TMI Tax Updates - e-Newsletter
January 12, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

Highlights / Catch Notes

• GST:

  Input tax credit - refusal on the basis that the petitioner availed of such credit on the basis of supplies from a non-existent supplier - the adjudication of this dispute hinges on the adequacy of evidence in support of the actual purchase and delivery of the goods to the petitioner. Such disputes cannot be conveniently addressed in proceedings under Article 226 of the Constitution of India. - HC
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• GST:

  Classification of supply - rate of GST on sale of Land and construction of Duplex over the same land on execution of two separate Agreements by the Applicant - the Applicant is liable to pay GST @7.5% (CGST @3.75% + SGST @3.75%) after deducting 1/3rd towards land cost from the total consideration i.e. effective rate of 5% GST - AAR
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• Income Tax:

  Business expenses - CSR - The expenditure could be related to ‘Commercial Expediency’, as any amount contributed to the BATF would generate goodwill of the local community as well as the Government Authorities. It must also be emphasised that the concept of ‘Commercial Expediency’ is from the perspective of an assessee and cannot be judged from the perspective of what the Revenue construes it to be ‘Commercial expediency.’ - As the subject matter of dispute relates to assessment year 2010-11, it can be stated that the said explanation to Section 37 of the I.T. Act would not apply as regards the present subject matter of dispute. - HC
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• Income Tax:

  Disallowance of interest on inter-corporate deposits - The observation of Ld. AO that there was increase in borrowed funds during AY 2003-04 has no relevance since the ICDs were placed by the assessee during financial year 1999- 2000 and it was impossible to make investment in 1999-2000 out of funds borrowed in subsequent years. Further, the nexus of borrowed funds with the ICDs have not been established by Ld. AO. - AT
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• Income Tax:

  Accrual of income in India - PE in India or not? - use or right to use brand name/trade mark - the receipts cannot be treated as royalty under Article 12(3)(a) of the Tax Treaty. Similarly, the fee received cannot be treated as royalty under Article 12(3)(b) as there is no transfer of use or right to use any industrial or commercial or scientific equipments. In any case of the matter, the fees received are purely for certain services, therefore, in our view, they cannot be treated as royalty. - AT
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• Income Tax:

  Validity of reopening of assessment - borrowed satisfaction or not - even during the course of assessment proceedings, these parties were untraceable in the enquiry conducted u/s. 133(6) and assessee also could not produce these parties, thus it cannot be held that reasons were not based on any tangible material. Therefore, it cannot be held that reasons recorded by the ld. AO is merely a borrowed satisfaction. - Reopening proceedings are valid - AT
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• Income Tax:

  Computation of LTCG - Based on a reading of Section 50CA of the Act, it is clear that where the actual sale consideration on transfer of unlisted equity shares is less than the fair market value of such shares determined as per the NAV method, the actual sales consideration shall get substituted with the deemed sales consideration as determined in accordance with NAV method. - the Assessee had sold shares in excess of fair market value as determined in accordance with Rule 11UAA of the Rules. - here is no need to tinker with the full value of consideration declared by the assessee. - AT
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• Income Tax:

  Exemption u/s 11 - registration u/s 12AB and approval u/s 80G(5) denied - The apprehension of revenue that the loans would be given to a related or favourable party is a heighted apprehension. - If the trust makes any such loan in future, the law provides for forfeiture of exemption u/s 13 which in case of necessity, can be invoked by authorities. - CIT(E) directed to consider the application of assessee - AT
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• Income Tax:

  Estimation of commission income - unaccounted cash found during the search - AO has not brought any material on record to show higher commission income earned by the assessee. The commission income duly recorded in the books of account and declared in the return of income cannot be disturbed in absence of any material. - AT
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• Customs:

  Evidence - It is a settled law that the statement recorded under Section 108 of the Customs Act is a material piece of evidence and can be used as substantive evidence. The statements recorded under Section 108 of the Customs Act in this case are consistent, the witnesses are supporting each other regarding the incident of recovery and such statements are further corroborated by the Panchnamas prepared at the spot which bear the signatures of the petitioner as also the Panch Witnesses. - The High Court exercising power under the writ jurisdiction cannot assume unlimited prerogative to correct all species of hardship or wrong decisions. - HC
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• Customs:

  Seeking provisional release of consignment of apples - import price below the minimum price of apples for import at Rs. 50/- per kg. - these goods are not prohibited goods - it would be correct for the petitioner to contend that the respondents cannot detain the petitioner’s consignment on the basis of the minimum price as fixed by the said notification - thus, there is no reason as to why the petitioner ought not to be permitted to clear the goods. - HC
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• Customs:

  Validity of second show cause notice - Withdrawal of First SCN thereafter - Issuance of SCN u/s 28(4) read with Section 124 of the Customs Act, 1962 - Challenging on the ground of same cause of action and during pendency of the proceedings pursuant to the first show-cause notice - Writ petition dismissed - HC
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• Customs:

  Valuation - Inclusion of royalty paid by the appellant to the foreign entity - The Rule 10(1)(c) does not say that royalty is to be added in transaction value if the supplier is a group company. It says that if the royalty is a condition for sale, the same has to be included in the transaction value. - AT
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• Customs:

  Smuggling of gold - Baggage Rules - Prohibited goods or not - allegations are that appellants did not opt for red channel to declare the gold nor did they file any declaration as required - the appellants were attempting to smuggle the gold without payment of duty - the gold recovered from the appellants is liable for absolute confiscation. - AT
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• Customs:

  Demand of duty foregone - SEZ unit - destruction of waste scrap or remnant arising in the course of manufacture - In the present case there is no allegation that appellant had not fulfilled the export obligation. - Demand set aside - AT
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• Customs:

  Classification of imported goods - If every ‘flange’ available in the market could be used in any industry, then perhaps the classification under a single CTH would have served that purpose, but since one size does not fit all, different classifications are provided. The classification thus depends on, inter alia, functionality as well. Hence, when an item is imported for a specific purpose, if the Revenue does not believe in the classification declared by such importer, then the same could be rejected on some palpable evidence and if required, the Revenue could always insist upon further details / explanation insofar as the function / end-use claimed by such importer is concerned, in order to ascertain the chief/primary function, to arrive at the proper classification, otherwise the purpose of having two Customs Tariff Headings loses its significance, which is not the intention of legislature. - AT
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• Customs:

  Benefit of exemption from customs duty - import of Patch Cord - The ISO specification of 11801-1 extracted above, shows that the minimum operating voltage of such product is 72 volts. This is Direct Current and when converted into alternate current (AC) it would be 101. Thus, the minimum operating voltage of the product is definitely above 80 volt AC. So also, the maximum operating voltage is 300. - Benefit of notification allowed - AT
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• IBC:

  CIRP - rejection of the claim of the appellant - fraud committed by corporate debtor while executing the "deed of assignment" - The word ‘automatically’ itself empowers the Appellant to put up the claim, declaring that the assignment agreement has been violated by the Appellant by making a false representation that their receivables were not encumbered or charged. The Corporate Debtor has no doubt made the misrepresentation in the deed of assignment which has become evident from the letter of SBI dated 08.06.2017, therefore, finding recorded by the Adjudicating Authority that the termination of the assignment was not valid is neither here nor there. - The RP has committed an error in relying upon Section 21 of the Act, 1996. - AT
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• IBC:

  initiation of CIRP - pre-existing dispute between the parties - The defence raised by the Corporate Debtor in their reply to the Section 8 demand notice and detailed reply filed in Section 9 application is not illusory or moonshine and that the nature of dispute raised was such that it required adjudication by competent court. - NCLT rightly rejected the application - AT
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• Service Tax:

  Valuation of services - Joint venture - inclusion of "cost petroleum" and "profit petroleum" as per the Production sharing contract - inclusion of cash calls in the assessable value or not - Providing mining services to government - there is no service provider and service recipient relationship in the joint venture and the amounts in the nature of profit petroleum/cost petroleum/ cash calls are not consideration for services. - AT
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• Service Tax:

  Export of services - non-receipt of convertible foreign exchange - non-payment of service tax - The appellants have, in fact fulfilled the first condition of Export of Services Rules, 2005 by rendering the same fully at Nepal. Therefore, they can be said to have entertained bonafide belief that no Service Tax is payable. All the documentary evidence shows that they have declared all the transactions in their books of accounts, ST 3 Returns and Income Tax Returns. - Demand beyond the normal period of limitation set aside - AT
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• Service Tax:

  Classification of services - supply of tangible goods for use services or not - the appellants have discharged the VAT considering the same as deemed sale under Article 366 (29A) of Constitution of India. Therefore, the hiring of equipment under this fact cannot be classified as supply of tangible goods for use service in terms of Section 65 (105) (zzzj) of Finance Act, 1994. - AT
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• Service Tax:

  Invocation of Extended period of limitation - Appellant has during the entire period of dispute not paid applicable service tax on such activity i.e. lease rent, carried out by them was not deposited to the government exchequer, with the intent to evade payment of the service tax. They have also not incorporated the details of the incomes earned on this account in their ST-3 returns thus suppressed the facts from the department. - AT
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• Service Tax:

  There is no Sales Tax / VAT liability on Transfer of the right to use any goods in the present case of hiring the motor vehicles/cranes - the contracts are not covered by the relevant provisions of the Sales Tax Act and of the VAT Act, as the contracts do not provide for the transfer of the right to use the goods made available to the person who is allowed to use the same. - Central government may initiate service tax recovery proceedings in accordance with law. - SC
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• Service Tax:

  Composition scheme - The payment of an amount equivalent to 2% of the gross amount charged for the works contract implies that they have opted for the composition scheme. - AT
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• Central Excise:

  Levy of Penalty u/r 26 of CER on the buyer / purchaser of goods - The Revenue has not brought on record as to the role of the appellant in the non-payment of Excise Duty by the said manufacturer; the appellant has pleaded that it was only procuring the said AVS and the only relationship that existed was that of manufacturer and purchaser and nothing more than that, which is not disputed by the Revenue. - No penalty - AT
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• Central Excise:

  The allegation of clandestine manufacturing/clearance is a serious allegation and the Department cannot merely rely on the recorded Statements alone and the quantification cannot be done based on the assumptions and presumptions without proper corroborative evidence in the form of evidence towards purchases, sales, movement of goods, electricity consumption, recorded statements of alleged purchasers and sellers etc. - AT
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• VAT:

  Levy of purchase tax and its applicability on dealer who opted for composition scheme - Constitutional Validity - in view of the admitted discrimination by the State, the Amendment shall not be sustainable - the Amendment is discriminatory in nature and also not in favour of the welfare of the economy of the State as it encourages purchases from outside the State - HC
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• VAT:

  Filing of form Manually instead of Electronically - Imposition of condition through circular - There is nothing in the Act to hold that Section 74(4) of the KVAT Act, 2003 mandates the dealer to furnish Form 240 electronically. On the basis of the circular which is alleged to have been issued mandating From 240 to be filed electronically, the respondent cannot contend that form 240 filed manually, which was in time, is not a valid submission of Form 240. - HC
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Articles

• ADJUDICATION AND APPEALS UNDER THE TELECOMMUNICATIONS ACT, 2023
• GST and seconded employees – Conundrum of control, supervision, and costs
• Revenue Department is required to de-freeze the bank account once the required amount for filing has been deposited by the Appellant

Notifications

• GST - States

• G.O.Ms. No. 02 - dated 3-1-2024 - Andhra Pradesh SGST
  Extend dates of specified compliances in exercise of powers under section 168A of APGST Act

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• G.O. Ms. No. 537 - dated 14-11-2023 - Andhra Pradesh SGST
  Amendments in Notification G.O Ms.No.264, Revenue(CT-II) Department, dated 29.06.2017

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• G.O. Ms. No. 536 - dated 14-11-2023 - Andhra Pradesh SGST
  Amendments in Notification G.O Ms.No.255, Revenue(CT-II) Department, dated 29.06.2017

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• G.O. Ms. No. 531 - dated 10-11-2023 - Andhra Pradesh SGST
  Amendments in Notification G.O.Ms.No.582, Revenue (CT-II) Department, dated 12.12.2017

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• G.O. Ms. No. 522 - dated 7-11-2023 - Andhra Pradesh SGST
  Amendment in Notification G.O.Ms. No. 588, Revenue(CT-II)Department, dated 12.12.2017

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• G.O. Ms. No. 521 - dated 7-11-2023 - Andhra Pradesh SGST
  Amendments in Notification G.O.Ms.No.259, Revenue (CT-II) Department, dated 29.06.2017

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Circulars / Instructions / Orders

• Customs - Instruction No. 01/2024 - dated 10-1-2024
  Requirement of quality control or inspection or both, prior to export as per Milk and Milk Products (Quality Control, Inspection & Monitoring) Rules, 2020
• Customs - Public Notice No. 95 /2023 - dated 20-10-2023
  Mandatory Additional Qualifiers in Import/Export Declarations in respect of Certain Products-reg.

News

• One District One Product achieves milestone enlisting 50 Aggregators to promote ‘Brand India’

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• Direct Tax collections at 80.61% of total Budget Estimates of Direct Taxes for F.Y. 2023-24 upto 10.01.2024

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• Insolvency & Bankruptcy Code – Towards Achieving Full Potential (Keynote Address by Shri Shaktikanta Das, Governor, Reserve Bank of India - January 11, 2024 - At the Conference on Resolution of Stressed Assets and Insolvency and Bankruptcy Code (IBC) organised by the Centre for Advanced Financial Learning (CAFRAL), Mumbai)

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• Turnaround of the Indian Banking System (Keynote Address by Shri Shaktikanta Das, Governor, Reserve Bank of India - January 11, 2024 - Delivered at the Mint BFSI summit, Mumbai)

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• GIFT City to be the gateway for India’s vision to become developed nation by 2047, says Union Finance Minister Smt. Nirmala Sitharaman at the 10th Vibrant Gujarat Global Summit in Gandhinagar

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• India-UAE Business Summit held as part of Vibrant Gujarat Global Summit 2024 to strengthen bilateral ties

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• India and UAE aspire to expand bilateral trade to US$ 100 Billion: Sh. Piyush Goyal

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• Seminar on PM GatiShakti: Informed Decision-Making for Holistic Development at 10th Vibrant Gujarat Summit

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• Income Tax Department conducts search operations in Mumbai

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Case Laws:

• GST

• 2024 (1) TMI 506
  Maintainability of petition - Constitutional Validity of paragraph 2 of the Notification No. 11 of 2017-Central Tax (Rate) dated 28.06.2017 issued under the Central Goods and Services Tax Act, 2017 - HELD THAT:- This Writ Petition filed under Article 32 of the Constitution of India not entertained - the same is dismissed reserving liberty to the petitioner herein to file a Writ Petition under Article 226 of the Constitution of India before the High Court, if so advised.

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• 2024 (1) TMI 505
  Cancellation of GST registration by the respondents - during the period between cancellation and revocation of cancellation, the petitioner has not been permitted to file return, it may be permitted to file the same and claim benefit of the Input Tax Credit - HELD THAT:- A perusal of the petition indicates that the challenge laid in the present petition pertains to cancellation of petitioner s registration and as during pendency of the present petition the said cancellation has been revoked, insofar as the present petition is concerned, the same has been rendered infructuous. However, qua the grievance now sought to be raised by the petitioner regarding filing of the return and claim of the ITC, the petitioner may approach the respondents in this regard and thereafter take appropriate proceedings in accordance with law. The petition is dismissed as having become infructuous with liberty to take appropriate proceedings in accordance with law.

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• 2024 (1) TMI 504
  Input tax credit - refusal on the basis that the petitioner availed of such credit on the basis of supplies from a non-existent supplier - HELD THAT:- From the documents on record, it appears that input tax credit was denied by appraising the documents on record with regard to the alleged purchase of goods by the petitioner from M/s.Siba Auto Private Limited. Therefore, the adjudication of this dispute hinges on the adequacy of evidence in support of the actual purchase and delivery of the goods to the petitioner. Such disputes cannot be conveniently addressed in proceedings under Article 226 of the Constitution of India. Petition dismissed.

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• 2024 (1) TMI 503
  Validity of adjudication notice issued under Section 73 of the Uttar Pradesh Goods and Services Tax Act, 2017 - respondent no. 2 has failed to consider the reply furnished by the petitioner dated 1.09.2023 - HELD THAT:- The satisfaction required to be recorded in terms of Section 61(3) of the Act is primarily subjective. Unless inherent lack of jurisdiction or complete absence of relevant material is alleged and established, no interference may be warranted in exercise of extraordinary jurisdiction of this court under Article 226 of the Constitution of India. In the present case, there are no jurisdictional or fundamental error in the proceedings as to compel us to intervene at this premature stage. The writ petition is dismissed.

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• 2024 (1) TMI 502
  Constitutional validity of Section 16(4) of Central Goods and Services Tax Act, 2017 (CGST Act) and also the Karnataka Goods and services Tax Act, 2017 (KGST Act) r/w Rule 61(5) of Karnataka Goods and Services Tax Rules, 2017 (KGST Rules) - HELD THAT:- Since the prayer challenging the constitutional validity or the prayer to read down the provision as prayed in the petition is not pressed, this Court need not examine the constitutional validity of the aforesaid provisions and the prayer to read down the said provision. Once the aforesaid prayers are excluded, then the Court has to examine the validity of the impugned order and impugned notice. In that event, the petitioner has to approach the Appellate Authority provided under the CGST Act and KGST Act. In so far as impugned show-cause notices are concerned, the petitioner has to issue reply or take such measures as provided under law. Hence, the writ petition is disposed of without expressing anything on the merits of the orders passed or show-cause notices issued by the Authorities.

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• 2024 (1) TMI 501
  Maintainability of the writ petition - objection raised on the premise that the impugned order is appealable under Section 107 of CGST Act - HELD THAT:- The definition of Adjudicating Authority under the State Act, cannot be made applicable to the definition of Adjudicating Authority under Section 107 of the CGST Act as the expression Adjudicating Authority under the CGST Act is defined including the Commissioner as the Adjudicating Authority. To interpret the meaning of expression Adjudicating Authority found in Section 107 of CGST Act, one has to refer to the definition found in the very same Act and not any other Act, unless such prescription is found in the Act. No provision is pointed out to support the contention. Thus, this Court is of the view that the petitioner has alternative remedy of appeal before the Appellate Authority. No exceptional case is made to entertain the writ petition despite alternative remedy being available. Accordingly writ petition is not entertained.

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• 2024 (1) TMI 500
  Classification of supply - rate of GST on sale of Land and construction of Duplex over the same land on execution of two separate Agreements by the Applicant - admissibility of input tax credit of tax paid or deemed to have been paid - HELD THAT:- Going by the mandates of the Memorandum of Agreement Power of Attorney, it is crystal clear that the land owner M/s Arnav Constructions has not authorized the Applicant to sale land/plot; rather to construct Duplex /Multi Stories buildings over the land in question. The Applicant started development of a land into plotting and other development activities like electricity, drainage, water facilities, parks, club house etc . Further, from the Circular No. 177/09/2022-TRU Dated: 3rd August, 2022, we observe that Plot/ Land may be sold either as it is or after some development such as leveling, laying down of drainage lines, water lines, electricity lines, etc. - the contention/view of the Applicant not differed upon, to the extent that sale of land/ developed land is also sale of land and is covered by Sr. No. 5 of Schedule Ill of the Central Goods and Services Tax Act, 2017 and accordingly does not attract GST. The Applicant has developed the land for the project at the behest of the buyer(s). The development of land undertaken by the Applicant is an activity preceding and in relation to construction of project, as evident from the Memorandum of Agreement Power of Attorney both dated 27.02.2019. Here, the project means the building and the land appurtenant thereto and all passages, the parking space, amenities thereto etc as provided in BDA plan. he Applicant has relied upon Ruling of Haryana AAR in case of M/s Informage Realty Private Limited [ 2018 (10) TMI 1868 - AUTHORITY FOR ADVANCE RULING, HARYANA] , in case of M/s Shantilal Real Estate Services [ 2022 (1) TMI 659 - AUTHORITY FOR ADVANCE RULING, GOA] and in case of of M/s Rabia Khanum [ 2022 (9) TMI 785 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA] . Wherein it has been held that sale of plots/developed plots is not taxable in terms of Entry 5 of Schedule III. In this regard, it is stated that the ratio of the rulings on the cases cited by the applicant are found different to be facts and situation of the case in hand. There is no law that those decisions will have universal application. It is ruled by the Hon'ble Supreme Court in the case of Escorts Ltd vrs CCE, Delhi, [ 2004 (10) TMI 91 - SUPREME COURT] that one additional or different fact may make a world of difference between conclusion of two cases. It would be relevant to mention here that the facts of the cases cited by the Applicant are different from the case under discussion. In those cases, the owner of the land has developed the land not at the behest of the buyer and not because the buyer has requested for any service from him. The development of land undertaken by the owner was an activity incidental to the sale of land. The transaction between the purchaser and the owner of the land was a transaction purely for the sale of land. Thus, the activity undertaken/proposed to be undertaken by the Applicant towards sale of plot/land and construction of Duplex/Flats over the said land amounts to taxable service under GST in view of the Schedule II, Para 5 Clause (b) definition of the CGST Act. In view of Notification No. 03/2019-C.T. (Rate) dated 29.03.2019, the Applicant is liable to pay GST @7.5% after deducting 1/3rd towards land cost from the total consideration i.e. effective rate of 5% GST on the full consideration received towards land and Duplex and is not eligible for ITC on any inward supply of goods and services.

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• Income Tax

• 2024 (1) TMI 499
  Stay of all the recovery proceedings - HELD THAT:- We are not inclined to interfere with the order passed by the High Court except for the following modifications. The amount of Rs. 2,956 Crores comprising of Rs 1,500 Crores offered by way of cash and Rs. 1,456 Crores towards Fixed Deposit Receipts (FDRs) can be encashed by the Union. We also record the undertaking of the learned ASG, who on instructions submitted that amount will be refunded within four weeks along with interest accrued in the event petitioner s appeals are allowed by the High Court. The requirement of security with respect to the penalty is dispensed with. In view of the high stakes involved in the matter, we request the High Court to take up the appeal and dispose it of same as expeditiously as possible, preferably within a period of six weeks from today.

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• 2024 (1) TMI 498
  Validity of Revision u/s 263 - as per CIT wrong computation of the income by AO under the head Capital Gain by treating the net capital gain to be LTCG, ignoring the provisions of Section 50 - Tribunal setting aside the order u/s. 263 - HELD THAT:- AO might have committed an error while computing the assessment order but in fact, the Tribunal has considered this aspect in detail and has held that there is no finding of any error by the PCIT in the order of the Assessing Officer with respect to the issue involved as the assessee claimed the set off of long-term capital loss while offering short-term capital gain in accordance with law which has remained un-controverted even by the departmental representative as well as the appellant. Tribunal has therefore, rightly come to the conclusion that the PCIT would not have any jurisdiction to invoke the powers under section 263 since the findings of error is essential for invoking such power and AO taking a plausible view in the matter, the assessment order cannot be said to be erroneous so as to cause prejudice to the Revenue. Considering the reasons assigned by the Tribunal for allowing the appeal filed by the assessee challenging the order u/s 263 we do not find any infirmity in the same and accordingly, no question of law much less any substantial question of law can be said have arisen.

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• 2024 (1) TMI 497
  Violation of principles of natural justice - personal hearing lasted only for eight minutes - HELD THAT:- The video recording of the personal hearing indicates that the petitioner's Chartered Accountant was heard patiently and the petitioner's Chartered Accountant requested time for uploading the written submissions which was also later uploaded by the Chartered Accountant on 16.01.2023. Therefore, the arguments advanced on behalf of the petitioner that there was violation of principles of natural justice cannot be countenanced. Therefore, the impugned Assessment Order passed by the respondent does not warrant interference. Therefore, these Writ Petitions are liable to be dismissed and are accordingly dismissed. However, liberty is given to the petitioner to file a statutory appeal against the impugned Assessment Orders before the Appellate Authority within a period of thirty days from the date of receipt of a copy of this order. Consequently, connected Writ Miscellaneous Petitions are closed.

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• 2024 (1) TMI 496
  Allowable business expenses - disallowing the expenditure claimed u/s 37 being the sum paid to the Bellary Agenda Task Force [BATF] as not incurred wholly and exclusively for the purpose of business - HELD THAT:- In the present case, it is clear from the material referred that the Deputy Commissioner having constituted the BATF which included development of infrastructure had convened a meeting of all stakeholders, including the assessee. As is evident from the Minutes of the meeting recorded on 28.02.2009, the contribution of the assessee as is recorded in the Minutes would be preserved and used for development works in Sandur Taluk. It is required in terms of Section 37 of the I.T. Act that the expenditure is expended wholly and exclusively for the purpose of the business. It is a settled position of law that the expenditure that could be relatable to Commercial Expediency would fall within the ambit of expenditure under Section 37(1) I.T. Act It is clear that the expenditure made to the BATF was to be expended for the purpose of road infrastructure. Such expenditure has a nexus with the business of the assessee insofar as road infrastructure is required for the purpose of transportation of iron ore. It could be stated that the expenditure was wholly and exclusively for the purpose of business. It is also to be noticed that though there was no legal obligation to make such contribution, however, as noticed by the ITAT, the contribution made at the behest of the Deputy Commissioner would go a long way towards generating goodwill and benefit of it would yield in the long run in earning profit. It could also be stated that the expenditure could be related to Commercial Expediency , as any amount contributed to the BATF would generate goodwill of the local community as well as the Government Authorities. It must also be emphasised that the concept of Commercial Expediency is from the perspective of an assessee and cannot be judged from the perspective of what the Revenue construes it to be Commercial expediency. Insofar as the contention of the Revenue that by virtue of amendment made to Section 37 of the I.T. Act by insertion of explanation to the effect that expenditure incurred relating to Corporate Social Responsibility as referred to under the Companies Act, 2013 shall not be deemed to be an expenditure for the purposes of Section 37 of the I.T. Act, however it must be noticed that the said explanation has been inserted vide Finance Act, 2014 and it is made out from the said Amendment Act that the amendment would take effect from 01.04.2015. The same interpretation regarding prospective application of the amendment has been considered by the High Court of Delhi in the case of Principal Commissioner of Income Tax Vs. P.E.C. Limited [ 2022 (12) TMI 759 - DELHI HIGH COURT] As the subject matter of dispute relates to assessment year 2010-11, it can be stated that the said explanation to Section 37 of the I.T. Act would not apply as regards the present subject matter of dispute. Thus the substantial question of law is held in the affirmative.

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• 2024 (1) TMI 495
  Disallowance of interest and Exchange Fluctuation loss on project being capital losses - AO noted that this item of expenditure pertained to earlier assessment years and therefore, the same could not be allowed as revenue expenditure in this year. Accordingly, the same was disallowed and added back as per revisionary directions - HELD THAT:- In this year, the loans have been liquidated and accordingly, the assessee has charged the residual interest and forex fluctuation loss aggregating to Rs. 11627.85 Lacs to the Profit Loss Account as revenue expenditure. The same is due to the fact that in this year, the assessee has reviewed the feasibility of pending projects / proposal and apparently, due to various business constraints, the assessee has not implemented the pending projects / proposals and accordingly, claimed the deduction thereof. It is clear that with the abandonment of the projects, the amount lying in this account becomes nothing but business loss for the assessee. Provisions of Sec.43A would have no applicability since the assessee has not imported any capital asset and there would be no occasion to capitalize the impugned amount along with the cost of imported assets. What remains in the account is nothing but a business loss for the assessee which would be an allowable loss incurred in ordinary course of business. How the funds have been utilized in earlier years would not have much relevance and would not have any bearing on the claim of the assessee in this year. It is not the case that the funds were obtained for non-business purposes. The ratio of decision of Hon ble High Court of Madras in the case of B. Nagi Reddy [ 1991 (6) TMI 9 - MADRAS HIGH COURT] would apply wherein it has been held that the cost of project given up by the assessee would be an allowable expenditure on commercial expediency. Similar is the decision of Hon ble Court in M/s Chemplast Sanmar [ 2018 (9) TMI 75 - MADRAS HIGH COURT] wherein the assessee charged expenditure incurred on abandoned projects in Profit Loss Account which was held by authorities to be capital losses. The Hon ble Court, distinguishing the decision in the case of Eid Parry (India) Ltd. [ 2001 (11) TMI 25 - MADRAS HIGH COURT] observed that there may be several permutations and combinations that may arise for determining whether the expenditure is revenue or capital and each case must be dealt with on the broad principles as accepted by various courts. The Hon ble Court further held that the unity of control, management and common fund is the decisive test and not the nature of two lines of business. Finally the issue was decided in assessee s favor and the expenditure was allowed as revenue expenditure. Respectfully following the ratio of these decisions, we direct Ld. AO to delete the impugned disallowance and allow the expenditure as claimed by the assesseee. Diesel Generator (DG) Set written-off - assessee wrote-off an amount of under this head and claimed the same as revenue expenditure. The revisionary authority viewed the loss as capital loss - assessee submitted that the claim was made as per the provisions of Sec. 32(1)(iii), however, rejecting assessee s submissions, the same was disallowed by Ld. AO - HELD THAT:- The undisputed position that emerges is that the crankshaft is part of DG set which forms part of block of asset. The provisions of Sec. 32(1)(iii), as rightly held by Ld. CIT(A), are not applicable since the asset has not been demolished / destroyed / sold / discarded. The block of asset still exists in the books of accounts. Therefore, the alternative plea of claim of depreciation is acceptable. The Ld. AO is directed to grant depreciation in accordance with law on block of asset. The assessee is directed to provide the requisite computations. The ground stand partly allowed. Disallowance of proportionate interest u/s 36(1)(iii) - certain interest free advances were made to sister concerns - revisionary authority directed Ld. AO to examine whether the amounts advanced to various sister concerns were out of commercial expediency or not - HELD THAT:- As seen that no new advances have been made during this year. It is trite law that when mixed funds are used in the business, a presumption would arise in assessee s favor that the interest free funds have been utilized to make the investments unless the nexus of borrowed funds vis- -vis those investments is establish by Ld. AO. In the absence of such an exercise, the impugned disallowance could not be sustained in the eyes of law. The ratio of decision of Hotel Savera [ 1997 (11) TMI 37 - MADRAS HIGH COURT] would apply wherein it has been held that when the mixed funds are used, no interest disallowance is called for. In the decision of Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] has held that in case interest free funds as available with the assessee are sufficient to meet the investment made in subsidiaries, the deduction of interest expenditure would be allowed to the assessee. Respectfully following the same, the impugned disallowance stand deleted. Whether gross interest is to be considered or net interest is to be considered while computing the interest disallowance ? - We find that the assessee has claimed only net expenditure in the Profit Loss Account., The interest income is not separately assessed as Income from other sources which would mean that the interest income has business nexus. In such a case, the ratio of decision of Hon ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. [ 2012 (2) TMI 101 - SUPREME COURT] would apply. The interest disallowance has to be computed by taking net interest expenditure only. Therefore, the additional disallowance as made by Ld. AO stand deleted. The corresponding grounds raised by the assessee stand allowed. Disallowance of interest on inter-corporate deposits - Assessee placed Inter-Corporate deposits (ICD) and submitted that the same were out of internal accruals and no borrowed funds were utilized for such purposes - HELD THAT:- We find that own funds as available with the assessee are quite sufficient to meet the quantum of ICDs. Further, in that year also, the assessee has used mixed funds. The observation of Ld. AO that there was increase in borrowed funds during AY 2003-04 has no relevance since the ICDs were placed by the assessee during financial year 1999- 2000 and it was impossible to make investment in 1999-2000 out of funds borrowed in subsequent years. Further, the nexus of borrowed funds with the ICDs have not been established by Ld. AO. Therefore, the stand of Ld. AO could not be upheld. Applying the same reasoning with respect to interest disallowance, we delete the impugned disallowance and allow the corresponding grounds raised by the assessee. Disallowance of interest relief given by the bankers - HELD THAT:- From the facts, it emerges that the assessee has accounted interest expenditure at reduced rates only and the separate reporting made by Auditor is part of statutory disclosure only. The Ld. CIT(A) has well appreciated the plea of the assessee and observed that the assessee did not provide the requisite documents and computations to support its stand. Accordingly, Ld. AO has been directed to verify the claim of the assessee. Therefore, no further directions are required in the matter. The directions given in the impugned order are quite apt and sufficient. The corresponding grounds stand dismissed.

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• 2024 (1) TMI 494
  TP Adjustment - assessee prayed for admission of additional evidences and pleaded that the matter may be remanded to AO/TPO for fresh consideration - HELD THAT:- As in similar facts and circumstances in assessee s own case for AY 2004-05 [ 2023 (12) TMI 406 - ITAT DELHI] , the ITAT restored the matter on this issue to the authorities below - Accordingly, the impugned final assessment order is set aside and the AO/TPO is directed to accept the fresh evidences and report of the assessee for the purpose of Section 92C of the Income-tax Act, 1961 (for short 'the Act') read with Rule 10B of the Income tax Rules, 1962 and after giving further opportunity to the assessee pass fresh order. The assessee will be at liberty to raise further incidental issues afresh before the TPO/AO. Valuation and depreciation of goodwill - When the transfer pricing issue is being remitted in its entirety along with additional evidences, it will be appropriate that these issues are also remitted to AO/TPO. The AO/TPO shall consider the issues afresh after giving assessee proper opportunity of being heard. Both the appeals filed by the assessee are allowed for statistical purposes.

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• 2024 (1) TMI 493
  Validity of assessment order passed u/s 144C as barred by limitation - TP adjustment u/s 92CA - HELD THAT:- According to the provisions of section 144C (13) of the act the AO shall upon the receipt of the direction issued under subsection (5) in conformity with such direction complete notwithstanding anything to the contrary contained in section 153 the assessment without providing any further opportunity by of being heard to the assessee within one month from the end of the month in which such directions are received. According to rule 11 of The Income Tax (Dispute Resolution Panel) Rules, 2009 the panel shall after the directions issued, communicate the same to the eligible assessee and to the assessing officer. The order is communicated to the assessee on 14 June 2022 at 4.10 p.m. digitally signed by one of the members of the learned dispute resolution panel. According to rule 11 of Dispute Resolution Scheme 2022 dated 5/4/2022 the delivery of such direction would be by placing an authenticated copy of such order in the registered account of the assessee or by sending an authenticated copy to the registered email address of the assessee or any other person. It is not the case of the revenue that the direction is not been received by AO on or before 30 June 2022, if not on 14 June 2022. Therefore, apparently the assessment order passed on 1/8/2022 is barred by limitation and hence quashed. Ground number 1 of the appeal of the assessee is allowed.

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• 2024 (1) TMI 492
  Revision u/s 263 - deposits during demonetization unexplained - assessment best judgment basis u/s 144 - as per CIT details pertaining to cash was not furnished and the cash deposits were not verified properly and AO made addition on account of stock but leaving the core issue of cash deposits during demonetization which was the primary reason for reopening the assessment - HELD THAT:- From the stated facts, it emerges that an assessment was framed in the case of the assessee on best judgment basis u/s 144 since the assessee failed to file the requisite details as called for by AO. Assessee only filed partial details. The case was reopened to verify the issue of cash deposit during demonetization period. However, since the assessee filed only partial details, AO considered the trading result of the assessee and finding discrepancies in the same to the extent of Rs. 240.85 Lacs, added the same to the income of the assessee. The bank statements were called for by Ld. AO u/s 133(6) and Ld. AO duly noted the cash deposit made by the assessee in its bank accounts. After considering material on record as well as submissions filed by the assessee, AO chose to make addition on account of trading result and thought it fit not to make any addition on the issue of cash deposit. Assessment was framed on best judgment basis since the assessee failed to file the requisite details. In such a case, the assessment has been made to the best of judgment of AO and therefore, that judgment of AO could not be held to be erroneous though it may be prejudicial to revenue. Once the assessment is on best judgment basis, CIT could not substitute the judgment of AO and impose another view on him. The second pertinent fact is that the assessee has assailed the reassessment proceedings before first appellate authority which was pending for adjudication at the time of revision of the order. As decided in Smt. Renuka Philip [ 2018 (12) TMI 129 - MADRAS HIGH COURT] when larger issue was pending before CIT(A), the revisionary authority could not exercise jurisdiction u/s 263. Following this decision, similar ratio has been laid down in CIT vs. VAM Resorts and Hotels Pvt. Ltd [ 2019 (8) TMI 1418 - ALLAHABAD HIGH COURT] The cited decision of Chennai Tribunal is also on similar lines and supports the case of the assessee. Thus we would hold that the impugned revision u/s 263 was bad-in-law and the same is therefore, liable to the quashed. Decided in favour of assessee.

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• 2024 (1) TMI 491
  Jurisdiction of PCIT (Central), Gurgaon cancelling registration granted to the assessee u/s. 12AA - assumption of jurisdiction for cancellation of registration u/s. 12AB(4) by virtue of transfer of jurisdiction order u/s. 127 - HELD THAT:- In any case the reference by jurisdictional AO was to be made not to the PCIT or Commissioner, to whom this AO was subordinate but one authorised by board for the purpose of Section 12AB. The one who could grant or cancel the registration as per amended provisions which is not PCIT, Gurgaon, but, would be CIT(E), Chandigarh. Thus assumption of jurisdiction for cancellation of registration u/s. 12AB(4) of the Act by virtue of aforesaid transfer of jurisdiction order u/s. 127 of the Act is not conceivable. We observe that reference in section 12AB is not to PCIT or Commissioner to whom the said Assessing Officer would be subordinate, but, the CIT(E) who has been given special power for grant and cancellation of the registration as original jurisdiction. In this case, the exercise of power u/s. 12AB(4) of the Act seems to also not have been done in accordance with law. As what comes up further is that, if at all, PCIT, Gurgaon was acting under clause (a) to Section 12AB(4), then, before issuing the notice dated 08.09.2022, itself the ld. PCIT, Gurgaon should have first formed his opinion that the assessee had committed one or more of a specified violation'. However, as we go through the relevant part of the impugned order we find that the ld.PCIT has not mentioned as to which amongst the various specified violations mentioned in Explanation attached to subsection (4) of section 12AB were attracted so as to show cause the assessee under sub-section (4) of section 12AB of the Act and ask for information by notice dated notice dated 08.09.2022. Thus, if it was the case of the PCIT (Central), Gurgaon that he was exercising the powers u/s. 12AB(4)(a) on his own cognizance of the specified violation , then, at first instance as he was not competent authority u/s. 12AB(1) to pass an order of registration of the Trust, then, he had no powers u/s. 12AB(4) to call for to show cause an order of cancellation. In any case, the manner of exercise of jurisdiction without first making conclusive notice of the alleged specified violation is not sustainable. Thus we are of the considered view that the impugned order has been passed by Ld. PCIT, Gurgaon, without jurisdiction in context to territorial powers and subject matter as well not in accordance with law and same is liable to be quashed. Accordingly, the additional ground raised by the assessee is allowed.

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• 2024 (1) TMI 490
  Accrual of income in India - PE in India or not? - royalty income both under the provisions of the Act as well as under Indian-Singapore Double Taxation Avoidance Agreement (DTAA) - taxability of reimbursement as business fee for technical service (FTS) - assessee is a non-resident corporate entity incorporated in Singapore - HELD THAT:- It is a fact on record that for use or right to use brand name/trade mark, the assessee has received separate consideration which has been offered to tax. Whereas, the receipts from loyalty program, marketing, reservation services, blackberry services etc. are purely for rendition of certain services and not for use or right to use of any copyright or trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience. As there is nothing on record to suggest that the services rendered by the assessee have transferred any design or model or plan or secret formula or for any information concerning industrial, commercial or scientific experience. Therefore, in our view, the receipts cannot be treated as royalty under Article 12(3)(a) of the Tax Treaty. Similarly, the fee received cannot be treated as royalty under Article 12(3)(b) as there is no transfer of use or right to use any industrial or commercial or scientific equipments. In any case of the matter, the fees received are purely for certain services, therefore, in our view, they cannot be treated as royalty. At this stage, we must observe, the services rendered by the assessee are merely for facilitating the sale and promotional operation of the entity and are not required to facilitate the application of the brand license. Pertinently, while considering taxability of similar nature of services as royalty/FTS, Hon ble jurisdictional High Court in the case of DIT Vs. Sheraton International Inc. [ 2009 (1) TMI 27 - DELHI HIGH COURT] has upheld the decision of the Tribunal holding that the receipts are neither in the nature of royalty nor FTS. As decided in Starwood Hotels Worldwide Inc. [ 2022 (7) TMI 781 - ITAT DELHI] fee received by the assessee under the Centralized Services Agreement cannot be treated as FIS either under Article 12(4)(a) or 12(4)(b) of the India US Tax Treaty. As a natural corollary, it can only be treated as business income of the assessee. Hence, in absence of a PE in India, it will not be taxable. Thus to conclude the amount in dispute, in our view, cannot be qualified as Royalty . Accordingly, we direct the Assessing Officer to delete the addition. Appeal of assessee allowed.

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• 2024 (1) TMI 489
  Estimation of income - bogus purchases - HELD THAT:- In the case of Haji Adam [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] it is observed that corresponding sales were not doubted and quantitative details of bogus purchase and sales was duly submitted to indentify the sales corresponding to the bogus purchases and identify the amount of the profit earned in the case of every transaction of bogus purchases. Assessee was asked to file details of the sales corresponding to the bogus purchases, however he submitted that said details were not currently available and therefore, he requested that matter might be sent back to the file of the AO for deciding in the issue in dispute relying on the decision of the Mohammad Haji Adam Co. [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] Accordingly, we feel it appropriate to restore this issue back to the file of the AO with the directions to identify the sales corresponding to the bogus purchases and compute the gross profit earned in each transaction of the sale of the bogus purchases and wherever the gross profit on transaction of sale corresponding to bogus purchases is found to be less than the gross profit on the genuine purchases, then he may make addition for the corresponding amount of deficiency of gross profit. Appeal filed by the assessee is allowed for statistical purposes.

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• 2024 (1) TMI 488
  Levy of penalty u/s 271(1) (c) - disallowance made by restricting the claim u/s 80IB in respect of Vicks Vaporub (Tins) Line which was allowed by the ld. AO @ 30% as against the claim of 100% by the assessee - Tribunal upholding the disallowance made by the AO is that assessee has failed to establish that unit which has been set up by transfer of old plant and machinery was less than threshold limit of 30% - HELD THAT:- Though the matter has been adversely viewed by the Tribunal on the ground that assessee was not able to establish the transfer of old plant and machinery less than threshold limit of 20% however, assessee s claim was based on audit report certifying the plant and machinery which was set up in A.Y. 2001-02 though the bills were not available at the time of assessment proceedings for A.Y. 2004-05. Thus, it cannot be claimed that assessee has furnished any inaccurate particulars of income when the claim was based on audit report. Thus, for the purpose of levying penalty u/s. 271(1)(c) finding given in quantum proceedings cannot be conclusive for the purpose of penalty proceedings, because the assessee claim was based on auditor s report and the earlier year claim made from the basis of audit report of 10CCB has not been disturbed. Thus, there cannot be case of furnishing of inaccurate particulars and accordingly, penalty levied by the ld. AO is deleted. Deduction claimed as based on Auditor s report in Form 10CCAC and only issue is of the other income of which was not considered for deduction by the assessee - This other income was in the form of foreign exchange having direct nexus with its operating business income. Since it is a debatable issue and assessee s claim was based on Auditor s report, therefore, penalty cannot be levied for furnishing of inaccurate particulars of income. Accordingly, the same is deleted. Levy of penalty u/s. 80HHC by reducing the profits determined u/s. 80IB - This issue decided in favour of the assessee by the Tribunal held Section 80IA(9) of the Act curtails the allowance of deduction and not the computation of deduction under any other provisions under Heading C of Chapter VIA of the Act dealing with 'Deductions in respect of certain incomes'. Accordingly, we hold that the reduction of the amount of deduction computed under Section 80HHC made by the Assessing Officer cannot be sustained and therefore, the Assessing Officer directed to re-compute the deduction under Section 80HHC of the Act as per the judgment of the Hon ble Bombay High Court in the case of Associated Capsules Pvt. [ 2011 (1) TMI 787 - BOMBAY HIGH COURT] TP Adjustment - during the course of TP study proceedings, the assessee has disclosed all the relevant facts and duly explained and justified the manner of benchmarking in the TP study report to substantiate that the same was done with due diligence in accordance with the rules. It is not the case of the ld. AO that computation of arm s length was not done in good faith and not with due diligence in terms of Explanation 7 to section 271 (1) (c). Thus, the penalty cannot be levied on TP addition in absence of any overt act by the assessee, which discloses any conscious and material suppression as held by the Delhi High Court in the case of PCIT vs. Verizon India Pvt. Ltd [ 2016 (8) TMI 1287 - DELHI HIGH COURT] Thus, on this ground also penalty levied by the ld. AO is directed to be deleted. Appeal of the assessee is allowed.

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• 2024 (1) TMI 487
  Validity of reopening of assessment - change of jurisdiction of AO - as argued approval granted u/s. 151 is mechanical and AO has not carried out any independent enquiry before the issue of notice u/s. 148 - allegation of borrowed satisfaction - assessee s case was reopened on the basis of information received from DGIT (Investigation) Mumbai which in turn was based on information from Sales Tax department that assessee has made bogus purchases from two parties - as argued AO has failed to issue copy of order passed by ld. PCIT for change of jurisdiction from AO Ward 25(2)(1) Mumbai to AO Ward 32(3)(1), Mumbai - HELD THAT:- We agree with the contention of the ld. DR that once the order of transfer u/s 127 has been passed by the competent authority transferring the case from one AO to another within the same city, no opportunity of hearing is required to be given and neither assessee has ever raised this objection that no order u/s. 127 has been passed. Accordingly the contention and ground raised by the assessee is rejected. AO has failed to issue notice u/s. 129 for change of incumbency from AO Shri Hemant Gaikwad to AO Shri Kundan Kumar - Once, the notice u/s. 129 has been issued by the ld. AO before passing the assessment order and has given opportunity to the assessee to represent case then such an allegation is incorrect. From the perusal of the notice u/s. 129 dated 05/01/2015, we find that ld. AO has issued notice and there is no illegality which assessee has tried to make that ld. AO has failed to issue notice u/s. 129, accordingly, this ground is also rejected. AO has got approval u/s. 151 and approving authority has approved the reasons in a mechanical fashion by stating Yes, I am satisfied - Once the reasons have been recorded and such reasons are otherwise are sustainable in law for which no objections have been raised by the assessee before the ld. AO nor the reasons have been challenged before us, then if such reasons have been approved by the authority u/s. 151, we do not find any infirmity that approving authority should give satisfaction in a detailed manner or give a satisfaction on such reasons stating that he is satisfied with the reasons recorded by the ld. AO. Thus, it cannot be said that on the facts of the present case, approval has been obtained in a mechanical way. Accordingly, this ground is also rejected. AO has relied upon the report of DGIT (Investigation), Mumbai which is a borrowed satisfaction - Here in this case, from the perusal of the reasons it is seen that there was a specific information that assessee has purchased goods from the parties who were found to be providing bogus bills. The assessee in the books of accounts has debited the purchase made from these parties and therefore, prima facie, there was a reason to believe that these might be bogus purchases. Further, even during the course of assessment proceedings, these parties were untraceable in the enquiry conducted u/s. 133(6) and assessee also could not produce these parties, thus it cannot be held that reasons were not based on any tangible material. Therefore, it cannot be held that reasons recorded by the ld. AO is merely a borrowed satisfaction. Accordingly, ground No.4 is also rejected. AO has failed to give assessee opportunity of cross examination of the parties who had deposed before the DGIT (Investigation) Mumbai - Assessee has made the purchases from parties who have not confirmed the purchases. AO has made the addition on the basis of his inquiry and assessee has not produced these parties. There is no statement which requires cross examination then where is the question that AO should have given opportunity of cross examination. Very importantly neither before the ld. AO nor before the ld. CIT (A), assessee has ever asked for any cross examination nor there is any reference of any statement. Accordingly, such ground is ill-conceived and same is rejected. Estimation of income - bogus purchases - AO has applied gross profit rate of 15% on the aggregate alleged bogus purchases - There is no delivery of goods purchased from alleged parties or even if assessee has taken accommodation bills from these parties then assessee has made purchase of goods may be from grey market. At the most it could be a case of suppression of gross profit by inflating the purchases through accommodation hawala bills. The sources of purchases are from the books and the quantity of purchase and corresponding quantity of sales has not been doubted. Therefore, AO has applied Gross Profit. But in such case, such a huge GP rate of 15% of trading in ferrous and non-ferrous metal is unwarranted. In the A.Y.2009-10, the VAT of ferrous and non-ferrous metal was @4% and if at all assessee had tried to inflate the purchases only to save VAT to the extent of 4%. Moreover, before us certain Tribunal decisions have been filed wherein on trading of ferrous and non-ferrous metals GP addition of 2% has been made on such kind of alleged bogus purchases. Accordingly, we apply GP rate of 2% on the alleged bogus purchases. Appeal of the assessee is partly allowed.

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• 2024 (1) TMI 486
  Determining the salary income from the ESOPs exercised - addition on account of salary without considering and appreciating Form 16 issued by the Employer - HELD THAT:- No addition is called for on this account and that the Assessing Officer has erred in not following the directions of the ld. DRP in true spirit and erroneously determining the salary income from the ESOPs exercised.

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• 2024 (1) TMI 485
  Estimation of income - bogus purchases - addition of 25% of alleged inflated purchase on the basis of sized excel sheets - this was the case of search u/s 132, yet the AO instead of issuance of notice under section 153A proceeded to make the assessment u/s 147 - HELD THAT:- It is settled position under law that no sale or consumption is possible in absence of purchase. The finished products of assessee is not in dispute. No evidence was brought on record to show that at the time of search, there was discrepancy in the stock register. No adverse evidence from the seller either in the form of their statements or other evidence suggesting on such bogus purchase are brought on record. No doubt, that employees of assessee during search action has accepted inflated purchase though such statement was retracted within a reasonable time. No comparable stances of GP in similar industry is brought on record either by assessing officer or by assessee. Thus, keeping in view overall facts and circumstances, when their certain statements of staff member of assessee though it was retracted, we are of the view that 7.5% of impugned purchase is seems to be a higher side when the assessee itself as declared income of Rs. 10.87 crores during current assessment year, which is higher than earlier years. We find that in the earlier year, assessee has shown gross profit at 7.69% and 8.68% in the current year respectively, which is 0.98% to earlier years also. We are also conscious of the fact that when there is allegation of bogus purchase only profit element embedded in such purchase is to be brought to tax and substantial part of the transaction. Therefore, keeping in view that assessee has shown good gross profit of 8.68%. Therefore, further addition of 7.5% of Rs. 36.05 crores would be on higher side. Therefore, in order to avoid possibility of revenue leakage, the gross profit of assessee is increased at 9.00% in place of 8.68%. This ground of assessee s appeal is partly allowed.

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• 2024 (1) TMI 484
  Computation of LTCG - FMV determination - unlisted equity shares held by the Assessee in the J.V. Company - Appellant had obtained two valuation reports for determining the FMV of the equity shares - i) Valuation report as per the RBI Guidelines for FEMA purpose and ii) Valuation Report as per Rule 11UA of Income Tax Rules 1962, for the purpose of computing Capital Gains under Income Tax Act - AO held that FMV of the same share of the same company on the same date cannot be valued at multiple prices and proposed to tax difference between sales consideration computed using Rs 178.12 per share as sale price and cost of acquisition as Long Term Capital Gain taxable @ 10% and remaining portion of sales consideration paid to the Appellant was treated as income from other sources and taxed @ 40% - HELD THAT:- Based on a reading of Section 50CA of the Act, it is clear that where the actual sale consideration on transfer of unlisted equity shares is less than the fair market value of such shares determined as per the NAV method, the actual sales consideration shall get substituted with the deemed sales consideration as determined in accordance with NAV method. In the facts of the Assessee, the unlisted equity shares held by the Assessee in the J.V. Company were sold at a price of Rs. 233 per share, which was higher than the fair market value determined in accordance with NAV method i.e. INR 178.12 per share. Hence, we hold that the revenue authorities erred on facts and in law in not appreciating that the provisions of Section 50CA of the Act are not applicable in the case of the Assessee since the Assessee had sold shares in excess of fair market value as determined in accordance with Rule 11UAA of the Rules. The same proposition is also affirmed by the Coordinate Bench of ITAT, Mumbai in the case of Nearby Pte. Ltd. Vs ACIT [ 2023 (8) TMI 1410 - ITAT MUMBAI] held that since the full value of consideration received by the assessee is more than the fair market value, there is no need to tinker with the full value of consideration declared by the assessee. Appeal of the assessee is allowed.

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• 2024 (1) TMI 483
  Exemption u/s 11 - registration u/s 12AB and approval u/s 80G(5) denied - Charitable activity u/s 2(15) - sole reason of rejecting assessee s application by CIT(E) is the last part of Clause 4(p) in the trust-deed which prescribes without being responsible or accountable for any loss caused thereby from which as inferred that the trustees have unlimited authority to divert funds of trust by giving loans to any related or favourable party - HELD THAT:- The words for any of the above charitable purposes coming before the underlined words being relied upon by revenue, cannot be ignored. One cannot take out a part of the sentence and interpret, one has to read entire verdict of a sentence. Otherwise, it becomes mis-reading. We find that in the said clause 4(p), it is clearly mentioned that the trustees can give loans for any of the above charitable purposes only. Therefore, the apprehension of revenue that the loans would be given to a related or favourable party is a heighted apprehension. In any case, Ld. AR has shown, with the help of audited financial statements, that till now the trust has not made any such loan to a related or favourable party. If the trust makes any such loan in future, the law provides for forfeiture of exemption u/s 13 which in case of necessity, can be invoked by authorities. Looking into these aspects, we do not find any merit in the objection raised by Ld. CIT(E). Since the sole objection raised by Ld. CIT(E) is dissolved, we order the Ld. CIT(E) to consider the application of assessee and pass a needful order granting registration u/s 12AB as applied for. Registration u/s 80GB - Since objection, as noted for registration u/s 12AB stands dissolved, it stands dissolved for section 80G also. We find that the assessee s case is directly covered by two decisions relied upon by Ld. AR, namely (i) KVC Trust [ 2011 (3) TMI 121 - ITAT, CHENNAI] and (ii) Mishri Lal Gordhan Lal Batra Charitable Trust [ 2007 (12) TMI 200 - RAJASTHAN HIGH COURT] . DR is not able to show any reason for non-applicability of these decisions or to show any contrary decision holding the field. Therefore, following the same view, we are inclined to direct the CIT(E) to consider the application of assessee and grant registration after limited verification that the assessee s case fits in section 80G(5B).

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• 2024 (1) TMI 482
  Disallowance of estimated depreciation on obsolete assets - HELD THAT:- As following the principle of consistency, the view taken by the Coordinate Bench in previous Assessment Years are respectfully followed A.Y. 2002-03 [ 2021 (8) TMI 609 - ITAT MUMBAI ], and A.Y.2001-02 [ 2014 (8) TMI 831 - ITAT MUMBAI ] no merit in the action of the AO for declining assessee's claim of depreciation on obsolete assets - ground raised by the assessee is accordingly allowed. Disallowance of Bad debts written off in the books (on the ground that written off debts not proved to be Bad) - HELD THAT:- Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2002-03 [ 2021 (8) TMI 609 - ITAT MUMBAI ] As per the amended provision of section 36(1)(vii) of the Act, any bad debt written off in the books of account as irrecoverable is an allowable deduction. The effect of the aforesaid statutory provision has been lucidly explained by the Hon'ble Apex Court in case of TRF Ltd VS CIT [ 2010 (2) TMI 211 - SUPREME COURT ] Therefore, once the conditions of section 36(1)(vii) are fulfilled, assessee's claim has to be allowed. Keeping in view the uncontroverted factual position that the conditions of section 36(1)(vii) are satisfied, we allow assessee s claim. Adjustment u/s. 145A of Modvat - HELD THAT:- As decided in A.Y.1999-2000 [ 2013 (2) TMI 907 - ITAT MUMBAI ] under the provision u/s 145A adjustment on account of tax, duty etc has to be made at all stages that is, opening stock, purchases and sales and closing stock. It has been held by the Hon'ble High Court of Delhi in case of Mahavir Aluminium Ltd. (295 ITR 77) that adjustment u/s 145A has to be made both to the opening stock and closing stock. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in previous Assessment Years is respectfully followed. It is brought to our notice that the department has accepted the similar decisions in the AY 2006-07 and 2007-08 were accepted by the revenue by not preferring appeals and subsequently no adjustments were proposed by Assessing Officer in the subsequent years, accordingly, this ground is decided in favour of the assessee. Disallowance of brokerage - assessee has incurred brokerage charges to let out the excess space available with the assessee - HELD THAT:- Since the expenses are purely relating to the earning of income under the head Income from House property, it is an expenditure deductable under that head and not under the head Income from Business or profession. Hence, we are inclined to agree with the findings of the Ld CIT(A) and at the same time, it is fact on record that gross income of the assessee is taxable, which includes income from business, income from house property, capital gains and income from other sources. The expenses claimed by the assessee are rejected under the head income from business and it is allowed under the head income from the house properties, the net result would be the same. That is, the AO will disallow the expenditure under the head income from Business and have to allow the same under the head income from House property. The net result would be Nill. There is no change in the tax rate for both the heads of income. Therefore, the claim of the assessee is allowed in this regard considering the above discussions. Disallowance of expenditure u/s 40A (2)(a)/(b) - AO has disallowed the portion of cost of purchase of vial, purchased from Chiron India, which is a subsidiary company of the assessee - HELD THAT:- In the similar situation and facts, the Hon ble Bombay High Court in the case of CIT v. Goa Mineral Pvt. Ltd. [ 2017 (7) TMI 365 - BOMBAY HIGH COURT ] held as find that the factual findings are that there is no excessive payment or that the arrangement has in any way enriched the respondents which cannot be faulted as they are based on the appreciation of evidence by the learned Tribunal and no perversity has been shown to such findings by the appellant. In such circumstances and for the aforesaid reasons, we find that the substantial question of law framed is answered against the Revenue/appellant. Disallowance representing 24/25 of the payment made for encashment of leave - AO has rejected the submissions of the assessee and disallowed the actual claim made by the assessee - HELD THAT:- As assessee submitted that the assessee has reversed the provisions made. It is fact on record that the assessee has claimed the expenses on leave encashment on the basis of actuarial valuation until previous year and no specific details were submitted before us to adjudicate the issue on merit, since it is factual matter, in our considered view, it needs to be verified by the tax authorities on the aspect of status of opening provisions outstanding in the books of the assessee, which was based on the actuarial valuation, which needs to be reversed first before allowing any expenditure on actual basis. Therefore, we are inclined to remit this issue back to the file of Assessing Officer to determine the provisions outstanding in the books of the assessee and disallow the same during this year and allow the actual claim of the assessee on the basis of actual payment. Accordingly, we allow the ground raised by the assessee for statistical purpose. Interest allowed u/s 244(1A) - A.O. noted that the assessee had not subjected the interest to tax on the plea that such interest was withdrawn on completion of regular assessment u/s 143(3) - HELD THAT:- We observed that in the case of Avada Trading Co. Pvt. Ltd. [ 2006 (1) TMI 465 - ITAT MUMBAI ] held that that interest on refund under Section 244A(1) would be assessable in the year in which it is granted and not in the year in which proceedings under Section 143(1)(a) attain finality. Long term capital gain on account of FMV as on 01.04.1981 - HELD THAT:- Respectfully following the above decision in M/s. Aventis Pharma Limited Versus ACIT -8(1) Mumbai [ 2014 (8) TMI 831 - ITAT MUMBAI ] and following the principle of consistency, the view taken by the Tribunal in previous Assessment Year is respectfully followed, ground raised by the assessee is accordingly dismissed. Curtailment of deduction u/s. 80HHC and part deduction of DEPB entitlement - assessee brought to our notice that Sales tax set off/refund and bad debts recovered are not to be reduced under Explanation (baa) from profits of business because they do not constitute receipts covered by said explanation - HELD THAT:- identical issue is decided in favour of the assessee for the A.Y. 2002-03. While deciding the issue, the Coordinate Bench of the Tribunal in Sanofi India Limited (formerly Aventis Pharma Limited) Versus The ACIT, Range-8 (1) , Mumbai And (Vice-Versa) 2021 (8) TMI 609 - ITAT MUMBAI ] directed to allow the DEPB claim and sustain the additions made on sales tax refund and bad debts. Adjustment u/s 92C(4) - adjustment to the arm s length price (ALP, hereafter) of export commission paid to the overseas associated enterprises (AE) - HELD THAT:- Respectfully following the decision and following the principle of consistency, the view taken by the Tribunal in previous Assessment Year 2021 (8) TMI 609 - ITAT MUMBAI ] is respectfully followed as held even applying the rule of consistency and past history relating to similar transaction, the export commission paid at 12.5% has to be accepted to be at arm s length. In view of the aforesaid, we are inclined to delete the adjustment made to the ALP of export commission paid to the AE. - ground raised by the assessee is accordingly allowed. Computation of deduction u/s 80HHC - excluding Toll Manufacturing charges and services charges (Processing Charges) from the total turnover of the business - HELD THAT:- We observe that the other income declared by the assessee in its claim under section 80HHC, which includes tool manufacturing and other service charges, these income are additional income generated in the business and may not be part of total turnover or export turnover but it is an additional income earned by the assessee. These are not part of turnover but can be considered as additional income eligible to be claimed under clause (baa) of explanation to section 80HHC of the Act. Therefore, the findings of the Ld CIT(A) are proper and as per law. Hence, we are inclined to dismiss the ground raised by the revenue. Indirect cost attributable to trading export - HELD THAT:- As denied in assessee's own case for the assessment year 1998-99 in AVENTIS PHARMA LTD. VERSUS DEPUTY COMMISSIONER OF IN COME TAX, RANGE-8(1), MUMBAI [ 2013 (1) TMI 257 - ITAT MUMBAI ] we have already discussed that for the purpose of sec. 80HHC(3}(b) r.w.clause (e) of Explanation, the indirect cost to be allocated in the ratio of export turnover of trading goods to the total turnover has to be taken as the total figure of the indirect cost incurred for the total turnover and not the indirect cost directly related to the export turnover as held by the C!T(A). - It is clear from the working of the Assessing Officer that for determining the indirect cost, the AO has reduced from the total cost of business, cost of goods as well as the other items. Therefore, we do not find any error as far as the formula adopted by the Assessing Officer for computation of indirect cost allocated to the export of trading goods. Decided against assessee. DEBP entitlement should be reduced under the proviso to Section 80HHC(3) and or should not be part of profits of the business - HELD THAT:- Respectfully following the above decision [ 2021 (8) TMI 609 - ITAT MUMBAI ] and following the principle of consistency, the view taken by the coordinate Bench in previous Assessment Year is respectfully followed, accordingly, ground raised by the revenue is dismissed. Not to deduct profit u/s 80IB while determining profit eligible for deduction u/s 80HHC - HELD THAT:- As identical issue has been decided in the case of Associated Capsules Pvt. Ltd. [ 2011 (1) TMI 787 - BOMBAY HIGH COURT ] decided the issue in favour of the assessee - overall deduction under Chapter VIA should not exceed the profit declared by the assessee, in this case the assessee has first claimed the deduction u/s 80IB and the balance u/s 80HHC. The above method of computation was upheld by the Hon ble HC, hence the ground raised by the revenue is accordingly dismissed. Correct head of Income - receipt from Chiron Behring Vaccines Pvt. Ltd - taxed under the head income from House Property or income from business - HELD THAT:- As decided in Modi Industries Ltd. [ 1994 (4) TMI 61 - DELHI HIGH COURT ] we endorse the view taken by the Tribunal that the income from Modi Bhawan should be assessed under the head Profits and gains of business and not under the head Income from house property and, consequently, the assessee would be entitled to deduction for the actual amount spent by it on repairs of the said building as also the depreciation while computing its income under the head Profits and gains of business . Accordingly, we answer the questions in both the references in the affirmative, in favour of the assessee and against the Revenue. Determining adjusted profits of the business for the purpose of section 80HHC(3) - HELD THAT:- At the time of hearing both the counsels agreed that the above said incomes were already considered for reducing from the profit as per explanation (baa) to section 80HHC of the Act while determining the net profit for the purpose of deduction u/s 80HHC. Therefore, there is no grievance to the revenue and it is as per the provisions of determining the deduction u/s. 80HHC of the Act. Therefore, this ground of appeal raised by the revenue dismissed. Penalty u/s. 271(1)(c) - defective notice u/s 274 - non-strike off of the irrelevant part in the notice - HELD THAT:- As could be seen from the case of Mr. Mohd. Farhan A. Shaikh [[ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) ] while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s. 271(1)(c) of the Act, held that assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness. Ratio of this full bench decision of the Hon'ble Bombay High Court (Goa) squarely applies to the facts of the assessee s case as the notices u/s. 274 r.w.s. 271(1)(c) of the Act were issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued. Decided in favour of assessee. Disallowance of write off of tender security deposits - HELD THAT:- After considering the submissions and the nature of deposits written off by the assessee we observe that no doubt these advances are made to secure the business for the assessee, however, when these tender deposits are not recoverable it becomes part of the expenditure for the assessee which assessee failed to claim. However, these are all outstanding for a long period of time, it becomes irrecoverable and becomes bad debts. Therefore, it is allowed as allowable expenditure for the assessee. Further, it is also brought to our notice that Ld. CIT(A) has allowed the similar deduction in A.Y. 2000-01 in his order dated 19.03.2004, however, it is brought to our notice that revenue has not preferred any further appeal against the above findings of the Ld. CIT(A). Accordingly, the ground raised by the assessee is allowed. Foreign exchange gain (net) - HELD THAT:- As we observe that foreign exchange gain is directly related to export business and if there is any foreign exchange gain or loss it is part of the turnover. Therefore, this can be considered as part of earning from the export business. Accordingly, assessee is eligible to claim the benefit under section 80HHC of the Act. Hence, allowed the ground raised by the assessee in this regard. Deduction u/s 80HHC - Claim of insurance rejected as it is not part of earning out of profit from the export business - HELD THAT:- As export insurance claim, transit insurance claim against finished goods lost in transit claim are eligible to claim as part of export business. Accordingly, we direct the Assessing Officer to allow only the above said claim under this head and other insurance claims disallowed by Assessing Officer are sustained. Accordingly, this ground is partly allowed. Adopting stamp duty value for computation of capital gains under section 50C - HELD THAT:- It is fact on record that the value which was adopted by the assessee for the total area of land, as approved by the appropriate authorities at ₹. 35.82 crores and it was agreed that this land will be developed in three phases. Once the value for development was agreed and relevant MOU was signed as on 31.03.2000 for the total area under consideration then the Assessing Officer has to adopt the value of stamp duty value as on the date of signing of MOU as per section 50C of the Act, (even though the amendment for the above has come into effect only from 01.04.2017, however, the courts have held that this amendment is retrospective in nature) or referred the issue to DVO for fresh valuation. It is also relevant to notice that the value for total land was approved by the appropriate authority and at that point of time the value obtained from appropriate authority existed in statute which is a high power committee consisting of Two Commissioners of Income Tax and a Chief Engineer of CPWD. Therefore, this valuation cannot be ignored and plays pivotal role in determining the valuation of property. Therefore, we are inclined to agree with the findings of the Ld.CIT(A) and Accordingly, ground raised by the revenue is dismissed. Penalty u/s 271(1)(c) - In the quantum appeals, as the additions were deleted by us or remitted the issues back to the file of Assessing Officer in the quantum appeal proceedings. The other issues, which are sustained by us are all debatable issues as adjudicated by Ld. CIT(A). Therefore, as such this penalty order is not sustainable. Accordingly, this appeal preferred by revenue is dismissed.

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• 2024 (1) TMI 481
  Disallowance of interest claim u/s 36(1)(iii) - assessee had debited the interest on loans taken and not charged any interest on loans given and the assessee could not substantiate that the interest free loans/advances given were out of non interest bearing funds - CIT(A) deleted addition as assessee had more funds than that advanced without charging any interest - HELD THAT:- In view of the facts decision of the Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] in this order that if there are funds available both interest free and over draft and/or loan taken then a presumption would arise that investment would be out of the interest free fund generated or available with the company, if the interest free funds were sufficient to meet the investments. The ITAT, Mumbai in the case of the assessee itself for A.Y. 2014-15 [ 2023 (9) TMI 1212 - ITAT MUMBAI] after following the decision of Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] held that such disallowance is not sustainable when the interest free advances given by the assessee to its suppliers were for less than interest free fund available with the assessee. No merit in this grounds of appeal, therefore, this ground of appeal of the revenue is dismissed. Disallowance of Lease rental in respect of the unexpired period of lease - HELD THAT:- During the course of appellate proceedings before us as discussed above, the assessee has filed additional evidences comprising copies of lease agreements and copies of security deposits ledger from the books of the assessee. After considering the submission of the assessee that relevant documents as referred above were not easily available because of cyber attack which affected the relevant record maintained on the computer system, we admit the additional evidences filed by the assessee vide its submission dated 28.09.2022 to decide the issue on merit. In view of the additional evidences filed by the assessee, we observe that this issue is required to be decided denovo after examination and verification of the additional evidences filed by the assessee, therefore, we restore this issue to the file of the AO for deciding fresh after examination of the documents filed by assessee as referred supra in this order Therefore, ground no. 1 to 4 of the assessee are allowed for statistical purpose. Nature of expenses - Software expenses - assessee has claimed that the software expenses incurred during the year under consideration were in respect of annual maintenance cost and licensing fees - HELD THAT:- As perused the decision of ITAT in the case of assessee for A.Y. 2014-15 [ 2023 (9) TMI 1212 - ITAT MUMBAI] wherein the similar issue on identical fact has been decided in the favour of the assessee holding that expenses incurred as annual license fees and annual maintence of software were of revenue in nature. Following the decision of the ITAT, we direct the AO to treat software expenses as revenue expenses. Therefore this ground of appeal is allowed. Dividend distribution tax [DDT] Paid to Dutch Shareholders - MFN clause Applicability - assessee submitted that since there is MFN clause in the protocol of India Netherlands tax treaty therefore beneficial rate of 5% be considered in the case of the assessee as per Article 10(2) of India- Slovenia Treaty - HELD THAT:- We find that the Hon ble Supreme Court in the case of ACIT (International Taxation) Vs M/s Nestle [ 2023 (10) TMI 981 - SUPREME COURT] Supreme Court held that the specific notification u/s 90/1 is necessary for effecting benefit under MFN clause.

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• 2024 (1) TMI 480
  Deduction u/s. 80P - income earned as interest/dividend from co-operative bank - Claim disallowed in view of the provision of section 80P(4) - Assessee is not a Co- operative Bank carrying banking business and, therefore, not hit by the newly inserted provision of section 80P(4) of the Act - HELD THAT:- As relying on Pathare Prabhu Co-operative Housing Society Ltd. [ 2023 (7) TMI 1272 - ITAT MUMBAI] Income if any earned by way of interest or dividend from the investments made with any other Co- operative Bank as well, is allowable as deduction under section 80P(2)(d) of the Act. Accordingly the AO is directed to allow deduction qua interest earned from Co-operative Banks only but subject to verification. Assessee appeal allowed as aforesaid.

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• 2024 (1) TMI 479
  Estimation of commission income - unaccounted cash found during the search as well as in the raid of Police authorities - As per DR assessee indulged in unaccounted transaction and non-submissions of the supporting details and documents regarding commission income, the AO has estimated the commission income by increasing 20% - CIT(A) deleted addition - HELD THAT:- AO has made ad hoc addition by estimating the commission income with increase of 20% of the income already declared by the assesse. The sole basis of the AO for increasing the commission income is the past unaccounted cash found during the search as well as in the raid of Police authorities in the year 1998 and 2008 respectively. Therefore, the AO suspected the unaccounted transactions of earning commission income by the assessee for these years also. Addition made by the AO is purely on the basis of the suspicion without any material or evidence to reflect any unaccounted commission income of the assessee for these years. As it is manifest from the assessment order that the AO has not referred to any incriminating material disclosing any undisclosed income of commission for these assessment year either found during the search and seizure action or even during the assessment proceedings. AO has not brought any material on record to show higher commission income earned by the assessee. The commission income duly recorded in the books of account and declared in the return of income cannot be disturbed in absence of any material. Accordingly we do not find any error or illegality in the impugned order of the CIT(A) qua this issue. Unexplained unsecured loan - Addition deleted by CIT(A) - HELD THAT:- There is no dispute that the loans were received by the assessee through banking channels as evident from the bank account statement of the assessee as well as the loan creditors. Further, it is also evident that most of the loans were repaid by the assessee in the very next year as reflected in the bank account statement and ledger accounts produced by the assesse. Accordingly in view of the documentary evidence produced by the assessee showing the transactions through banking channel and subsequent repayment of loan amounts through banking channel and in the absence of any defect pointed out by the AO in the evidence produced by the assesse, we do not find any error or illegal in the impugned order of the CIT(A) who has duly considered the supporting evidence produced by the assessee as well as the remand report of the AO before passing impugned order. Undisclosed investment - Alleged Hawala transactions - Addition deleted by the CIT(A) - HELD THAT:- Once it is found that such party was involved in the Hawala transactions then the text massages found from the mobile of such party send from the mobile of the assessee lead to a safe inference that the involvement of the assessee in the Hawala transactions cannot be ruled out. Even otherwise the searched party as well as assessee did not dispute the ownership of the respective mobile numbers. However, the question arises whether the involvement of the assessee in Hawala transaction would attract the addition of the entire quantum of the transactions or only the commission income as would have been earned by the assessee on such transactions. Therefore, in the facts and circumstances of the case as well as in view of the decision of Coordinate Bench of this tribunal in case of ACIT vs. Narendra Gupta [ 2023 (1) TMI 1004 - ITAT INDORE] we concur with the view of the CIT(A) that only the commission income in the hand of the assessee is assessable to tax. Hence, we uphold the impugned order of the CIT(A) qua this issue. Validity of assessment u/s 153C - Whether the documents found during search and seizure operations, pertains to assessee and do not belong to assessee? - HELD THAT:- As assessee has fairly submitted that this issue is now covered by the Hon ble Supreme Court in case of ITO vs. Vikram Sujitkumar Bhatia [ 2023 (4) TMI 296 - SUPREME COURT] Accordingly in view of the judgment of Hon ble Supreme Court as well as fair statement of Ld. AR of the assessee ground no.2 is dismissed being devoid of any merit. No satisfaction note recorded by the AO of searched person - When the satisfaction was recorded by the AO who is having jurisdiction over the assessee as well as search person then there is no infirmity in the recording of satisfaction for want of separate satisfaction by the AO of search person as well as by the AO of the assessee. Accordingly we do not find any reason to interfere with the impugned order of the CIT(A) qua this issue. Unexplained expenditure on foreign trips - HELD THAT:- The assessee has produced the certificate of M/s Grand Agencies, Indore who has confirmed the fact of sponsoring foreign trip of the assessee and bearing expenses. Once the assessee has produced the certificate of M/s. Grand Agencies Indore claiming and confirming the expenditure incurred on foreign trips of the assessee then the AO ought to have conducted further inquiry to ascertain the correctness of said claim of the assesse. Even otherwise the AO has only estimated the expenditure and not even referred any basis for such estimation of the expenditure. Accordingly, in the facts and circumstances of the case and when the assessee has explained source of the expenditure and also produced confirmation/certification of sponsoring entity then the addition made by AO without conducting further inquiry is not justified. Hence, in the interest of justice this issue is set aside to the record of the AO for fresh adjudication.

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• 2024 (1) TMI 478
  Exemption u/s 11 - genuineness of the activities of Society - CIT(Exemptions) had rejected the claim of assessee u/s 80G(5)(vi) of the Act on the ground, inter alia, that gross receipts in all the five years are far in excess of Rs. One crore and the assessee Society has wrongly claimed exemption u/s 10(23C)(iiiad) - HELD THAT:- As decided in SHIV PUBLIC SCHOOL MANAGING COMMITTEE [ 2018 (2) TMI 2109 - ITAT DELHI] society as indulging predominantly in activities on cash basis and has kept substantial amounts of its so-called receipts out of the regulated banking channels. Society s indulgence in cash transactions makes the activities not amenable to proper verifications. It doesn t make the functioning of the entity, based on public funding and sitting over public money, transparent and amenable to scrutiny by the beneficiaries from amongst the general public as also the regulating agencies. In the light of aforesaid discussion the issue is restored to the file of Learned CIT(Exemptions) to examine the amended and active Memorandum of Association and bye-laws of the Society for the purpose of satisfaction about the genuineness of the activities of Society and pass order afresh in the light of aforesaid observations. Appeals are allowed for statistical purposes.

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• Customs

• 2024 (1) TMI 477
  Restoration of penalty - revision application filed under Section 129-DD of the Customs Act - existence of evidence against the petitioner or not - HELD THAT:- It may be seen that the petitioner gave incriminating statements under Section 108 of the Customs Act admitting to the recovery of 7140 memory cards from the rack of the table, as also the recovery of 2360 memory cards from his laptop bag. He admitted that he did all this at the instance of one Chacha . In his further statement dated 28.01.2011, he recognized Rajdeep Chawla as the same person who gave him Hong Kong Duty Free Shop poly bag from which memory cards were recovered from the room of Wing Incharge, AFRRO, Arrival Office. It is a settled law that the statement recorded under Section 108 of the Customs Act is a material piece of evidence and can be used as substantive evidence. The statements recorded under Section 108 of the Customs Act in this case are consistent, the witnesses are supporting each other regarding the incident of recovery and such statements are further corroborated by the Panchnamas prepared at the spot which bear the signatures of the petitioner as also the Panch Witnesses. The High Court exercising power under the writ jurisdiction cannot assume unlimited prerogative to correct all species of hardship or wrong decisions. This exercise must be restricted to grave dereliction of duty and flagrant abuse of fundamental principles of law and justice. The jurisdiction which the High Court exercises in the writs is neither original nor appealable. It is administrative and supervisory in nature. In the present writ petition, petitioner is assailing the impugned order passed in revision on the basis of appreciation of evidence only. The High Court while exercising the power under the writ jurisdiction cannot normally substitute its own conclusion. There are no patent illegality or error apparent on the face of the record - there is no merit in the present writ petition - petition dismissed.

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• 2024 (1) TMI 476
  Seeking provisional release of consignment of apples - import price below the minimum price of apples for import at Rs. 50/- per kg. - applicability of N/N. 5/2023 - HELD THAT:- In the present case, the Bills of Entry seeks to clear the imports of apples which are imported by the petitioner at a price which is at Rs. 50/- per kg. Thus clearly the price per kilogram being Rs. 50/-, which is not below the price fixed by Notification No. 5 of 2023, it would be correct for the petitioner to contend that the respondents cannot detain the petitioner s consignment on the basis of the minimum price as fixed by the said notification - thus, there is no reason as to why the petitioner ought not to be permitted to clear the goods. It is directed that the imports of the petitioner, which are the subject matter of Bill of Entry No. 8876300 dated 22/11/2023 and Bill of Entry No. 8940516 dated 25/11/2023 be not detained on the ground that these goods are prohibited goods under Notification No. 5/2023, and, on such count, be released on the petitioner furnishing a bond - petition disposed off.

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• 2024 (1) TMI 475
  100% EOU - Duty Drawback on bulk tea in question procured by it from the bulk tea manufacturer and supplier which has admittedly paid the Excise Duty - Existence of valid reason to deny drawback to the petitioner or not - HELD THAT:- The impugned order of the revisional authority dated 20th December, 2019 is not sustainable both in law and in fact and is liable to be set aside. Revisional authority while passing the impugned order on the revisional application of the respondents customs authority setting aside the order of the Appellate authority which had allowed drawback in favour of the petitioner, has taken into consideration the ground which was no part of show cause notice or adjudication order or order of the Appellate authority. Issue of concession by the petitioner s representative before the adjudicating authority, raised by the respondents customs authority for the first time in course of hearing of this writ petition which was neither before the Appellate authority nor before the revisional authority nor in the affidavit-in-opposition to the writ petition with regard to petitioner s statutory and legal right of availing the benefit of Drawback in question on the basis of aforesaid notification dated 22nd November, 2001, issued by the DGFT authority, is not sustainable since there can be concession on fact and not on law and further petitioner has not accepted the same and has challenged the order-in-original before the Appellate authority. Petitioner is entitled to avail the benefit of Drawback under the Notification No. 39(RE-01)/1997-2002, New Delhi dated 22nd November, 2001 issued by the DGFT (Government of India, Ministry of Finance) issued in exercise of powers conferred under paragraph 4.11 of the Export and Import Policy 1997-2002, relating to Duty Drawback for the period from 01.06.2000 to 31.03.2001, since it has fulfilled all the criteria of the aforesaid notification which has statutory force. The petition is disposed of by upholding the order of the Appellate authority and setting aside the impugned order of the revisional authority. No order as to costs.

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• 2024 (1) TMI 474
  Validity of second show cause notice - Withdrawal of First SCN thereafter - Issuance of SCN u/s 28(4) read with Section 124 of the Customs Act, 1962 - Challenging on the ground of same cause of action and during pendency of the proceedings pursuant to the first show-cause notice - HELD THAT:- A bare perusal of sub-section (9) of Section 28 of the Act, 1962 shows that though clause (d) provides that the proper officer shall determine the amount of duty or interest under sub-section (8), within one year from the date of notice, in respect of cases falling under sub-section (4) but the first proviso, further provides that where the proper officer fails to so determine within the specified period, any officer senior in rank to the proper officer may having regard to the circumstances under which the proper officer was prevented from determining the amount of duty or interest under sub section (8) extend the period specified in clause (a) to a further period of six months and the period specified in clause (b) to a further period of one year. Therefore, in our view the period under clause (b) of sub-section (9) is extendable for a further period of one year. It is not the submission of the learned counsel for the petitioner that the said period was not extended. Such extendable period has also yet not expired. It is also not the submission that the period for determination, if not extended as of now, cannot be extended. The second proviso upon which much reliance has been placed would come into effect only after the expiry of the extended period. There are no valid ground to entertain the writ petition challenging the show-cause notice - petition dismissed.

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• 2024 (1) TMI 473
  Seeking enhancement of penalty - non-submission of documents within the stipulated time - Regulation 5 of the Customs (Provisional Duty Assessment) Regulation, 2011 - HELD THAT:- The appellant has already submitted the documents necessary for finalization of the provisional assessment while submitting their reply to the show cause notice. Thus, the penalty of Rs.5,000/-(Rupees Five Thousand only) imposed by the Assistant Commissioner would be sufficient to meet the ends of justice. Also, the Commissioner(Appeals) has not given adequate reason for enhancing the penalty from Rs.5,000/- to Rs.50,000/- on each Bill of Entry. In view of discussions and the decisions cited above, the enhance penalty is not warranted in this case. Accordingly, the same is set aside. Appeal allowed.

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• 2024 (1) TMI 472
  Levy of penalty - illegal smuggling of cosmetics by mis-declaring the same as printing paper - HELD THAT:- The primary evidence is in the nature of detection of certain luxury goods concealed behind paper cartons. The entire case linking the role and knowledge of all the appellants namely Shri Tejas Narendra Mehta of Jaguar Shipping and Logistic Pvt Ltd, Shri Tony Fernandes and Shri Bharat Achare is based on the statements have been recorded of (1) Shri Rajesh MukhiaJee G- Card holder (2) Shri Tejas N. Mehta of M/s Samrat Shipping Agency, (3) Shri Babu ramji Bera the alleged importer Shri Bharat Achare of Jeguar Shipping And Logistics Pvt Ltd, Shri Karan Adhikrao Bamne, Shri Tony N. Fernandis Authorized Secretary/Director of M/s. Jaguar Shipping and Logistics Pvt Ltd. It is seen that prima facie no significant evidence has been gathered from the searches made in premises of the appellants. From the evidences, it is apparent that the SCN is largely based on the statements recorded during investigations. It is apparent that the statements cannot be relied without cross-examination of the witnesses. It will be necessary for the authorities to grant cross examination of all the witnesses before relying on their statements. The current order which has been relying very heavily on all these statements and that too without granting cross-examination cannot therefore be sustained. The order is therefore set aside and matter remanded to the original adjudicating authority to decide the issue a fresh - appeals are allowed by way of remand.

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• 2024 (1) TMI 471
  100% EOU - confirmation of demand and appropriation of the amount of duty and interest already paid and in addition, equal amount of penalty was also imposed - issuance of SCN as per proviso to sub-section (2) to Section 28 of CA - HELD THAT:- Despite the fact that appellant did not have the EPCG license and they got their 100% EOU de-bonded without payment of duty, therefore it will be well within the knowledge of the appellant that duty is payable and they avoided to pay the duty. Therefore, it is clearly a malafide on the part of the appellant. As regards the submission of the learned Counsel that their case is covered by proviso to sub-section (2) to Section 28 and show cause notice cannot be issued, it is observed that the provision for non-issuance of show cause notice is applicable only when the assessee paid the duty and interest and informed in writing to the department. Whereas, in the present case, firstly the extended period was informed on the ground that there is suppression of facts and malafide on the part of the appellant and secondly, the appellant have not declared to the department that they want to close the case on payment of duty and interest and therefore, the appellant is not entitled for relief as provided under sub-section (2) of Section 28 of the Customs Act, 1962. However, as the appellant have admittedly paid duty and interest but the option for payment of reduced penalty under sub-section (5) of Section 28 of Customs Act has not been extended either by the Adjudicating Authority or by the Commissioner (Appeals) therefore, only for limited purpose of option for reduced penalty in terms of sub-section (5) of Section 28, the matter needs to be remanded. The Adjudicating Authority may reconsider the redemption fine imposed against the confiscation of capital goods. As regards the payment of duty and interest, since the same is not contested, it is maintained. The appeal is allowed by way of remand to the Adjudicating Authority.

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• 2024 (1) TMI 470
  Valuation - import of goods - whether the royalty paid by the appellant to the foreign entity is to be included in the transaction value for the purpose of payment of duty? - HELD THAT:- The twin conditions required to be satisfied are (i) the payment of royalty should be in relation to imported goods (ii) the payment should be as a condition of sale of the imported goods. The contention of the Department is that since CGEM MRT are group companies of M/s. MFPM there is a nexus of the royalty paid to the annual net sales. It is to be seen that M/s. MFPM, France procures goods from third party suppliers and then supply to Respondent. Further royalty is paid only on the annual net sales to M/s. CGEM MRT who have no role in supply of capital goods and are companies in Switzerland. Other than the contention that these are group companies there is no evidence adduced to establish that royalty is paid as a condition of sale of capital goods / raw materials. The Rule 10(1)(c) does not say that royalty is to be added in transaction value if the supplier is a group company. It says that if the royalty is a condition for sale, the same has to be included in the transaction value. In the case of COMMISSIONER OF CUS. (PORT), CHENNAI VERSUS TOYOTA KIRLOSKAR MOTOR P. LTD. [ 2007 (5) TMI 20 - SUPREME COURT] , it was held that when technical assistance fees have direct nexus with post import activities and not with import of goods, the same is not to be included in the assessable value. The Tribunal in the case of COMMISSIONER OF CUS. (IMPORT), MUMBAI VERSUS BRIDGESTONE INDIA PVT. LTD. [ 2013 (12) TMI 1089 - CESTAT MUMBAI] held that the royalty and license fee paid on net sale value of products sold in India which has nothing to do with imported goods nor was a condition of sale cannot be included in the assessable value. In the present case, apart from contending that foreign entities are group companies, no evidence is adduced to establish that the relationship has influenced the price. The Tribunal in the case of M/S. KOSTWEIN (I) CO. PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS, (IMPORTS) [ 2019 (6) TMI 278 - CESTAT MUMBAI] while considering the issue as to whether license fee has to be included in transaction value observed as far as the relationship has not influenced the pricing pattern there is no justification for inclusion of royalty and technical know-how in the assessable value of the imported products. The impugned order does not require any interference - the appeal filed by Department is dismissed.

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• 2024 (1) TMI 469
  Absolute Confiscation - Smuggling - Baggage Rules - Prohibited goods or not - allegations are that appellants did not opt for red channel to declare the gold nor did they file any declaration as required under the Notification - it is sought that gold recovered was allowed to be redeemed on payment of redemption fine or permitted for re-export and penalties were imposed on the three of the appellants - HELD THAT:- In the instant case, it is on record that the four passengers had gone to Bangkok on 05.06.2019 and had returned on 08.06.2019. Therefore, the appellants did not satisfy the requirements of the aforesaid notification in order to be eligible to import the gold legally. It is also on record that the appellants were intercepted near the exit gate. The argument that they were prevented from making the declaration is clearly an afterthought. The gold was recovered from their person. It is also noted that the appellants, in their respective statements have accepted that there were aware of the Customs procedures for passenger clearance, and that Gold was dutiable. Consequently, the argument that there is no of concealment or attempt to smuggle cannot be accepted. The High Court of Gujarat in the case BHARGAVRAJ RAMESHKUMAR MEHTA VERSUS UNION OF INDIA AND 1 [ 2018 (3) TMI 284 - GUJARAT HIGH COURT ] held that attempt to smuggle by concealing the same, and breaching the condition for the import of such goods would make them prohibited goods in terms of Section 2(33) of the Customs Act, 1962. Further, in the case at hand, the facts are the appellants were carrying gold in their person and were intercepted near the exit gate of the Customs Baggage Hall, which clearly establishes their intention to smuggle the Gold - Failure to check the goods on the arrival at the customs station and payment of duty at the rate prescribed, would fall under the second limb of Section 112(a) of the Act, which states omission to do any act, which act or omission, would render such goods liable forconfiscation under Section 111 of the Act, and clause (b) to Section 111 of the Act covers the persons involved. As per the facts of the case, the seizure of gold from the appellants, as recorded in the panchnama and admitted in their respective statements is undisputed. It is also established that the gold was of foreign origin. It is also established that the appellants were attempting to smuggle the gold without payment of duty - It is also noted that legal import of gold is governed by certain conditions which the appellant do not fulfil. Therefore, the gold recovered from the appellants is liable for absolute confiscation. Appeal of appellant rejected.

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• 2024 (1) TMI 468
  Classification of imported goods - Crossmatch L Scan Guardian F LSE - parts of Automatic Data Processing Machines and accordingly classified items under Chapter Heading 8471 6050 or the goods are fingerprint reader under CTH 8543? - HELD THAT:- The issue has already been considered by this Tribunal taking note of the various aspects on the issue - This Bench in the case of CC vs. Kronos Systems India Pvt. Ltd. [ 2023 (10) TMI 1006 - CESTAT BANGLORE] has held Since the specific function of the imported item is to mark attendance or to take note of the persons of the employees for the purpose of attendance or payroll or leave, they cannot be classified under Chapter 84 as it excludes from this Chapter as per the Chapter Note 5(e). In a similar set of facts in the case of Enterprise Software Solutions Lab vs. CC [ 2023 (12) TMI 1112 - CESTAT BANGLORE] , the products were classified under CTH 8543. Thus, the product in question merits classification under CTH 8543 instead of CTH 8471 as claimed by the respondent - appeal filed by Revenue allowed.

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• 2024 (1) TMI 467
  Absolute Confiscation under Section 111(b) and Section 111(d) of the Customs Act, 1962 - penalty imposed under Section 112 (b)(i) and Section 112(b) of the Act - non-imposition of penalty under Section 114AA of the Act against the appellant, Suresh Bhonsle - recovery of legal possession of the gold bars - foreign origin Gold or not - Burden of proof - prohibited goods or not. Foreign Origin goods or not - HELD THAT:- The contention of the appellant that gold is not of foreign origin is not sustainable in view of his own statement dated 15.07.2016 where he specifically admitted that he used to get gold from one Mohan of Kathmandu, Nepal through one Rajesh. Gold of foreign origin was received in melted form to hide its identity and suppress that it is of foreign origin - Once there is an admission by the appellant himself nothing further is required to be proved to the contrary. The Apex Court in SURJEET SINGH CHHABRA VERSUS UNION OF INDIA [ 1996 (10) TMI 106 - SUPREME COURT] held that confession made by the appellant binds him. Reliance is placed on COMMISSIONER OF C. EX., MADRAS VERSUS SYSTEMS COMPONENTS PVT. LTD. [ 2004 (2) TMI 65 - SUPREME COURT] where it has been held that it is a basic and settled law that what has been admitted need not be proved. Onus to proof (shifting burden) - HELD THAT:- On the issue of burden of proof, the submission that gold was entrusted to Amzad Khan and Imran Mullick for delivery to Delhi under proper voucher would shift the burden on the department to prove that it was smuggled gold, the challan issued by the appellant had no sanctity as he could not show the source of procuring the gold. The appellant has not been able to discharge the burden that he has purchased the gold as per the specified sources by the RBI - as per Section 123 of the Act the department was under reasonable belief that it was smuggled gold and therefore the burden was on the appellant being the owner of it to prove that the gold seized was not smuggled gold, which remained undischarged at his end - as the appellant failed to prove that the gold seized was validly procured in compliance of the statutory provisions whereby gold has been put in restricted category by DGFT and in terms of the RBI Circular only nominated agencies and banks are entitled to import the foreign marked gold bars. Absolute Confiscation - HELD THAT:- The factum of recovery of such large quantity of 10 kgs. of gold concealed under the shirt speaks for itself and the appellant being the owner thereof was unable to provide any licit document of procuring the gold, justifies the confiscation under Section 111(b) and 111(d). Taking note of the fact that the appellant had indulged in such illegal gold transactions in the past, the absolute confiscation needs to be affirmed and therefore the gold seized cannot be provisionally released in terms of section 110A read with Section 125 of the Act - in the present case the appellant neither adduced any evidence to show that he had legally procured the gold by following requisite conditions of payment of customs duty and other charges nor did he produce any documents for having purchased the said gold within India and therefore the gold recovered were in violation of the prohibition imposed by DGFT and RBI apart from the provisions of the Customs Act hence was liable for confiscation under section 111 of the Act. Purity of the gold, in the instant case is not really relevant in view of the peculiar circumstances, i.e., the voluntary statements of all the persons recorded under section 108 of the Act which reveals the conspiracy in executing the smuggling of gold, the manner of concealment of gold in such large quantity when recovered, its transportation and the use of fake challans along with the phone call details clearly establish the role and involvement of all the persons involved . The appellant by taking such plea is indeed trying to mislead but the fact is that the goods smuggled, even if they change their form by melting, they still remain smuggled goods which are liable to confiscation under the Act. Restricted or prohibited goods - HELD THAT:- As gold is a restricted item, the same has been treated as prohibited goods in view of the interpretation placed by various decisions on the definition of prohibited goods as defined in Section 2(33) and hence the same have been held to be liable for confiscation. Once it is found that the gold recovered was not under valid documents, the same would be treated as prohibited goods liable to confiscation and consequently, penalty is inbuilt and is leviable under Section 112 of the Act - Both the appellants were consciously and intentionally dealing with illegal activity of sale purchase of gold and therefore the penalty imposed by the adjudicating authority is justified and needs no interference. Appeal of appellant dismissed. Failure to Impose penalty under Section 114AA of the Act - HELD THAT:- From the perusal of the impugned order, it is found that there is no discussion by the Adjudicating Authority on the proposal of imposing the penalty under Section 114AA. Without stating anything on this issue on merit, it is considered appropriate to remand the matter to the adjudicating authority for limited purpose to consider the said proposal in the light of the facts and circumstances and the legal provisions. The appeal filed by the Revenue is allowed by way of remand.

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• 2024 (1) TMI 466
  Demand of duty foregone - SEZ unit - destruction of waste scrap or remnant arising in the course of manufacture - destruction of obsolete goods - HELD THAT:- As regard to the judgment of Hon ble Supreme Court in the mater of COMMISSIONER OF CUSTOMS, HYDERABAD VERSUS M/S. PENNAR INDUSTRIES LTD. ANOTHER [ 2015 (8) TMI 56 - SUPREME COURT] , the importer has claimed Exemption Entitlement Certificate under DEEC Scheme and imported the goods on actual use of condition but unable to export goods produced by them using imported material. Thereafter DGFT allowed them to meet the export obligation through 3rd party with a finding that they were neither mis utilization of raw material nor violation of any other conditions of license to the cost of exchequer - Apex Court held that DGFT order was not binding on Customs authorities for taking action under Customs Act, 1962. In the present case, there is no allegation that appellant had not fulfilled the export obligation. Appeal allowed.

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• 2024 (1) TMI 465
  Classification of imported goods - Flanges - to be classified under CTH 85030090/84839000 or CTH 7307? - HELD THAT:- The claim of the importer that the flanges that were imported were for its specific use needs to be accepted since the same were claimed to be used in the manufacture of gearboxes/gear motors and secondly, that the same was not of the likes of couplings or elbows. The claim of the appellant was based on the usage of the imported goods in its industry, for specific purposes, which is required to be considered primarily, before brushing aside the same. This is apparently not done by the Revenue and the original authority Additional Commissioner chose only to go by the word flanges , thereby seriously ignoring whether the same was for specific/special use or for general use. Be that as it may, the original authority having rejected the classification under CTH 8503 and proposed to re-classify under CTH 7307, it was incumbent upon him to at least place on record that the flanges in question were in fact for general use alone and not for specific purpose as claimed by the appellant. If every flange available in the market could be used in any industry, then perhaps the classification under a single CTH would have served that purpose, but since one size does not fit all, different classifications are provided. The classification thus depends on, inter alia, functionality as well. Hence, when an item is imported for a specific purpose, if the Revenue does not believe in the classification declared by such importer, then the same could be rejected on some palpable evidence and if required, the Revenue could always insist upon further details / explanation insofar as the function / end-use claimed by such importer is concerned, in order to ascertain the chief/primary function, to arrive at the proper classification, otherwise the purpose of having two Customs Tariff Headings loses its significance, which is not the intention of legislature. There are no substance or merits in the impugned order, to sustain the re-classification attempt made by the original authority as sustained in the impugned order, for which reason the same deserves to be set aside - appeal allowed.

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• 2024 (1) TMI 464
  Levy of penalty - penalty imposed on the ground that the appellant has abetted the commission of the offence - HELD THAT:- The BMW M5 car was imported in the name of Mrs. Sadhana Aggarwal. She has already filed an application before the Settlement Commission regarding the duty involved and settled the issue vide order dated 19.07.2012, wherein she has been imposed a penalty of Rs.25,000/- by the Settlement Commission for the commission of the offence. The appellant has imported another Range Rover car in his name for which separate proceedings have been initiated and it is still pending. Along with importation of his car, he has dealt with importation of BMW M5 car in the name of his wife. The offence related to BMW M5 car has been settled by the Settlement Commission by settling the duty, interest and imposing the penalty of Rs.25,000/- and fine of Rs.1.00 Lakh in lieu confiscation of the vehicle. As Mrs.Sadhana Aggarwal has already been penalized for the offence related to importation of the BMW M5 Car, there are no reason to impose penalty against the appellant for the same offence. Accordingly, the penalty imposed on the appellant is liable to be set aside. Appeal allowed.

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• 2024 (1) TMI 463
  Levy of penalty u/s 112 (a) and 112(b) of the Customs Act, 1962 for involvement in the smuggling activities of gold of foreign origin - HELD THAT:- The department has not brought in any evidence on record to show involvement of the appellant in the alleging smuggling. The impugned order admits that the appellant has procured the gold from Mr. Santosh Patil. Even if it is imported gold, the appellant cannot be held responsible for the offence, if any, committed by Mr.Santosh Patil. The appellant cannot be penalized just because he was in possession of the gold which is taken from Mr. Santosh Patil, as there is no evidence available on record to establish that the involvement of the appellant in the alleged smuggling of the gold. The penalty imposed on the appellant under section 112(a) and 112(b) is not sustainable - Appeal allowed.

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• 2024 (1) TMI 462
  Benefit of exemption from customs duty - Notification No. 25/2005-CUS dated 01.03.2005 at Sl.No.29 for the item Patch Cord imported - Denial of benefit on the ground that the operating voltage should be more than 80 volts and the imported good operate only at 72 volts - HELD THAT:- The Commissioner (Appeals) has observed that the imported product would operate only at 72 volts and that to the eligible for the benefit of the Notification, the product has to be operational in between 80V and 1000v. It requires to be mentioned that the Notification does not mention AC or DC voltage. However, the imported product specification mentions DC voltage. The ISO specification of 11801-1 extracted above, shows that the minimum operating voltage of such product is 72 volts. This is Direct Current and when converted into alternate current (AC) it would be 101. Thus, the minimum operating voltage of the product is definitely above 80 volt AC. So also, the maximum operating voltage is 300. The product thus falls within the operating voltage mentioned at Sl.No.29 of the Notification. We therefore are convinced that the goods are eligible for the benefit of the Notification. The impugned order is set aside - The appeal is allowed.

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• Corporate Laws

• 2024 (1) TMI 461
  Professional Misconduct - Failure to maintain Audit Files and to co-operate with NFRA - sanctions and penalties - HELD THAT:- It is established that CA Anil Chauhan committed professional misconduct by not submitting the Audit Files and related documentation to NFRA and by not responding to the SCN issued by NFRA under Section 132 (4) of the Act - It is concluded that the following failures on the part of CA Anil Chauhan as contained under the Articles of Charges in the SCN stand established: i. Failure to exercise due diligence and being grossly negligent in the conduct of professional duties as defined by clause 7 of Part I of the Second Schedule of the Chartered Accountants Act 1949 because of the lapses and omissions. ii. Failure to supply the information called for, and non-compliance with the requests of NFRA, as defined in clause 2 of Part-III of First Schedule of The Chartered Accountants Act, 1949 because the EP did not co-operate with NFRA. Considering the aforementioned proved professional misconduct by the EP and considering the nature of the violations, in exercise of powers under section 132(4)(c) of the Companies Act, 2013, it is ordered that: i. Imposition of a monetary penalty of Rs Twenty Lakhs on the EP, CA Anil Chauhan, proprietor of M/s Anil Chauhan Associates. ii. Debarment of CA Anil Chauhan and the audit firm M/s Anil Chauhan Associates (FRN: 0140786W), for Ten Years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate. This order will become effective after 30 days from the date of issue of this Order.

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• Insolvency & Bankruptcy

• 2024 (1) TMI 460
  Wrongful and fraudulent invocation of guarantee by the Concessionaire - Invocation of bank guarantee by Concessionaire after termination of the agreement - HELD THAT:- The Adjudicating Authority have already granted leave to the Liquidator to proceed in arbitration against the Concessionaire where claim on basis of wrongful invocation of guarantee is also included, the Adjudicating Authority did not commit any error in directing deletion of name of Respondent No. 1 in application under Section 66 of the Code. It is observed that after a decision by the Arbitrator in the arbitration proceeding to be filed by the Liquidator in event facts and findings come in the proceeding which may oblige the Liquidator to file an application under Section 66 against the Concessionaire, the liberty is granted to the Appellant and the deletion of name by the order impugned shall not come into way in filing a fresh application under Section 66 of the Code, if any such circumstance arises. Appeal dismissed.

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• 2024 (1) TMI 459
  Rejection of application filed - rejection of the claim of the Appellant - assignment of debt - Appellant is stated to have not recovered any amount under the deed of assignment rather it transpired later that the Corporate Debtor had practiced fraud upon the Appellant by making misleading and false representation in the said deed of assignment - no appointment of arbitrator - HELD THAT:- There is no dispute to the fact that the Corporate Debtor had availed the loan from the Appellant. It is also not in dispute that the Corporate Debtor was unable to repay the loan and thus entered into a deed of assignment on 29.03.2017. It is also not in dispute that the Corporate Debtor represented to the Appellant that he had certain receivables which are without any charge or encumbrance which may be received by the Appellant for the purpose of settling the account and also agreed that in case it is found to be otherwise then it would be termed as an event of default and in the event of default the consequence would be the revival of all the financial contracts automatically. There is also no dispute to the fact that the SBI, lead consortium bank, vide letter dated 08.06.2017 informed that the Corporate Debtor had also created a charge/encumbrance on the receivables for the purpose of recovery of their dues. This fact triggered the clause of event of default and as a consequence, the financial contracts were automatically revived. The Adjudicating Authority rejected the application by its impugned order, inter alia, on the ground that rejection of the assignment agreement vide letter dated 15.06.2019 was not valid. Whereas it is also a fact that there is a categoric provision in the agreement itself that in the event of default, the existing financial agreements and all the obligation of the Corporate Debtor under the existing financial agreements shall automatically revive and become effective and the Appellant shall be entitled to exercise all the rights available to it against the Corporate Debtor under the existing finance agreements. The word automatically itself empowers the Appellant to put up the claim, declaring that the assignment agreement has been violated by the Appellant by making a false representation that their receivables were not encumbered or charged. The Corporate Debtor has no doubt made the misrepresentation in the deed of assignment which has become evident from the letter of SBI dated 08.06.2017, therefore, finding recorded by the Adjudicating Authority that the termination of the assignment was not valid is neither here nor there. Arbitration - HELD THAT:- Admittedly, the arbitrator has not been appointed, no arbitration is pending nor any effort has been made by the Respondent (Corporate Debtor) by filing an appropriate application in terms of the Act of 1996, therefore, the RP has committed an error in relying upon Section 21 of the Act, 1996. It is really heartening to mention that this is the 3rd round of litigation at the instance of the Appellant in which the Appellant is only asking for admission of its claim by the RP which has been rejected on the flimsy grounds. There is an error in the impugned order in rejecting the application filed by the Appellant, therefore, the appeal is hereby allowed and the impugned order is set aside.

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• 2024 (1) TMI 458
  Maintainability of Section 9 application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - pre-existing dispute between the parties - Whether any operational debt qua the Corporate Debtor has been proven to have become due and payable and if there has been a default in the payment thereof and whether there is any pre-existing dispute between the parties? - HELD THAT:- The Operational Creditor has admitted that the date of default had initially been inadvertently entered as 27.08.2016 in the Section 8 demand notice. In view of the last payment having been made on 28.04.2017, the fresh period of limitation would start from that date and the Operational Creditor was entitled for taking benefit of 3 years period of limitation from the date of last payment. Therefore, the Section 9 application was filed well within time. Hence the objection on the ground of limitation raised by the Corporate Debtor basis the date of default mentioned in the demand notice while choosing to ignore the date of default shown in the Section 9 application lacks merit. Keeping in mind the settled position of law as laid down in the Mobilox judgment [ 2017 (9) TMI 1270 - SUPREME COURT] , it is amply clear that there exists a pre-existing dispute with respect to the computation of claims by the Operational Creditor qua the Corporate Debtor in the backdrop of an arrangement which had come into existence following a meeting held on 28.08.2012. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. Where Operational Creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which is not so borne out given the facts of the present case. It is well settled that in Section 9 proceeding, the Adjudicating Authority is not to enter into final adjudication with regard to existence of dispute between the parties regarding the operational debt. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court - On application of the case of Mobilox by the Hon ble Supreme Court to the facts of the present case, it is clear that defence raised by the Corporate Debtor in their reply to the Section 8 demand notice and detailed reply filed in Section 9 application is not illusory or moonshine and that the nature of dispute raised was such that it required adjudication by competent court. Thus, the Adjudicating Authority did not commit any error in rejecting the Section 9 Application filed by the Appellant on the ground of pre-existing dispute. Appeal dismissed.

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• Service Tax

• 2024 (1) TMI 457
  Liability to pay service tax on sub-contractor - Cargo Handling Service - appellant had not charged any service tax for the service of Cargo Handling provided by them to their client and hence not paid the same - main contractor has paid the service tax on the entire services - invocation of Extended Period of Limitation - HELD THAT:- The issues were considered by this Tribunal in the case of Megh Raj Bansal Vs. CCE, [ 2023 (7) TMI 362 - CESTAT CHANDIGARH ]. This Tribunal in the aforesaid case has considered in detail the various provisions of the services tax and the circular issued by the department and has held by relying upon the judgment of the Larger Bench in the case of GST vs. Melange Developers (Pvt.) Ltd [ 2019 (6) TMI 518 - CESTAT NEW DELHI-LB ] that the sub contractor is liable to pay service tax even when the main contractor has paid the service tax on the total consideration. Secondly, the Tribunal has also held in the cases, after considering the various judgment of the Tribunal and also Larger Bench decision that extended period cannot be invoked to demand service tax. In the present case the show cause notice was issued on 07.02.2007 for the period 2002-03 to 2004-05 and the entire demand is barred by limitation. The appeal of the appellant is allowed on the ground of limitation only with consequential relief, if any as per law.

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• 2024 (1) TMI 456
  Valuation of services - Joint venture - inclusion of cost petroleum and profit petroleum as per the Production sharing contract - inclusion of cash calls in the assessable value or not - consideration for rendering survey and exploration service and mining services to government or not - Time limitation - suppression of facts or not - HELD THAT:- The very same issue was considered by the Tribunal in the case of B.G. EXPLORATION PRODUCTION INDIA LTD. VERSUS COMMISSIONER OF CGST CEX., NAVI MUMBAI [ 2021 (10) TMI 306 - CESTAT MUMBAI] . The Tribunal thoroughly examined the nature of the Product Sharing Contract and whether the distribution of profit, petroleum and cost petroleum, as well as cash calls are consideration for service provided by assesse to Government. The Tribunal held that the manner in which the contract provides for distribution of profit petroleum and cost petroleum is a business model for ensconcing within itself the alienation of risk by the Government of India, which necessarily mandates a working arrangement for the disaggregation of cost petroleum as compensation for the mutually exclusive risks undertaken by the contractor. The Tribunal held that there is no service provider and service recipient relationship in the joint venture and the amounts in the nature of profit petroleum/cost petroleum/ cash calls are not consideration for services. The issues that arise in the present case as to whether cost petroleum/profit petroleum are to be treated as consideration for rendering mining services by assesse to government was examined in the case of B.G. EXPLORATION PRODUCTION INDIA LTD. VERSUS COMMISSIONER OF CGST CX., NAVI MUMBAI [ 2022 (1) TMI 207 - CESTAT MUMBAI] . Besides the earlier decisions, the Tribunal also referred to the Board Circular dt.12.02.2018 to hold that the demand of service tax is not sustainable. Thus, the issue on merits has to be answered in favour of assessee and against the department. The appellant succeeds on merits. Time Limitation - suppression of facts or not - HELD THAT:- The assessee was under bonafide belief that being a joint venture in which even the government is a participant, there is no element of rendition of service or payment of consideration falling within the scope of Finance Act, 1994. Further, the department has not been able to establish any positive act of suppression of facts on the part of assessee with intent to evade payment of service tax. For these reasons, the assessee succeeds on the issue of limitation also. The impugned order is set aside - The assessee appeal is allowed.

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• 2024 (1) TMI 455
  Refund of Service Tax paid - rejection on the ground that conditions of N/N. 09/2009 as amended by N/N.17/2011-ST dated 01.03.2011 were not complied - whether against the mandate of having invoice in original as per the notification a photocopy backed by C.A certificate can be accepted? - whether retrospective effect can be given to specified operation having been approved by Board Of Approval/Unit Approval Committee which were not available at the time even when the refund was applied? Non production of invoice and alternate course available to the appellant - HELD THAT:- This Court finds support from the decision of Commissioner of Central Excise and Customs Vadodara-II vs. Steel co Gujarat Ltd. reported in 2010 (255) ELT 518 (Guj.) wherein, the Hon ble High Court of Gujarat approved the course of action, whereby in the absence of original invoice, photocopy duly verified by the Range Superintendent was directed to be accepted. This Court decides accordingly and directs that the photocopy of invoice can be taken as evidence of underlying transaction, if the same is got verified by the department/appellant party in the matter. On this issue, the matter is accordingly remitted. Retrospective application of approval of certain operations when granted by the executive authorities under SEZ Act - Administrative discretion of authorities - HELD THAT:- This Court finds that any given approval of specified or applied operations to a Developer or unit is prerogative of the executive authority under SEZ only. This Court, therefore, in the absence of any such decision of the executive authority of the SEZ Act having been brought on record, is not inclined to exercise discretion not particularly vested in this Court. Matter is therefore remitted back to the original authority, on this issue too with direction to seek clarification on this aspect from the office of Development Commissioner, take it on record and then decide the matter. Appellant shall also be free to take such clarification from the office to Development Commissioner, if so desired by them. Appeal disposed off by way of remand.

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• 2024 (1) TMI 454
  Levy of service tax - reverse charge mechanism - received services from Goods Transport Operators - HELD THAT:- The bearing of tax liability would be on the Appellant himself, that would have resulted in a revenue neutral situation apart from the fact that low turnover in the entire period of 5 years is a sufficient indication that abatement could have been taken as an alternate plea for seeking exemption from tax liability, had the activities of the Appellant been covered under taxable service which going by the judgment of this Tribunal passed in the case of M/S. NANDGANJ SIHORI SUGAR CO. VERSUS CCE. LUCKNOW [ 2014 (5) TMI 138 - CESTAT NEW DELHI] is held to be not taxable. Appeal allowed.

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• 2024 (1) TMI 453
  Invocation of Extended period of Limitation - Export of services - non-receipt of convertible foreign exchange - non-payment of service tax - Maintenance and Repair Services - Installation and Commissioning services - appellants were not discharging Service Tax for the services rendered to their Nepal clients - interest - penalties - HELD THAT:- The service in question was being provided by the service provider located in India, to Indian clients wherein part of the service was rendered to these clients in foreign locations. The service in question was that of tour operator in relation to a tour . Section 65B (52) and 66B considered by the High Court came into effect from 1.7.2012. It is also observed that the Petitioners, as a matter of fact canvassed the lenient clauses of Export of Services Rules 2005, by which they were better off under those Rules rather than the modified provisions of Rule 6A of Service Tax Rules. This point also has been considered, while the High Court rendered the judgement. Therefore, in the present case where the period is question in April 2004 to March 2009 and Rule 6A has no application, the decision of this case law is not relevant to the facts of the present case. In the present case, the service provided by the appellant falling under Section 65 (105) (zzg), is specifically mentioned at Export of Services Rules, 2005, Rule 3 (1) (ii). Under this Rule, even if the service is partly provided abroad, the same is to be treated as export of service. In the present case, admittedly, the repairs and maintenance service has been carried out for their Nepal based clients at Nepal only. Therefore, this condition is getting fulfilled. The condition of receiving the proceeds in convertible foreign exchange is a mandatory condition and not a procedural one. During the period under discussion, the Tribunals and High Courts were consistently holding that while mandatory condition is required to be fulfilled without any deviation, the procedural lapses, if any, can be condoned - in the present case, the appellant has not fulfilled the Condition of receiving the proceeds in Convertible Foreign Exchange , as has rightly been held by the Adjudicating Authority with proper reasoning at Page 6 of the Order in Original and as upheld by the Commissioner (Appeals). Therefore, the Appeal fails on merits. Accordingly, we uphold the impugned Order on merits. If the Service Tax is not separately collected, the benefit under Section 67(2) should be granted? - HELD THAT:- The appellant has carried a firm belief that Service Tax is not payable in terms of Section 64(1) and did not pay the same. They also treated the transactions as exports in their ST 3 Return showing the full Invoice value as turnover and did not pay the Service Tax, on a clear belief that no Service Tax is payable. The Invoice has been raised for the full consideration. Therefore, in view of these factual details, it cannot be held that the appellant had any intention to treat the consideration received as cum-tax amount. They have realized the amount purely for the services rendered only. Hence, the provisions of Section 67(2) cannot be applied in this case. Therefore, this benefit for quantification of demand cannot be extended. Time Limitation - HELD THAT:- From the Invoices, it is seen that they have not charged any Service Tax on the Nepal service recipients. The appellants have, in fact fulfilled the first condition of Export of Services Rules, 2005 by rendering the same fully at Nepal. Therefore, they can be said to have entertained bonafide belief that no Service Tax is payable. All the documentary evidence shows that they have declared all the transactions in their books of accounts, ST 3 Returns and Income Tax Returns. Hence, far from the allegation of suppression with an intent to evade, the appellants have come clean with their proper filing of ST 3 Returns and other statutory Returns - the confirmed demand for the extended period is legally not sustainable - the confirmed demand for the extended period set aside. Interest - HELD THAT:- Since it is held that the confirmed demand for the extended period is not legal and payable, the appellants are required to discharge the Service Tax which is payable, if any, for the normal period, along with interest in terms of Section 75. Penalties - HELD THAT:- As the issue is that of bonafide belief and interpretational difficulties, all the penalties, including in respect of the balance amount to be quantified for the normal period is set aside. Appeal allowed in part.

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• 2024 (1) TMI 452
  Classification of services - supply of tangible goods for use services or not - hiring of the equipment by the appellants to the client - HELD THAT:- The services can be classified under supply of tangible goods for use service only when right to possession and effective control of the equipment is not transferred to the service recipient. In the present case as per arrangement between the appellant and the service recipient, since after giving the equipment on hire to the service recipient, the right to possession and effective control is with the service recipient who possessed the equipment and operated the same with their own employee. It is also undisputed fact that the appellants have discharged the VAT considering the same as deemed sale under Article 366 (29A) of Constitution of India. Therefore, the hiring of equipment under this fact cannot be classified as supply of tangible goods for use service in terms of Section 65 (105) (zzzj) of Finance Act, 1994. The Hon ble Supreme Court in UFO Moviez India Limited [ 2017 (9) TMI 507 - CESTAT MUMBAI] has given the observation that where the VAT is paid no service tax can be demanded. The impugned orders are set aside - Appeals are allowed.

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• 2024 (1) TMI 451
  Invocation of Extended period of limitation - suppression of facts or not - supply of the tangible goods services - it is alleged that appellant had knowingly evaded payment of the service tax on rental income/ lease income of earth station and related equipment - CENVAT credit of input services for providing their output service namely the Business Auxiliary Services - input services or not - HELD THAT:- In terms of the definition as per Section 65 (105) (zzzzj) of the Finance Act, 1994, the taxable service is in respect of supply of goods for use by one person to another person without transferring the ownership, control and possession of the goods to the other person. Before proceeding further in the matter what is necessary is to take the note of the appellant and the parties involved in the transactions undertaken by the appellant. It is the submission of the appellant M/s SICC has a unit Sahara India TV Network (SITV) , engaged in broadcasting Sahara channel on TV. SICC earns income by way of sale of time slots for advertisement on this channel. Appellant has been outsourced all the activities by SICC relating to distribution i.e., for broadcasting its channel through network of cable operators. The instant agreement fulfils the condition of taxable service by way of supply of tangible goods including machinery, equipment and appliances for use (earth station and related equipment in the instant case), without transferring right of possession and effective control of such machinery, equipment and appliances. The registration certificate of the utility van, which was a part of the equipment leased out, was registered in the name of appellant on 29.12.2008 and remains under their control, as shown in the fitness certificate issued by the Transport Department of Uttar Pradesh on 26.06.2014 - there are no merits in the submissions of the appellant that they entered into agreement with the lessee, whereby the effective ownership control and possession was also transferred to the lessee. From the terms of agreement and stipulations, the assets were made available to the lessee for use without transferring the effective control and possession over the said assets to the lessee and hence the service tax under the category of Supply of Tangible Goods Services has been rightly demanded from them. Appellant has during the entire period of dispute not paid applicable service tax on such activity i.e. lease rent, carried out by them was not deposited to the government exchequer, with the intent to evade payment of the service tax. They have also not incorporated the details of the incomes earned on this account in their ST-3 returns thus suppressed the facts from the department. These fact come to the knowledge of the department only at the time of visit/search of the of the premises of the appellant and after making investigations in this respect. Thus appellant have had deliberately suppressed the facts from the department with the intent to escape the service tax payments. Thus, the proviso to Section 73 (1) of the said Act for invoking the extended period of time was found to be applicable in the instant issue along with the penalty under Section 78 of the said Act for suppressing the facts. CENVAT Credit - input services or not - HELD THAT:- Appellant was fully aware of taxability of such transactions and have thorough out taken the CENVAT Credit in respect of these inputs services. The act of taking the credit respect of these input without payment of service tax on the output services clearly show the intention of the party to evade payment of service tax in respect of the lease amount recovered by them from SICC by suppressing the facts of lease from the department - these output services are taxable under the category of Supply of Tangible Goods Services it is held that CENVAT Credit in respect of these four input services namely, Space Segment Charges, Training Service Installation, Freight Cartage, Vehicle Maintenance, Insurance Charges and Internal Audit fee will be admissible to the appellant. However are not in position to admit the claim of the appellant towards Chartered Flight hiring as admissible credit. Nothing has been stated by the appellant as to how this service was used for providing the output services provided by them - the impugned order upheld to the extent of denying the credit to the tune of Rs 16,80,000/- in respect of these services. Invocation of extended period of limitation - HELD THAT:- The same is invokable in the present case as the appellant was suppressing the facts with intent to evade payment of service tax. Interest - HELD THAT:- Issue in respect of interest has been settled by the Bombay High Court in case of COMMISSIONER OF CENTRAL EXCISE CUSTOMS,, AURANGABAD. VERSUS M/S PADMASHRI VV PATIL SAHAKARI SAKHAR KARKHANA LTD. [ 2007 (7) TMI 6 - BOMBAY HIGH COURT ] wherein it has been held that we are unable to agree with the proposition that interest u/s. 11AB is also not chargeable in case the short duty or unpaid duty is deposited with the Government before issuance of show cause notice. Penalties - HELD THAT:- As it is held that appellant to be guilty of suppression with intent to evade payment of tax, penalty under Section 78 needs to be imposed mandatorily - While upholding the penalties imposed under Section 78, the amounts confirmed earlier upheld - there are no merits in the submissions made by the appellant in respect of the penalties imposed upon them under Section 77 (1)(a) (2) of Finance Act, 1994. Appeal allowed in part.

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• 2024 (1) TMI 443
  Levy of Service tax or Value added tax (VAT) - Transfer of the right to use any goods - hiring the motor vehicles/cranes - sale within the meaning of clause (iv) of subsection (43) of Section 2 of the VAT Act or not - whether the transactions will amount to service, thereby attracting liability to pay service tax? - HELD THAT:- Sub-clause (d) of Clause 29A of Article 366 essentially defines tax on the sale or purchase of goods . Sub-clause (d) provides that tax on the sale or purchase of goods includes a tax on the transfer of the right to use any goods for any purpose. The condition for applicability of the sale of goods under the Sale of Goods Act is that apart from the transfer of possession of the goods, there must be a transfer of the property in goods to the buyer. However, sub-clause (d) of Clause 29A refers not to the transfer of property in the goods to the buyer but to the transfer of the right to use any goods for any purpose for consideration as mentioned in sub-clause (d) of Clause 29A. The transfer of the right to use any goods can be for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. Only because a person is allowed to use certain goods of the owner, per se, there is no transfer of the right to use any goods. The transaction can be either of transfer of right to use the goods or granting mere permission to use the goods without transfer of the right to use the goods. This Court has interpreted sub-clause (d) of Clause 29A in various decisions. The first important decision on this aspect is a decision of the Constitution Bench in the case of 20th Century Finance Corporation Ltd. [ 2000 (5) TMI 980 - SUPREME COURT] . This was a case where the appellant had entered into a master-lease agreement with the lessee. The lessee was a party that desired to take equipment for use on hire. Under the agreement, the appellant agreed to give diverse machinery/equipment listed in the schedule to the master-lease agreement. The master-lease agreement provided that the appellants would place the orders for individual equipment on the request made by the lessee, and the equipment to be leased would be dispatched by the manufacturer or supplier concerned to the location specified in the lease agreement. In paragraph 27 of the aforesaid decision, the Constitution Bench held that the levy of tax in accordance with Clause 29A(d) is not on the use of goods but on the transfer of the right to use goods. In other words, it was held that the right to use goods accrues only because of the transfer of the right to use goods. It was held that the transfer is sine qua non for the right to use any goods. It was held that if the goods are available, the transfer of the right to use goods occurs when the contract for the goods is executed. In other words, if the goods are available, irrespective of whether the goods are delivered and the written agreement is entered into between the parties, a taxable event on such a deemed sale would be executing a contract to transfer the right to use goods - the Constitution Bench held that it cannot be said that there would be no complete transfer of the right to use goods unless the goods are delivered. When the goods are in existence, the taxable event for the transfer of the right to use goods occurs when a contract is executed between the lessor and the lessee, and the situs of sale of such a deemed sale would be where the agreement in respect thereof is executed. On a conjoint reading of the terms of the contract, it is apparent that the contractor has an option of replacing the cranes in case one of the cranes was not working properly. Only the contractor is liable to take care of the legal consequences of using the cranes. The contractor must maintain the cranes, and it is for the contractor to pay for consumables like fuel, oil, etc. Even the cranes must be moved and operated by the crew members appointed by the contractor. Moreover, in case of any mishap or accident in connection with the cranes or connection with the use of the cranes or as a consequence thereof, the entire liability will be of the contractor and not of the ONGC. Thus, in short, the contract is for providing the service of cranes to ONGC - as regards the contract to provide cranes, the finding of the High Court that there was a transfer of the right to use cranes was not correct as the transactions do not satisfy all the five tests. Essentially, the transfer of the right to use will involve not only possession, which may be granted at some stage (after execution of the contract), but also the control of the goods by the user. When the substantial control remains with the contractor and is not handed over to the user, there is no transfer of the right to use the vehicles, cranes, tankers, etc. Whenever there is no such control on the goods vested in the person to whom the supply is made, the transaction will be of rendering service within the meaning of Section 65(105) (zzzzj) of the Finance Act after the said provision came into force. Thus, to conclude, the contracts are not covered by the relevant provisions of the Sales Tax Act and of the VAT Act, as the contracts do not provide for the transfer of the right to use the goods made available to the person who is allowed to use the same. Appeals of the assessee allowed. Central government may initiate service tax recovery proceedings in accordance with law.

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• Central Excise

• 2024 (1) TMI 450
  Levy of Penalty u/r 26 of CER on the buyer / purchaser of goods - appellant were the other party who had received the non-duty paid goods from the said M/s. St. Roch Enterprises, who crossed the SSI limit - HELD THAT:- The appellant had outsourced the manufacture of AVS, for which the said manufacturer was to affix the brand name of V-Service , it is also a fact borne on the record that the said manufacturer was marketing the stabilizers manufactured by it under its own name Info Power . That there is a possibility of the said manufacturer catering to the needs of other similar purchasers holding different brand names cannot be ruled out. The Revenue has not brought on record as to the role of the appellant in the non-payment of Excise Duty by the said manufacturer; the appellant has pleaded that it was only procuring the said AVS and the only relationship that existed was that of manufacturer and purchaser and nothing more than that, which is not disputed by the Revenue. Even the fact that the said manufacturer was enjoying the exemption being the SSI unit, has also been claimed by the appellant as being unaware of, which is also not denied by the Revenue. The granting of exemption for SSI unit is based on certain criteria of the particular claimant/unit and it does not depend on the business understanding, if any, of the said unit with any other person. Having obtained the SSI exemption, it was for the said unit to comply with the requirements of the applicable statutes including the Central Excise provisions insofar as the liability to duty of the product/s manufactured by it are concerned, and it is not the case of the Revenue that the said manufacturer is catering to the needs of the present appellant alone. The penalty levied under Rule 26 ibid. cannot sustain - Appeal allowed.

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• 2024 (1) TMI 449
  Clandestine removal of manufactured products between the period 01.04.2012 and 31.08.2012 - Demand based on documents allegedly recovered from third party like M/s. Vikram Steel - uncorroborated testimony of some witnesses - denial of cross-examination - violation of principles of natural justice - HELD THAT:- First, on the point of the observation that admission needs no further prove, as has been held by the Hon'ble Supreme Court in System Components case [ 2004 (2) TMI 65 - SUPREME COURT] that is being relied upon by this Tribunal in the case of Gulabchand Silk Mills [ 2005 (3) TMI 192 - CESTAT, BANGALORE] , there is a clear finding that recovery of unaccounted goods was made and as because clandestine clearance is very difficult to establish in linking each chain of the circumstances admission of the person involved, in view of provision contained in Section 56 of the Indian Evidence Act, is to be taken as best piece of evidence to establish guilt of the delinquent but in the instant case, no recovery of any goods had taken place to apply the judgment to the facts of this case. Second, what is required to be discussed here is that Appellant was denied with the opportunity of cross examination of the witnesses basing on whose statements, demand was confirmed and in this connection, it would be of great importance to reproduce para 6 of the judgment of the Hon'ble Supreme Court passed in the case of Andaman Timber Industries Vs. Commissioner of Central Excise, Kolkata-II [ 2015 (10) TMI 442 - SUPREME COURT] that explains the basic requirement of cross examination and states the order to be a nullity if principle of natural justice is violated in denying cross examination. The third important point that needs consideration and analysis is the retracted statement of the Director. The contention of the Appellant is that under coercion and duress statement of the Director was recorded. This may be true in most of the cases in which investigation is carried out by agencies who have authority also to prosecute the offenders, for which the statement recorded before those authority could not be taken as a statement given voluntarily or on free will despite the fact that Section 25 of the Indian Evidence Act would not applied to the statement recorded by Revenue Officials, as they are treated at par with Police. Retraction made subsequent to such statement could be bona fide or could be made after thought but again communicating the said retraction to the investigating authority is fraught with danger and is beyond the competency and courage of an ordinary human being to venture into - Apart from confessional statement, nothing noticeable is found in the order of the Commissioner (Appeals) that would substantiate the allegation and discard the order passed by the Adjudicating Authority. The appeal is allowed and the order passed by the Commissioner of GST Central Excise (Appeals) Nashik is hereby set aside.

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• 2024 (1) TMI 448
  Clandestine removal - Steel Ingots were found short against the recorded stock - several of the relied upon documents were not provided to the Appellant - violation of principles of natural justice - time limitation - HELD THAT:- It is observed from the list of documents relied upon at Page 4 of SCN that the tendered documents and joint stock verification Report, etc. are very crucial to show as to how the total quantity of shortages and alleged clearances were arrived at by the Department. Even after 20 years of issue of Show Cause Notice, these documents which should have actually formed part of the Show Cause Notice in the first place, are not available. This shows that no proper care was taken to compile all the documents while issuing the Show Cause Notice. Even after specific directions of the Tribunal, these documents were neither made available to the Appellant nor are they available before us today, to come to a conclusion as to how the shortages and alleged production and removal of clandestine manufactured goods took place. When the alleged value of the clandestinely removed finished goods is more than Rs. 50 crores, it is surprising that no effort whatsoever has been made by the Department to gather any corroborative evidence on relevant issues. The allegation of clandestine manufacturing/clearance is a serious allegation and the Department cannot merely rely on the recorded Statements alone and the quantification cannot be done based on the assumptions and presumptions without proper corroborative evidence in the form of evidence towards purchases, sales, movement of goods, electricity consumption, recorded statements of alleged purchasers and sellers etc. - In the present case, the Department has not made any efforts whatsoever on these counts. Even the recorded statement of Mr. A. K. Ladia has been retracted by him. Thus it loses its evidentiary value as held by Hon ble Chhattisgarh High Court in the case of M/S HI TECH ABRASIVES LIMITED VERSUS THE COMMISSIONER, CENTRAL EXCISE AND CUSTOMS RAIPUR [ 2018 (11) TMI 1514 - CHHATTISGARH HIGH COURT] . There are also force in the arguments of the Appellant that though the officials visited the unit of 1st September 2001 and necessary Statements were recorded by September 2002, the Show Cause Notice was issued only on 27/07/2004. This shows that the Department has not issued the Show Cause Notice inspite of having all the documents with them. Time Limitation - HELD THAT:- The Tribunals and High Courts have been consistently holding that the Show Cause Notice is to be issued within 6/12 months from the date of visit of officials since that is taken as the date of availability of knowledge to the Department. Therefore, the Show Cause Notice issued on 27/07/2004 is also barred by time. The Appeal allowed both on merits as well as on account of limitation.

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• 2024 (1) TMI 447
  Denial of MODVAT Credit availed on capital goods - levy of penalty - denial of credit on the ground that they do not conform by their description either as specified machines or parts and accessories of such machines - HELD THAT:- The Appellant has produced details of capital goods of which these goods are claimed as parts and accessories. Accordingly, most of the items specified therein are eligible for credit as 'capital goods' as defined under Rule 57Q of the Central Excise Rules. 1944. Regarding the remaining goods , the appellant contended that even if the goods are not covered under the definition of 'capital goods' they are eligible for credit under input category as per Rule 57A of the Central Excise Rules, 1944. However, it is observed that the adjudicating authority has rejected their contention on the ground that these two categories are not interchangeable. There is no doubt that these goods on which MODVAT credit has been availed were received in the factory premises of the Appellant. Also, there is no dispute that these goods were duty paid and used in relation to manufacture of final product. As these goods were received in the factory premises and they have been used in manufacture of dutiable final products, we hold that they qualify as 'inputs' used in the manufacture of dutiable goods and hence qualify as 'inputs' as defined under Rule 57A of the Central Excise Rules, 1944. Accordingly, the appellant is eligible for the credit of Rs.50,98,653/- either as 'capital goods' as defined under Rule 57Q or as 'inputs' as defined under Rule 57A of the Cenvat Credit Rules. 1944. Denial of credit on the ground that the invoices based on which the credit has been availed do not contain description of goods/part no. of goods - HELD THAT:- There is no dispute regarding the receipt of these goods in the factory of the Appellant, and its use in the manufacturing process. Apart from non-mentioning of description or part nos. of goods there is no allegation that other mandatory particulars have been incorrectly mentioned or not mentioned at all. It is a settled position of law that substantive right should not be denied merely due to procedural infirmities. Accordingly, denial of MODVAT credit merely due to deficiency in invoice is not sustainable - this tribunal in Appellant s own case TATA MOTORS LTD. VERSUS COMMISSIONER OF C. EX., JAMSHEDPUR [ 2009 (10) TMI 316 - CESTAT, KOLKATA] dealt with a similar nature of dispute and allowed credit even if there was some deficiency in the invoice. By following the decision cited above, it is held that the MODVAT credit availed by the Appellant cannot be denied. Since, the credit availed is held to be eligible, no penalty imposable. Accordingly, the penalty imposed on the appellant is set aside. Appeal allowed.

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• 2024 (1) TMI 446
  Reversal of proportionate CENVAT Credit - electricity so generated in the power plant is partly used by the appellant within the factory and the excess portion is wheeled out to various other entities - case of Revenue is that the reversals done by the appellant was not in accordance with law and the amount reversed was much less than what had to be reversed as per Rule 6(3A) of CCR, 2004 - period 2014-2015 and 2015-2016 - HELD THAT:- As seen from Rule 6(1), its clear that cenvat credit cannot be allowed on inputs and input services that are exclusively used for exempted goods or services. Therefore, Rule (3A) needs to be enforced in order to determine the extent of cenvat credit reversal when common inputs or services are used in both dutiable and exempted goods/services. The fact that the reversal was done as per the above Rule and promptly intimated the department is not in dispute; the only dispute with regard to above Clause (c)(iii) of Rule 6(3A) where the credit attributable to the exempted goods needs to be calculated as per the formula M/N*P where P denotes the total credit taken on input services during the financial year. The Commissioner in the impugned order rejects the appellant s contention that the total credit here refers to only the common services which are attributable to dutiable and exempted goods. This issue now stands settled in view of the amendments made to the CCR 2004 vide Notification No. 13/2016-C.E. (NT) dated 01.03.2016 wherein it has been clarified that the formula refers to the common inputs/input services for ascertaining the credit to be reversed on exempted products. The Tribunal in the case of M/S E-CONNECT SOLUTIONS (P) LTD. VERSUS CENTRAL EXCISE AND CENTRAL GOODS SERVICE TAX, UDAIPUR [ 2020 (11) TMI 282 - CESTAT NEW DELHI] observed that It would be clear from a conjoint reading of sub-rules 6(1), (2) and (3) of Rule 6 that the total Cenvat credit for the purpose of formula under Rule 6(3A) is only total Cenvat credit of common input service and cannot include Cenvat credit on input service exclusively used for the manufacture of dutiable goods. The impugned order is set aside - the appeal is allowed.

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• 2024 (1) TMI 445
  CENVAT credit - clearance of exempted goods without following the procedures laid down under Rule 6 of CENVAT Credit Rules, 2004 - duty paid by the appellant by debiting SFIS (Served from India Scheme) scrips for clearance of tipper trucks during the relevant period - recovery of 6% of the value of the exempted goods with interest and penalty - HELD THAT:- The Appellate Tribunal in its impugned order had held that appellant had cleared the dutiable finished goods by debiting the same under SFIS (Served from India Scheme). There is no dispute as regards the correctness of said certificates and debits made therein. Such clearances made by appellants under Notification No. 34/2006-C.E. would not be considered as exempted clearances and the appellant is not required to pay amount equal to 10% of the value of goods cleared by availing benefit of said notification. In the clearance of 131 Nos. of tipper trucks, the scrips utilised for debiting the duty in availing exemption Notification No.34/2006-CE dated 14.06.2006 as amended vide Notification No.15/2013-CE dated 18.04.2013, would not be considered as exempted goods; hence, Rule 6 of CENVAT Credit Rules, 2004 cannot be attracted. The impugned order is set aside - Appeal allowed.

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• 2024 (1) TMI 444
  Eligibility for Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Seeking waiver of penalty - demand for recovery alongwith interest and penalty - HELD THAT:- A person imposed with penalty would be eligible to be declarant subject to there being no demand of tax pending in the impugned proceedings. To the extent that the impugned order upheld recovery of duties under section 11A of Central Excise Act, 1944 none of the individual appellant herein would have been eligible to be declarant; the scheme itself does not acknowledge the existence of such appellant even though the scheme is intended to erase the detriment of penalty in each and every case. It is on record that the principal-noticee has been accorded the prescribed relief including erasure of penalties arising therefrom. Even though the appellants herein could not, at the time of existence of the scheme have derived the benefits from the coverage by the scheme, the intent and purpose of the scheme being collection of the duty or some percentage thereof, and forgoing interest, fine and penalty, the disposal of the application of M/s JSW Ispat Steel Ltd renders the continuance of the penalty against the three appellants to be not in conformity with the relief scheme - they are eligible for erasure of the penalties against them. The impugned order set aside - appeal allowed.

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• CST, VAT & Sales Tax

• 2024 (1) TMI 442
  Jurisdiction of the Authorities to re-open the Assessment of Value Added Tax - HELD THAT:- This Court having gone through the judgement dated 06.11.2023 rendered by Hon'ble Supreme Court [ 2023 (11) TMI 298 - SUPREME COURT] , a copy of which has been provided, is of the opinion that it is not contended by the State Respondents that the jurisdiction to re-open was exercised for some other reason except for the judgement rendered by this Court in Commissioner of Commercial Tax, U.P. Lucknow Vs. Modi Natural Ltd., Bisalpur Road, Bareilly [ 2019 (5) TMI 1087 - ALLAHABAD HIGH COURT] , which has already been set aside by Hon'ble Apex Court, therefore, this Court finds it appropriate to quash the impugned notices issued under Section 29(7) of the U.P. Value Added Tax, 2008 for the Assessment Years 2011-2012 to Assessment Years 2016-2017, in so far as petitioners are concerned. The approval that was granted by the Additional Commissioner for re-opening the Assessment under Section 29(7) of the Act also stands quashed. The writ petitions stand allowed.

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• 2024 (1) TMI 441
  Levy of purchase tax and its applicability on dealer who opted for composition scheme - Constitutional Validity of Section 15(5)(e) of the KVAT Act - seeking declaration that Section 4(3)(d) of the Finance Act, 2007 as prospective in nature. Whether Section 15(5)(e) of KVAT Act, inserted by the Finance Act, 2007 is ultra vires Constitution? - HELD THAT:- The object sought to be achieved by the Amendment is to encourage purchase from registered dealers. This object will fail and instead encourage purchase from dealers outside the State since goods purchased within the State are only taxable and therefore, the object sought to be achieved will not be fulfilled. It is recorded that State has all the machinery such as, Tax Inspectors, Flying Squads etc. to identify the URDs and to register them as dealers - in view of the admitted discrimination by the State, the Amendment shall not be sustainable - the Amendment is discriminatory in nature and also not in favour of the welfare of the economy of the State as it encourages purchases from outside the State - question answered in the affirmative. If the answer to the above question is in the negative, will it have retrospective effect i.e., from April 1, 2006? - HELD THAT:- Since, first question is answered in the affirmative, this question does not require any consideration. Whether the order passed by the Hon ble Single Judge requires any interference? - HELD THAT:- This question also answered in the affirmative. Section 15(5)(e) of the KVAT Act is declared ultra vires Constitution of India - Petition allowed.

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• 2024 (1) TMI 440
  Filing of form Manually instead of Electronically - Applicability of Sections 31(4) and 74(4) of the Karnataka Value Added Tax Act, 2003 - Form VAT-240 filed by the petitioner for the years 2012-13 and 2013-14 - seeking direction to respondent No.2 not to insist for electronic computer statement as per Circular bearing No. 43/2011-12, dated 31.12.2011 marked at Annexures B and C. Whether the respondents can maintain the stand that Form 240 have been filed in 2015 as alleged by them? - HELD THAT:- This petition is filed in the year 2016. Till today, statements of objections have not been filed by the respondents. As already noticed, statement of objections are not filed disputing the authenticity of these documents. Respondents have not produced Form 240 said to have been filed in the year 2015 as alleged by the respondents. Hence, this Court is of the view that Form 240 vide Annexures D and E have been filed manually by the petitioner as on the date mentioned in the said forms. Whether the Form 240 has to be filed electronically? - HELD THAT:- Under Section 33 of KVAT Act of 2003, there is a mandate to maintain the records in electronic form. The mandate is in respect of accounts as referred in Section 31 of the KVAT Act of 2003. The accounts referred in Section 31 refers to the accounts maintained by the dealer pertaining to his business transaction. Section 31 does not refer to Form 240. This being the position, Sections 31 and 33 cannot be interpreted to say that Form 240 is to be furnished electronically. It is relevant to note that Annexure A is the notice under Section 31(4) read with Section 74(4) of the KVAT Act, 2003. Notice indicates that the petitioner has filed Form 240 manually. By referring to the Circular Nos. 43 and 44/2011-12 dated 31.12.2011, the respondents have demanded penalty in exercise of power under Section 74(4) of the KVAT Act, 2003 on the premise that VAT form 240 is not filed in the electronic form. In the said notice the respondent admits that the petitioner has filed Form No. 240. Thus the contention that the Form No. 240 is not filed at all is rejected. There is nothing in the Act to hold that Section 74(4) of the KVAT Act, 2003 mandates the dealer to furnish Form 240 electronically. On the basis of the circular which is alleged to have been issued mandating From 240 to be filed electronically, the respondent cannot contend that form 240 filed manually, which was in time, is not a valid submission of Form 240. As already noticed, the circular does override the requirements of Section 74(4) and the power under Section 59 to issue instructions to the authorities cannot be construed as a power to impose conditions and restrictions on the dealer. Petition allowed.

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• Wealth tax

• 2024 (1) TMI 439
  Revision petition u/s 25 of the Wealth Tax Act - Commissioner, Wealth Tax, Udaipur held that the revisions u/s 25 of the Wealth Tax Act against the intimation issued under Section 16(1) of the Act of 1957 is not an order, and therefore, the revision petitions under Section 25 of the Act of 1957 were not maintainable - HELD THAT:- As intimation order was passed under Section 16(1), the appeal lay under Sections 23 23A of the Act of 1957 and the revisionary powers were specified under Section 25 of the Act of 1957. Such powers were in existence and the authority passing the order of appeal was subordinate to the revisionary authority, and therefore, it was open for such authority as it deemed it appropriate to adjudicate the matter, strictly in accordance with law. Commissioner has not examined the matter on merits and the analogy in the Income Tax Act whereby it has been held by the Hon ble Bombay High Court that the process of taking a decision in the matter, sending the intimation, being a decision in itself in the nature of the order passed by the concerned authority gives sufficient ambit within the four corners of law under the Act of 1957 to invoke the jurisdiction of revision under Section 25 of the Act of 1957. In view of the judgment rendered by the Hon ble Bombay High Court in Anderson Marine [ 2003 (12) TMI 47 - BOMBAY HIGH COURT] and while taking into consideration the observations made by the learned Single Judge and not refuted by the respondent, this Court does not find any reason to interfere in the appeals, and thus, the special appeals are accordingly dismissed.

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• Indian Laws

• 2024 (1) TMI 438
  Dishonour of Cheque - rejecting the petitioner's prayer under Section 311 of the Code of Criminal Procedure for recalling of Prosecution Witness No. 1. The Learned Metropolitan Magistrate concerned was pleased to reject the said application on the ground that by allowing the said application the petitioner herein could not be permitted to fill up the lacuna of the prosecution case to the disadvantage of the accused person in the said case, being the opposite party no. 2 herein. HELD THAT:- In the present case, the documents sought to be brought on record by the petitioner by way of additional evidence are documents essential and thus relevant for arriving at a just decision in the case. The prayer under Section 311 Cr.P.C. has been made in this case as soon as the documents were made available to the petitioner and the same are essential to aid in the discovery of truth. The documents in this case are necessary only with the object of proper proof of relevant facts in order to meet the requirement of justice. The reason for not being able to bring the present materials on record at the relevant stage has been satisfactorily explained and as such the Trial Court should have allowed the prayer under Section 311 Cr.P.C., considering the materials on record, while carrying out its function of administration of criminal justice to meet the ends of justice. The accused/opposite party herein shall have ample opportunity and the liberty to counter the materials to be brought on record by the petitioner. The object underlying Section 311 of the Code is that there may not be failure of justice on account of mistake of either party in bringing the valuable evidence on record or leaving ambiguity in the statements of the witnesses examined from either side - In the present case, the documents sought to be brought on record are essential for arriving at a just decision and as such is to be allowed for the ends of justice. Revision allowed.

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