departmental inquiry can foreclose the right of the prosecution to proceed with the FIRs and criminal cases against the petitioners - petition dismissed.
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